Silver Dollar options First Majestic’s La Joya project

Canadian junior Silver Dollar Resources (CNSX: SIL) plans to earn 80% of First Majestic Silver’s (TSX: FR; NYSE: AG) La Joya silver-copper-gold project, 75 km southeast of the city of Durango in Mexico.

A preliminary economic assessment (PEA) in 2013 of the first phase of the project outlines an open pit mine with an initial nine-year mine life and a conventional mill and flotation-leaching plant that would produce silver-copper concentrate with gold credits. The plant would operate at a rate of 5,000 tonnes per day.

The advanced exploration and development stage project, Silver Dollar Resources reports, has a historic inferred resource estimate of 71 million tonnes grading 34.4 grams silver per tonne, 0.23 gram gold per tonne, and 0.28% copper for 79 million contained oz. silver, 524,000 oz. gold and 437 million lb. copper.

Silver Dollar president Mike Romanik noted the deal would give the junior the opportunity to work with First Majestic, one of Mexico’s largest silver producers, and said the property’s regional targets were “of particular interest.”

The property consists of 15 concessions totalling 46 sq. km and hosts the Main Mineralized Trend, Santo Nino and Coloradioto deposits.

To earn an 80% interest in La Joya, Silver Dollar will pay First Majestic $1.3 million in cash over four years and issue shares equal to 19.9% of Silver Dollar’s then-outstanding common shares within one year; as well as spend $1 million on exploration within the first five years and grant First Majestic a 2% net smelter return royalty. If Silver Dollar spends the $1 million on exploration during three years, First Majestic will waive the remaining $600,000 – or nearly half of the cash option payments.

Silver Dollar can also exercise a second option to acquire the remaining 20% of the project by issuing First Majestic additional shares equal to 5% of Silver Dollar’s then outstanding common shares within five years. If Silver Dollar decides not to acquire the remaining 20% of the project, the two companies will then form a joint-venture.

At press time in Toronto, Silver Dollar was trading at 40¢ per share within a 52-week trading range of 22¢ and 45¢. The junior has about 19.6 million common shares outstanding for a $7.84-million market capitalization.