Minera Alamos (MAI.V) and ePower Metals (EPWR.V) have entered into a binding letter of intent whereby the underlying option to acquire the Los Reyes project (new name) from Vista Gold (VGZ, VGZ.TO) will be transferred from Minera to ePower.
ePower will issue 9.45 million post-consolidation shares to Minera Alamos (representing a 19.8% stake after including the dilution effect of the concurring private placement). Using the term sheet of the private placement (C$0.30 after a 2:1 rollback), the dollar value of the stock represents almost C$3M. On top of that, Minera Alamos will now also no longer have to pay the remaining US$3M in option payments while ePower (to be renamed to Prime Mining Corp) will reimburse Minera for the most recent payment of US$1.5M.
Considering Minera Alamos is focusing its (human and capital) resources on the near-term producing Santana and La Fortuna projects in Mexico, it does make sense for the company to assign the option to earn into the Los Reyes project. Minera’s cash on hand should be used to build mines and not to wire cash to Vista Gold. And with a stake of almost 20% in ePower Metals, it does keep a substantial economic interest in the wellbeing of the project.
As it will take a while for the deal to be completed and Minera Alamos required ePower to wire the April 23rd payment of US$1.5M, ePower has entered into a 12 month bridge loan arrangement with Andy Bowering, George Dengin and Perfect Storm Holdings. The total cost of this one year loan is approximately 34% as ePower will have to pay C$240,000 in interest expenses, a C$40,000 commitment fee and issue C$400,000 in shares. This represents a total cost of C$680,000 on a C$2M loan.
ePower Metals will remain halted until the transaction will be completed.