Mandalay Resources Corp (TSE:MND) revealed it had now struck a binding option agreement with Equus Mining over its Chilean asset: the Cerro Bayo mine.
As reported in late June this year, the metals miner may have found a buyer for the mine as it announced an option with Equus for the property, which was the scene of a flood back in 2017, after which output was suspended.
READ: Mandalay sees encouraging results from drilling at Costerfield in Australia and Björkdal in Sweden
Equus now has an option to explore at the 29,495 hectare Cerro Bayo mine district in Region XI, Southern Chile. The option will extend for 36 months from the start date.
Equus can exercise its option to acquire all the issued share capital of subsidiary Compania Minera Cerro Bayo Ldta (CMBC), including its mining properties, resources and mine infrastructure at Cerro Bayo, as well as the 1,500 tpd (tonnes per day) processing plant, which has been on care and maintenance for the last two years.
Output from the mine was suspended from June 9, 2017, when the Delia NW mine part of the site was flooded. A search for two missing miners following the flood was called off on June 27.
The precious metals producer declared force majeure in respect of the mine the same month.
If Equus does exercise the option to acquire the asset, then Mandalay will receive 19% of Equus’ share capital, along with a 2.25% net smelter royalty on production once the mine has produced at least 50,000 ounces of gold equivalent, subject to a re-purchase option in favor of Equus.
In addition, Equus will assume 50% of the approved site closure costs at Cerro Bayo.
Mandalay has producing mines in Australia and Sweden, and care and maintenance and development projects in Chile.
Shares in Mandalay rose 7.21% in Toronto to C$1.19 each.
---Updates for share price---
Contact the author at [email protected]