Kenorland options three Ontario projects to Centerra

Kenorland Minerals (TSXV: KLD; OTCQ-X: KLDCF) said it’s optioned three early-stage gold projects located in Northwestern Ontario to Centerra Gold (TSX: CG; NYSE: CGAU) with a view of developing the assets under a joint venture.

The agreement gives Centerra, through its subsidiary Thompson Creek Metals Company, the option to acquire up to 70% of the Flora, Western Wabigoon and Algoman projects, according to a statement issued Wednesday. The properties, covering a combined area of 2,300 sq. km, are all greenfield assets that have seen limited exploration to date.

Kenorland fell 4% to $1.90 in early afternoon trading Thursday following an 8.2% jump Wednesday. The company now has a market capitalization of about $148 million.

Centerra rose 1.3% Thursday to $9.88, giving it a market capitalization of about $2 billion. The company is a 9.9% shareholder of Kenorland.

The option agreement is divided into two earn-in periods. First, Centerra can acquire an initial 51% interest in the projects by spending $10 million on exploration within three years, including $3.5 million the first year, and complete at least 10,000 metres of diamond drilling. Vancouver-based Kenorland will act as the projects’ operator during this period.

Upon completion of the first earn-in, Centerra would hold an exclusive right to earn an additional 19% interest in the projects by completing a preliminary economic assessment, based on a mineral resource of not less than 1 million oz. in gold equivalent, within seven years of acquiring the initial 51% stake.

During the second option period, Centerra must spend at least $100,000 annually, or provide equivalent value through cash or share payments to Kenorland. If it elects not to exercise this option, a 2% interest will revert to Kenorland, resulting in a 51% interest in the projects for Kenorland and 49% for Centerra.

Once the second option – or, if it is not exercised, the interest reversion – is completed, the companies will form a joint venture reflecting their pro-rata property interests. Successful completion would make Centerra the venture’s 70% owner, while Kenorland would keep a 30% free-carried interest through to the completion of a prefeasibility study.