Pacifico Minerals Ltd (ASX:PMY) has entered into a binding agreement to acquire a majority stake in the advanced Sorby Hills Lead-Silver-Zinc Project in Western Australia’s Kimberley region.
The agreement will result in Pacifico acquiring KBL Sorby Hills Pty Ltd and its affiliate Sorby Management Pty Ltd.
KBL Sorby Hills owns 75% of the Sorby Hills project with the remainder owned by Henan Yuguang Gold & Lead Co Ltd.
The Sorby Hills deposit comprises several shallow mineralised bodies over a strike length of several kilometres.
Inferred resource of 16.7 million tonnes
It has a global inferred resource of 16.7 million tonnes at 52 g/t silver, 4.5% lead and 0.7% zinc.
With lead prices close to a 5-year high, silver recovering and zinc rising steadily, Pacifico believes Sorby Hills presents an opportunity to become a leading exporter and producer in the current economic cycle.
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The binding terms sheet includes $50,000 paid to complete due diligence within 30 days, which can be extended for a further 30 days.
It includes $2.5 million in cash and $500,000 in shares in Pacifico, with the value of shares to be determined by the volume weighted average price for the 15 days prior to completion.
Other inclusions are $1 million in cash 90 calendar days after completion and a 1% net smelter royalty to the vendor, Quintana MH Holding Company.
Capital raising required
Pacifico will be required to undertake a capital raising to fund the acquisition payments as well as ongoing exploration and development.
Completion is expected to occur in 75 days.
Pacifico has executed a Heads of Agreement with the WA Government and Ord River Managers, and full environmental approval has been received for mining.
Excellent recoveries reported
Previous project owner KBL Mining Ltd reported excellent lead and silver recoveries from metallurgical test-work of 91% and 87%, respectively.
Initial mining is planned from a shallow open cut and the process plant will be alongside the open cut, allowing for short haulage distances.
A sphalerite recovery circuit could be considered to extract the zinc content.
Minimal regulatory and financial risk
The project has excellent infrastructure access, with Kununurra’s airport and the bulk loading container port at Wyndham in the vicinity, and sealed roads to the project gate.
After due diligence, Pacifico envisages a 12-month pre-mining program to upgrade the resource, optimise mining and metallurgy, submit final mining development applications, and prepare the project finance package.