Equus Mining & Mandalay Resources Option Deal – Cerro Bayo Mine District and Infrastructure
On the 26th June 2019, Equus executed a non-binding Heads of Agreement with Mandalay Resources Corporation (TSX:MND, OTCQB: MNDJF) for a 3 year option to acquire Mandalay’s Cerro Bayo Project in Region XI, Southern Chile. The Cerro Bayo Project infrastructure is optimally situated nearby Equus’s Los Domos and Cerro Diablo Projects (Figure 1).
The Option will entitle Equus to explore Mandalay’s 29,495 hectare Cerro Bayo mine district and to acquire all the mining properties, resources and mine infrastructure project which includes a 1,500tpd processing plant and tailings facility (currently on care and maintenance).
Consideration for completion of the acquisition, should Equus exercise its option, will be the issue to Mandalay of 19% of Equus’s share capital at the time of exercise. Additionally, Equus will pay a 2.25% NSR on production from the Cerro Bayo Mine District claims, payable once production reaches 50,000 gold equivalent ounces, which is subject to a re-purchase option in favour of Equus.
Equus will also assume 50% of the closure costs at Cerro Bayo, up to an agreed maximum of those final approved closure costs which based on the current government approved closure plan total approximately US$14.5m.
Other Option Terms
- During term of Option Period, Mandalay will cover all costs of claims, insurance, care and maintenance and cash bonding payments required under the current mine closure plan
- At the 18 month review date:
– Either party may terminate the agreement
– If neither Mandalay or Equus decide to terminate the agreement, Equus will contribute US$50K/month towards Care and Maintenance until the end of the Option Period
– If Mandalay terminates the agreement after 18 months, it will grant to Equus a Right of First Refusal on terms satisfactory to Equus regarding any sale of Cerro Bayo or its assets until the expiry of the Option Agreement
Detailed review of historic exploration and mine data is underway as the basis for target definition which will be executed as part of Equus´s maiden near mine and brownfields exploration drill program, subsequent to signing of the definitive agreement. Equus has also initiated a detailed and comprehensive field-based review of a portion of the currently highest ranking follow-up targets.
The Cerro Bayo Mine has produced in the order of 600,000oz Au and 40Moz Ag since 1995 and the large Cerro Bayo Mine claim package is interpreted by Equus to hold good potential for hosting significant additional gold and silver resources (Figure 2).
Figure 1. Location of the Cerro Bayo-Los Domos and Cerro Diablo Projects-XI Region Chile
Figure 2. Cerro Bayo Mine District Summary Geology & Past Production -XI Region Chile
The Cerro Bayo, Los Domos & Cerro Diablo Projects are situated in the interpreted northwest extension of the world-class Deseado Massif mineral province, where it extends into southern Chile, which currently hosts 7 operating gold-silver mines (Figure 3). This interpretation is based on comparable host rocks, styles and Upper Jurassic ages of mineralization, the latter as reported from south-eastern portions of the Cerro Bayo mine district, to several of the deposits that occur in the western portion of the Massif in Argentina e.g. San Jose Mine.
Several of the more notable Low to Intermediate Sulphidation epithermal style gold-silver projects in the Deseado Massif include: Cerro Negro (7.4 Moz Au equivalent), San Jose (2.9 Moz Au equivalent) and Cerro Moro (2.3 Moz Au equivalent).
Figure 3. Cerro Bayo, Los Domos & Cerro Diablo Projects´ location in northwestern portion of Deseado Massif mineral province