Shares of Solvista Gold (TSXV: SVV) rose 31% after Iamgold (TSX: IMG; NYSE: IAG) signed an option agreement for the junior’s Caramanta gold project in Colombia.
The international gold producer, with no current operations in Colombia, has agreed to complete work commitments and provide cash payments to earn up to 70% of Caramanta.
“We are very happy to have Iamgold as our partners. We think it gives a great vote of confidence in the project and in Colombia and we look forward to work with them and to make more discoveries in 2014,” Miller O’Prey, Solvista’s chief executive, says.
The deposit is located in the heart of the Middle Cauca belt — one of Colombia’s historic gold districts— some 120 km south of Medellin. Discoveries near Caramanta include: AngloGold Ashanti’s (AU-N) La Colosa porphyry-gold project with 24 million oz. in reserves; Gran Colombia Gold’s (TSX: GCM) Marmato deposit hosting 11.8 million gold oz. and 80 million silver oz. in measured and indicated; and Sunward Resources’ (TSX: SWD) Titiribi project containing 6.2 million gold-equivalent oz. in measured and indicated.
Under the agreement, Iamgold can earn an initial 51% in the 130 sq. km property and become the project’s operator by spending US$18 million — including a US$2.5 million non-discretionary commitment and a US$900,000 cash payment— over five years starting Dec. 16, 2013.
Iamgold could bump its stake to 70% by shelling out another US$18 million over three years following its initial earn-in, bringing its total to US$36 million.
The gold major must spend a minimum of US$1.25 million on the property in 2014.
The 3 km long CPC “represents an aligned cluster of related mineralized bodies and as such, has the potential to host additional, significant new gold-copper-silver-molybdenum porphyries and other related discoveries in the Middle Cauca belt of Colombia,” the company explains. So far the junior has discovered three mineralized porphyry systems in the southern portion of the CPC at its El Reten, El Corral and Ajiaco Sur targets.
Along with the option agreement, Solvista reported results from its latest drilling at Caramanta, where it punched four holes on the Malabrigo target and one on the Casa Verde target. Both targets lie in the northern portion of the CPC.
The drilling at Malabrigo, Solvista explains, hit near-surface porphyry style gold dominant mineralization, with one hole ending in mineralization, with 6.8 metres grading 0.45 gram gold, 4.2 grams silver and 0.05% copper per tonne, adding more work is required to fully assess the target. The hole that tested Casa Verde returned 67 metres of 0.37 gram gold, 2.5 grams silver and 0.13% copper and was directly south of a large soil gold–and-copper anomaly, suggesting follow-up drilling to the north.
The junior plans to draft an environmental management plan with Iamgold for Corantioquia, the regional environmental authority, to resume exploration on El Reten, El Corral and Ajiaco Sur, which fall under an area known as the district of integrated management (DMI), where open-pit mining is currently banned and exploration temporarily halted.
Solvista has requested those targets in the southern portion of its property to be excluded from the DMI. It says Corantioquia has indicated if the environmental management plan is approved exploration could restart while authorities consider Solvista’s request. The DMI restriction currently affects less than 5 sq. km of Caramanta, O’Prey says. He estimates that the plan could be approved in the first half of 2014, allowing drilling there to resume later that year.
Once Iamgold acquires a majority interest, it will form a joint-venture with Solvista to continue advancing Caramanta. If either company dilutes to a 10% interest by not picking up its share of costs, its stake will be converted into a 2% net smelter return royalty. Half of that royalty could be purchased at any time before production starts for US$2 million.
On the option agreement news, Solvista’s shares tacked on 2.5¢ to close at 10.5¢, within a 52-week range of 6.5¢–76¢. It has roughly US$4.5 million in the bank.
Meanwhile Iamgold slipped 14¢ to $3.55, a new 52-week low. Helping that decline was the producer’s recent decision to cut its dividend payments.
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