Canada’s Prime Mining ( TSX-V:PRYM & OTCMKTS:EPWMF) has inked a 15-year deal for surface use of the Los Reyes gold-silver project area in Sinaloa, Mexico. The deal includes a 15-year right of exploration, with the option to extend for a further 15 years, as well as engineering, construction and commercial operations.
Prime’s shares were up 2% to 0.43p in early Tuesday trading. This builds on a strong start to the year for the company, which has seen its stock rise 60% in just two months.
Los Reyes is located near the city of Cosalá, 45 miles from the west coast of Mexico in the Gulf of California. The project boasts a confirmed 535,000-ounce gold resource and a whopping 9.95 million ounces of silver. Prime hopes to bring Los Reyes into production within 18 months, by adopting an accelerated growth plan.
How it works
Prime completed the acquisition of Los Reyes in August 2019 and went public in September the same year. Since then executives have been meeting with local landowners of the Ejido Tasjera and negotiating terms for access rights.
An “Ejido” is a plot of land originally reserved for farming which the local community jointly owns. Under Mexican law the owners have what is known as “usufruct”, a civil law right entitling them the right to use and derive income from the tranche of land. Most Ejidos are no longer used for agriculture but the local communities have retained ownership and usage rights.
Prime says Los Reyes will work best as a heap leach mine, which comes with lower capital and operating costs than technically-challenging underground digging and hence a more rapid payback on expenditure.
The method involves treating near-surface low-grade gold ore deposits with a solution of sodium cyanide to extract the precious metal. It involves lower water and energy use and brings fewer environmental concerns than traditional mining.
Terms and conditions
The Los Reyes deal has required extensive local negotiations to secure a binding agreement.
The terms include a three-year exploration deal with an upfront fee of $38,300 paid to the Ejido. Prime has the right to extend exploration for two years with a payment of $20,000 in year four and $30,000 in year five.
Prime now has the right to begin mine construction at any time but annual payments will increase to $30,000 per year if this happens before year five.
When commercial production begins the annual payment to the Ejido is hiked to $200,000, with the company paying an additional $15,000 gift to local families. Prime has also agreed to prioritise using qualified local labour.
The Los Reyes project sits within a region that historically has been used for gold and silver mining. Prime say that reserves of 380,000 oz of gold and 6.3Moz of silver are indicated in the region, but that the area has been significantly overlooked by developers.
Modern drilling projects began in the area in the 1990s targeting lower-grade gold-silver mineralisation. Los Reyes was slated for development as a heap leach mine but the scheme fell through when the price of gold dropped 22% in 1997 to end the year at $287.
With gold prices hitting recent highs around $1,700/oz., Prime believes the time is right to re-explore the area.
According to the company, Los Reyes comprises a “large epithermal system with the bulk of work being conducted over less than 40% of the known structures, leaving significant opportunity to expand known resources”.
This could present a significant opportunity for investors.
Prime is jointly listed on the junior market of the Toronto Stock Exchange (TSX-V:PRYM) , which is reserved for early-stage growth companies and on the OTCMKTS, the middle tier of the US over-the-counter venture market (OTCMKTS:EPWMF) .
To read our recent EXCLUSIVE REPORT on Prime, which covers upside offered by the undervalued Los Reyes project in great detail, PLEASE CLICK HERE.
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