Sierra Madre Gold and Silver (SM.V) has entered into a definitive agreement to acquire the La Tigra gold project in Mexico, less than 150 kilometers north of Sierra’s flagship Tepic project in Nayarit. The La Tigra project consists of 357 hectares and hosts several past producing small-scale mines (at its peak, up to 5,000 gold panners were operating in the area). This appears to be Sierra Madre’s first acquisition to create its hub and spoke model where it’s looking to scoop up projects that should be seen as a satellite deposit to the flagship Tepic project.
The most recent production data encompasses an 8 year period between 1983 and 1991 where a local company operated a 250 tonnes per day plant and reported a mill feed of 10 g/t gld and 300 g/t silver mined from easily accessible mine workings in the area.
The agreement allows for Sierra Madre to acquire full ownership of La Tigra by making US$1.5M in cash payments over a three year period and the commitment to complete a NI43-101 resource estimate before the end of that three year period. Additionally, a 2.5% NSR will be issued to the vendor, which can be reduced to 1% by making a payment of US$1.5M in cash.
There is a back-in right for the vendor: should the compliant resource estimate contain in excess of 1 million ounces of gold (the Sierra Madre press release specifically mentions ounces of gold, and not gold-equivalent ounces), the vendor has the right to back in to a 51% stake while Sierra Madre will retain a 49% ownership in the joint venture. Should the vendor indeed execute the joint venture plan, no NSR will be payable and both companies will just a have a straightforward 51/49 partnership.
Disclosure: The author has a long position in Sierra Madre. Sierra Madre is a sponsor of the website. Please read our disclaimer.
