On 7 March 2016, the Company announced that it had entered into an agreement with Troy Resources Limited (“Troy”) (ASX: TRY) to acquire 70% of the Casposo gold-silver mining project located in Argentina (“the Project” or “Casposo”).
This strategic acquisition gives the Company an established asset in Argentina and a foundation in that market to further consolidate its asset base.
The Company and Troy entered into an Implementation Deed whereby the Company:
- will immediately acquire a 51% economic interest in Casposo for US$1 million;
- will be entitled to acquire a further 19% economic interest in Casposo for US$1 million paid within 12 months;
- has options to acquire the remaining 30% as follows:
- 10% for US$1,500,000 in 3 years;
- 10% for US$2,500,000 in 4 years; and
- 10% for US$3,000,000 in 5 years.
The exercise price of each option is subject to adjustment based on any increase in the price of silver (base case US$15/oz Ag);
- will make deferred payments totalling US$2 million (US$1 million payable within six months and US$1 million payable within 12 months) from proceeds generated from Casposo; and
- will provide or obtain through other sources up to US$10 million pursuant to an initial capital investment plan to develop and implement a re-engineering plan for Casposo with a view to achieving profitable operations within 12 months, which plan shall include:
- geological, mine design and processing studies;
- redesigning the mine operations according to the size of the deposit; and
- optimising the processing cycle.
The Company is funding the initial payments and working capital requirements from existing cash reserves and is taking steps to secure additional debt or equity capital to advance the above-mentioned capital investment plan.
Overview of Casposo Project
The Casposo project is located in the department of Calingasta, San Juan Province, Argentina, approximately 150km from the city of San Juan, and covers an area of 100.21 km2.
The Company has also entered into a Management Agreement with Troy, whereby the Company is to act as Manager of the Project. As Manager, Austral Gold is now responsible for all business and activities conducted in relation to the Project and has been granted all authorities and powers by Troy in order to perform those functions.