Canadian gold producer Yamana Gold has entered into an agreement to sell its Gualcamayo mine in San Juan Province, Argentina, to Colombia-based Mineros.
Yamana Gold has also agreed to grant the Colombian company an option to acquire a 51% interest in the La Pepa project in the Maricunga gold belt, Chile, over a period of four years, and then the remaining 49% interest pursuant to a call option.
Under the Gualcamayo mine deal, Yamana will receive $30m in cash, payable at closing; $30m in cash upon declaration of commercial production of the deep carbonates project; a 2% net smelter return royalty (NSR) on metal produced after the initial 396,000 ounces, capped at $50m of total payments; and a 1.5%, uncapped NSR on the deep carbonates project.
The valuations for Gualcamayo mine are reflective of the current commodity price environment, which is approximately $100 per ounce of gold lower than as of December 31, 2017.
The total value has been estimated at $85m, and the carrying value of Gualcamayo mine has been reduced to this amount.
The transaction is subject to regulatory and third-party approvals and is expected to close in the fourth quarter of 2018.
For the La Pepa deal, Mineros must spend $5m on the project over a two-year period to earn an initial 20% interest.
For an additional 31% interest, Mineros will be required to pay $5m in cash to the company on completion of an additional $15m of spending on the La Pepa project over another two-year period.
After acquiring the 51% interest, Mineros will be able to exercise the call option to acquire the remaining 49% interest at fair market value.
Mineros will act as operator and nominees of Mineros and Yamana will serve on a technical committee during the option term. A Chilean joint venture company will be formed to own the La Pepa project.
Both companies will; sign the Option Agreement on closing of the sale transaction.
Yamana has appointed Cassels Brock & Blackwell as legal advisors and TD Securities as exclusive financial advisor.