Last Tuesday, Golden Arrow Resources Corp. (GRG.V) shareholders voted overwhelmingly in favor of the sale of the royalty on the Gualcamayo mine owned by Yamana Gold Inc. (TSX: YRI – NYSE:AUY). Premier Royalty Corporation will buy the 1% Net Smelter Royalty for $16.5M cash and 1 M warrants with a “Put Right” for Premier to purchase for $1.25 per share making the total transaction worth a minimum of $17.75M or greater if the IPO proves to be successful.

After this transaction, Golden Arrow will hold $18M or approximately 32.5 cents per share in cash, so you basically get all their other projects for free. Having a well-financed company in these market conditions should be attractive to investors.

We expect a portion of the royalty sale proceeds to be used for a Phase II drill program at Golden Arrow’s exciting Chinchillas silver project. We think it might be the Silver discovery of the year after analyzing the drill results from the Phase I program leaving enough in treasury for further development or possible new acquisitions.

The Chinchillas-project is a silver-project in the Argentinean Jujuy-province. The company drilled in excess of 3,200 meter in 27 holes, of which 26 holes were mineralized. As mineralization almost starts on surface, Chinchillas has the potential to be a low capex and low opex project in the distant future.

After analyzing the data retrieved from the Phase I drill program, the project has the potential to be a world-class silver-discovery. Golden Arrow expects to release a maiden resource estimate (which we expect to contain in excess of 50 million ounces silver-equivalent) on Chinchillas in Q2 2013, and we hope the market will have realized the real value of Chinchillas by then.

Read the full press release here.

Disclosure: The author holds a long position in Golden Arrow Resources Corp. Please see our disclaimer for current positions.

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