Avanco to earn into Jaguar's gold project

PERTH (miningweekly.com) – Metals developer Avanco Resources has signed a deal with TSX-listed Jaguar Mining to acquire the Gurupi gold project, in northern Brazil.

Under the terms of the agreement, Avanco can earn an initial 20% interest in the project by paying a cash fee of $1.7-million, and an additional $500 000 in either cash or shares, as well as spending $300 000 to perfect title and establish access at the project within 12 months.

Avanco can earn an additional 31% interest in the project on the publication of a Joint Ore Reserves Committee-compliant reserve estimate of more than 500 000 oz of gold. The company can earn a further 29% interest upon the demonstration of adequate funding, coupled with the start of construction of a process plant with a capacity of more than 50 000 oz/y.

If Avanco could not demonstrate adequate funding, Jaguar will have the right to buy back a 31% interest in the Gurupi project for "reasonable costs" and expenses incurred.

ASX-listed Avanco will have the option to acquire the remaining 20% shareholding in the project by paying a fee equal to the greater of $6.25-million, or the sum of $12.50/oz of gold, as per the reserve study.

Jaguar, for its share, will retain a net smelter royalty of 1% on the first 500 000 oz of gold produced, a 2% on production from 500 001 oz to 1.5-million ounces, and a 1% royalty on all production above 1.5-million ounces.

Avanco MD Tony Polglase said on Friday that the Gurupi project provided a reasonably priced entry over an exciting and prospective, advanced stage gold project.

“The transaction is structured as a staged earn-in to ensure there is no material impact on the company’s cash reserves or current development plans for Pedra Branca,” Polglase said.

The Gurupi project covers some 137 000 ha and has a foreign resource estimate of some 88.5-million tonnes, grading 1.14 g/t gold for 3.14-million ounces of contained gold.