Mirasol Resources Ltd (CVE:MRZ) (OTCMKTS:MRZLF), the project generator, unveiled an option deal to buy the Inca gold project from mining major Newmont Corporation (NYSE:NEM) (TSE:NGT), bolstering its portfolio in Chile.
The 14,000 hectare property has good access and lies in region III of Chile, the firm said. Newmont's exploration to date has been limited to surface work and prospecting.
It has five target areas, none of which have been drill tested.
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The project sits in the Inca Del Oro mining district, which hosts Santiago Metals' San Pedro de Cachiyuyo copper-gold project and PanAust/Codelco's Inca de Oro copper-moly-gold porphyry deposit.
"We are pleased to add the Inca gold project to our portfolio and to work toward delivering a second Mirasol-funded exploration and drilling program in Chile," said Mirasol Resources CEO Norm Pitcher.
"This is an attractive transaction allowing Mirasol to acquire Inca Gold by exploring and drilling the property. If our exploration demonstrates the potential for a Newmont size target, the agreement will allow them to earn back 70% of the project by reimbursing our costs and investing in significant additional exploration expenditures," he added.
Mirasol has five years to earn-in to 100% of Inca, subject to a 1.5% net smelter royalty (NSR).
To do so, it must drill 1,000 meters over two years and incur US$3 million in exploration over five years.
The right to earn back 70%
Upon completion, Newmont will have the right to earn back 70% of the project, in two stages by paying in cash US$3 million to Mirasol, and funding US$6 million in exploration over three years.
The second stage involves delivering an NI 43-101 compliant prefeasibility study, reflecting a resource of no less than 2 million ounces of gold-equivalent, and paying a further US$15 million in exploration over three years.
If Newmont completes the first but not the second stage, Mirasol will retain 100% and NEM will be granted a further 0.5% NSR royalty which may be bought back by Mirasol at fair value.
If Newmont completes Stage 2, then they will hold a 30% and 70% (NEM) joint venture.
Mirasol would then have the option to either fund its 30% interest or reduce it to 25% in exchange for a loan from NEM to fund Inca's development to commercial production.
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