Cash-strapped Maya agrees to spend $20.5M on old Moroccan silver mine

Maya Gold & Silver (MYA-V) is buying another past-producing precious-metals mine in the Kingdom of Morocco, this time the Zgounder silver project in central Morocco’s Anti-Atlas mountains.

The company has not disclosed exactly how much it will pay for the old mine, but it did say “the overall budget allocated to the transaction for the first 24 months is $20.5 million.” This will include an initial cash payment, exploration expenditures, infrastructure development and mine site rehabilitation.

The acquisition likely means Maya will soon have to raise more money than it has raised in its entire time since listing as a Mexico-focused gold explorer in mid-2008 (around $12.5 million). According to the company’s financial statements dated June 30, Maya currently has negative $1.01 million in working capital. Its biggest general and administrative expense last quarter was corporate development, promotion and travel, on which it spent $122,175.

The purchase is part of five possible acquisitions Maya has been trying to secure since December 2010, all of which are either gold, silver or polymetallic projects in Morocco. The company optioned its first and main Moroccan property, the Amizmiz gold project, in early 2009. It has since spent more than $6.25 million on the property and plans to spend another $500,000 this year completing sampling, survey work and minor exploration drilling. Though the company previously announced grand plans for a “preproduction program” at Amizmiz, it has not mentioned the property or the program in a press release since March.

Maya says it is buying an 85% interest in the Zgounder silver mine from L’Office National des Hydrocarbures et des Mines, a state-owned company “responsible for the promotion of the mining and oil activities of the Kingdom of Morocco.” It secured the purchase through an international tender submitted in March. Maya says the mine produced 500,000 tonnes of rock grading 330 grams silver per tonne for 5.9 million oz. silver from 1982 to 1990.

Zgounder comes with an old processing plant which has been kept on care and maintenance and is in “generally good condition,” as well as a historical non-National Instrument 43-101-compliant mineral resource totalling 582,000 tonnes grading 361 grams silver containing 7.5 million oz., assuming a cut-off grade of 150 grams silver. There are also 500,000 tonnes of surface tailings averaging 125 grams silver, and reports from the previous owner of a newly discovered North Zone exhibiting some higher silver grades.

Other recent acquisitions by Maya include the past-producing Azegour polymetallic mine, located directly south of the Amizmiz property, which produced some molybdenum, copper and tungsten before shutting down in 1971. Maya says the property has never been investigated before for gold or silver.

It also bought a 16-sq.-km mineral claim adjacent to the south of the world-class Imiter silver mine in the eastern Anti-Atlas Mountains. It paid $50,000 for the claim, giving investors some idea of the property’s true value given how expensive decent gold or silver projects are at today’s record-high metals prices. According to Maya’s Montreal area-based president and CEO, Guy Goulet, however, “Historically, the most efficient way to find a mine has been to explore beside an existing mine.”

To help with the search for prospective properties in Morocco, Maya has advanced $1.25 million so far this year to Glowat SARL, a private Moroccan company owned by “a party related to an officer who is also a director of the corporation.”

Leading Maya’s surge in Moroccan mineral exploration has been Noureddine Mokaddem, its executive vice-president, chief operating officer and director. He has prior experience mining in Morocco, both with explorers listed on the Casablanca Stock Exchange and as an executive of the ONA Group’s mining division. (The ONA Group is part-owned by the Moroccan Royal family.) So far, Mokaddem has been a keen buyer of Maya’s stock, buying 800,000 shares last year at 25¢ each and 666,666 shares this year at 45¢ each, all in three private placements with warrants attached.

The director with the most shares, however, is chairman Rejean Gosselin. He bought 1.5 million in 2008 at 10¢ and has added 300,000 since then at prices between 25¢ and 35¢. He also controls 122,000 shares indirectly through Onyx Management. The Quebec-based geologist was the main principal behind founding Maya, and before that he was president and CEO of Dia Bras Exploration (DIB-V).

To help further motivate management, Maya passed a new resolution at its annual shareholders meeting in June. The company will issue up to 4 million shares in stages until 2015 to chief executive officer Goulet and chief operating officer Mokaddem, provided they reach “certain goals and milestones.” This includes acquisitions of material mining properties and the development up to commercial production of any of the company’s properties.

Shares of Maya closed up 1¢ to 37¢ on 342,000 shares traded following the Sept. 15 announcement of the Zgounder silver mine acquisition. The company has 49.1 million shares outstanding and a 52-week share price range of 23¢-62¢.