Metallica Resources (MR-T) has signed a letter of intent to acquire a half-interest in the Choquelimpie gold-silver mine from a privately held Chilean company.
In the letter of intent, Metallica agreed to invest US$15 million in two phases over four years to earn a 50% interest in Sociedad Contractual Minera Villacollo, the Chilean company which owns Choquelimpie.
The first phase requires Metallica to spend US$1.5 million in the first year to explore and develop oxide reserves, and to complete a feasibility study in the second year to earn the 50% interest. Total expenditures would be at least US$5 million.
In phase two, Metallica has the option to complete a bankable feasibility study on the sulphide mineralization at a minimum cost of US$10 million. The study must recommend production of at least 125,000 oz. gold equivalent per year over a minimum mine life of eight years.
Metallica will also grant Minera Villacollo 1 million warrants to purchase Metallica shares at $2.50 each for the next two years. If the second phase is reached, Metallica would grant Minera Villacollo another 1 million share-purchase warrants.
The Choquelimpie open-pit mine produced 380,000 oz. between 1988 and 1992.
The property, which covers 27,000 ha in northernmost Chile, contains an oxide resource of 200,000 oz. gold within the previously mined areas and dumps, as well as a sulphide resource of 1 million oz. gold.
Metallica plans to rapidly expand the size of the oxide resource in an effort to reactivate the fully permitted oxide facility at an annual production rate of 60,000 oz. gold equivalent within two years. At that point, it plans to turn its attention to expanding the sulphide resource.
The agreement is subject to due diligence, which expires March 23.
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