Vancouver, British Columbia, Jul 28, 2021 (Newsfile Corp via COMTEX) -- Vancouver, British Columbia--(Newsfile Corp. - July 28, 2021) - Austral Gold Limited (asx:AGD) /zigman2/quotes/205808903/delayed CA:AGLD -8.33% (" Austral " or the " Company ") is pleased to announce that the Company and Pampa Metals Corporation /zigman2/quotes/223220900/delayed CA:PM 0.00% /zigman2/quotes/208558273/delayed DE:FIRA +2.60% (otcqx:PMMC) (" Pampa ") have executed an Option Agreement following the signing of a non-binding letter of intent () LOI ") disclosed on 14 April 2021 whereby Austral may acquire up to an 80% interest in the Cerro Blanco and Morros Blancos properties held by Pampa () Transaction ").
Austral Gold's Chief Executive Officer Stabro Kasaneva said: "Following our acquisition of Revelo Resources Corporation ("Revelo") in February 2021, which included exploration projects located close to our Guanaco/Amancaya mining complex and a 19.9% shareholding interest in Pampa, we are pleased to execute this Option Agreement, which will enable us to further increase the number of projects that we own or control in the area. Our interest in this Transaction is consistent with our strategy to obtain a leading role in the Paleocene-Eocene Belt in Chile which we believe to be a prolific mineralized belt underexplored for precious metals."
Highlights of the Transaction:
Pampa will grant an option to Austral in exchange for 2,963,132 shares of Pampa owned by Austral. After returning these shares, Austral's shareholding in Pampa will be reduced to 5,926,084 shares or approximately 13.6% of Pampa's outstanding shares. In addition, the Company will:
Terminate its nomination right to appoint a representative to the board of directors of Pampa;
Terminate rights to the contingent payments on the Cerro Blanco and Morros Blancos Properties, unless a Property reverts to Pampa and exploration results determine that copper is the dominant metal rather than gold, silver and other precious metals, in which case Austral could receive half of the contingent payment if its interest in that Property is reduced to less than 20%.
Refund the pro rata portion of Pampa's 2021 C$94,000 annual license fees incurred on the Properties calculated from the date closing conditions are met.
a) Initial 60% Interest:
Austral may exercise the initial 60% interest option by incurring US$3 million in exploration expenses on the Properties as follows:
at least US$1 million in year 1; and
an additional US$2 million in year 2
b) Stage 1:
If Austral exercises the initial 60% interest option and earns a 60% interest in a property or the Properties, Austral may increase its interest in each such property to an aggregate total of 65% ("Stage 1") within five years from the date of closing the Option agreement for the following consideration on each Property:
minimum drilling of 15,000m,
studies required to complete a preliminary economic assessment ("PEA"),
PEA by an internationally recognized engineering firm to the standards, and in the form, prescribed under National Instrument 43-101 ("NI 43-101"), and
minimum annual exploration expenditures on each property of US$250,000.
After completion of this stage, both parties intend to form a Joint Venture (JV) Company and execute a Shareholder Agreement in respect of each Property subject to the JV. Any Property on which a PEA is not completed according to the terms, will be returned to Pampa.
c) Stage 2
Austral may at its sole discretion, elect to earn an additional 15% interest to increase its interest to 80% in a property or the Properties ("Stage 2") by completing the following activities within 5 years from providing notice to Pampa that it intends to reach Stage 2:
minimum drilling of 10,000m,