Shares of Evrim Resources (TSXV: EVM) surged 18.5% to $1.28 on news that Newmont Mining (NYSE: NEM) is acquiring 4.85 million shares of the company at $1.50 per share for a 5.2% stake.
It’s the first time Newmont has taken a position in the junior, although the two companies have worked together on generative exploration in North America for the last year, and had an earlier exploration alliance from 2012–2014 in the Trans-Mexican Volcanic Belt.
Eighty percent of the $7.27 million in proceeds from the Newmont private placement will be spent on Cuale, a high-sulphidation, epithermal gold project in Jalisco, Mexico.
The early-stage project is 185 km west of Guadalajara in the Cordillera Madre del Sur and a two-hour drive from the resort town of Puerto Vallarta.
Agnico Eagle Mines’ (TSX: AEM; NYSE: AEM) El Barqueno project is 50 km east of Cuale, and Endeavour Silver’s (TSX: EDR; NYSE: EXK) Terronera project is 50 km northeast.
Paddy Nicol, Evrim’s president and CEO, said the company signed confidentiality agreements and carried out site visits with seven companies, including Newmont.
“It came down to a matter of negotiations,” he says in a telephone interview from Vancouver. “Obviously we have a great working relationship with [Newmont], but they demonstrated they really wanted to be involved in the company and provide funding to see where we could go with Cuale, and for that they also got a right of first offer on the project, but there are no hooks or any sort of rights on the project specifically, other than the right of first offer.”
In addition to the right of first offer, Newmont will keep participation rights in any future equity financings to keep its pro-rate ownership interest. Under the investment agreement, the companies will collaborate through a joint technical committee to advance the project.
Evrim has nearly finished trenching, controlled-source audio frequency magnetotellurics geophysics, detailed mapping and rock-chip sampling, as well as a broad soil geochemical survey.
Permit applications for drilling have been submitted and Nicol expects to drill in October. Evrim would finish a 3,000-metre drill program on the property before year-end.
The business model at Evrim includes joint-venture exploration partnerships, and the company has seven with the likes of companies like First Majestic Silver (TSX: FR; NYSE: AG), Coeur Mining (NYSE: CDE) and Antofagasta (US-OTC: ANFGF). Under its exploration partnership looking for gold projects with Newmont in North America, Evrim and Newmont co-fund a US$1.84-million exploration program through a 30–70% funding allocation.
Cuale is the only project Evrim wanted to drill and develop on its own.
In addition to the technical work Evrim did on the project, it also secured a five-year agreement with the local community for access to the property. “That is a big deal,” Nicol says, “and we’re happy to have gotten that at this stage of the game … it puts both parties on an equal footing going forward, in terms of information exchange and transparency.”
Cuale is situated within the Talpa de Allende area of Jalisco and the project is subject to a 1.5% net smelter return royalty (NSR) for precious metals and 1% NSR for base metals payable to Altius Minerals (TSX: ALS).
Evrim has just over 79 million shares for a $100.9-million market capitalization.
Over the last year, it has traded within a low of 20¢ (December 2017) and a high of $1.70 (April 2017).