Mako Gold Ltd (ASX:MKG) has signed a binding Memorandum of Understanding (MoU) with Geodrill Ltd (TSX:GEO) whereby Geodrill may subscribe for up to US$1 million worth of Mako shares in return for drilling services at Mako’s discretion.
Geodrill is partnering with Mako on Mako’s Napié and Niou projects.
The company has also signed an option agreement for 100% ownership of the Niou Permit in Burkina Faso. Mako is currently in the process of transferring the permit to its subsidiary.
Under the terms of the agreement Geodrill has agreed to provide drilling services in exchange for Mako shares, up to a total value of US$1 million or up to 10,000 metres of reverse circulation (RC ) drilling, or its equivalent in diamond drilling (DD) or air core (AC) drilling, within twelve months, in two stages of up to US$0.5 million each.
The agreement effectively allows Mako to drill at half of its normal drilling contractor cash costs, thereby allowing the company to preserve cash, while continuing its drill programs.
Mako plans to implement the drill-for equity facility on its upcoming drill programs, pending shareholder approval.
Significant West African experience
Mako managing director Peter Ledwidge said: “We are extremely pleased to have secured a drill-for-equity agreement with such a high-calibre drilling company.
“We have a long-standing relationship with Geodrill and have always been impressed with the quality of their work.
“It will be a great endorsement for Mako to add Geodrill to our share register, since they have worked in West Africa for so many years and understand junior exploration companies better than most.
“We look forward to continuing and strengthening our relationship with Geodrill, which should be beneficial to all Mako shareholders”.
Option for cash payment
Geodrill chief executive officer Dave Harper said: “Geodrill is proud to be partnering with Mako Gold on their Napié and Niou projects.
“We have had a long and successful relationship, having drilled on previous discoveries together in Burkina Faso (then with Orbis Gold), one of which went on become a major producing mine.
“The ‘drill-for-equity’ arrangement allows Mako to drill twice the meterage for the same cash burn, doubling the likelihood of success, while at the same time providing flexibility to revert to cash payment, should Mako elect to.
“We look forward to becoming shareholders in Mako”.