Evrim Resources EVM 2

Evrim Resources (EVM.V) has announced it has signed a 3-year exploration alliance agreement with Meridian Gold, an unlisted full-owned subsidiary of Yamana Gold (AUY), whereby the latter will grant Evrim access to its database that it has been compiling over the past several decades. According to the announcement, Meridian’s database consists of 7,000 location in North America and contains both digital and non-digital data, making it a great tool for an exploration-focused company to figure out if previous exploration programs may have missed something.

Evrim will digitize the database and will be looking out for new promising projects. Should Evrim effectively pick up land within the designated area (as defined in the exploration alliance agreement), Yamana will have 60 days to decide whether or not it would like to exercise a back-in right to earn a 75% stake in the property.

Evrim Resources EVM

Should Yamana be interested in pursuing a 75% ownership of newly generated exploration targets, it will have to spend at least US$1M on exploration within the first two years of Evrim acquiring the property, while it will have to bear 100% of the exploration expenses from year 3 on until it completes a pre-feasibility study on a resource of at least 1 million gold-equivalent ounces. On top of that, Yamana will be required to pay US$150,000 in cash to Evrim upon signing the option agreement, with additional cash payments of $100,000 due on the 1st, 2nd and 3rd anniversary of the agreement. Evrim will also be the operator of the exploration programs during the first US$10M, and we would assume the company will receive a nice operators fee for its efforts.

This deal with Yamana Gold seems to be a good deal considering the risk for Evrim is minimal (it can generate and acquire exploration targets basically at a zero cost), while the potential upside could be huge – even if Yamana Gold would use the claw back provision to retain a 75% stake in the projects.

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The author has no position in Evrim. Please read the disclaimer

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