Sierra Minerals (SIM-V) has agreed to a reverse-takeover deal with privately owned Australian company Minera Secotec, owner of the Cerro Colorado heap-leach gold mine in Sonora, Mexico.
Upon completion of the deal, Secotec shareholders would own 60% of Sierra’s outstanding and issued shares, which currently number around 11.7 million. Sierra is also responsible for raising $1.14 million before the deal can close; the company will also inherit US$1.9 million worth of debt associated with the mine’s construction.
Sierra intends to spend around $1 million to more than quadruple the mine’s output to around 30,000 oz. of gold per year. The open-pit mine currently runs at a rate of 1,500 tonnes per day, with an average head grade of just more than 1 gram gold per tonne. Heap leach mining cranked up earlier this year, with some 9,000 oz. recovered so far.
In 1996, the mine’s previous owner Laramide Resources (LAM-V) pegged Cerro Colorado’s indicated resource at 4.3 million tonnes running 1.4 grams gold. The estimate was based on 20,905 metres worth if drilling in 196 reverse-circulation and diamond drill holes.
While the estimate does not conform to National Instrument 43-101 standards, Sierra believes would qualify as inferred resources under the Instrument. Kappes, Cassiday & Associates of Reno are currently preparing a 43-101-compliant technical report for the project.
Sierra plans to use cash flow from the mine to further explore the 31-sq.-km project.
Cerro Colorado is subject to US$1 million worth of land payments over the next 14 months; another US$250,000 is required to cover some minor incidental mine operating costs. The project is also subject to a 2.5% net smelter royalty.
Under the deal, Secotec general manager Keith Piggott will manage operations and take a seat on Sierra’s board; Martin Walter will retain his role as Seirra’s CEO. In the end, Piggott will control about 25% of Sierra’s shares.
The transaction requires regulatory and shareholder approval and further financial and technical due diligence.
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