Vancouver’s Tournigan Ventures (TVC-V) has inked a letter agreement paving the way for the company to acquire up to a 100% interest in Meridian Gold‘s (MNG-T) Mercedes gold project in Sonora state, Mexico.
Under the agreement Tournigan can acquire a 51% interest in the project by spending US$500,000 per year for the first two years on exploration and project maintenance. The company will also issue Meridian 100,000 shares on regulatory approval of the deal, plus another 100,000 shares on Aug. 8, 2003.
The company can terminate the deal with no further commitments, other than taxes and payments under the underlying agreements until Aug. 8, 2003, but only if it spends at least US$250,000 within the first six months of the deal’s closing.
Tournigan can buy the remaining 49% of the project by completing a positive bankable feasibility study. Otherwise the two will form a joint venture with Tournigan acting as operator. Failure to participate by either party to the joint venture will result in dilution.
Tournigan has also agreed to use its best efforts to crank up commercial production within five years. Either way, Tournigan will issue Meridian another 100,000 shares. Once production begins, Meridian will retain a 2.5% net smelter royalty capped at US$5 million.
The project is a 1-hour road trip from the town of Magdalena, and power and water sources are readily available.
The 27.4-sq.-km project covers a series of epithermal veins containing high-grade gold and silver mineralization within a package of altered Tertiary age volcanic rocks of the Sierra Madre Occidental. Surface and underground mapping and sampling, and three phases of drilling, by Meridian has turned up several precious metal mineralization including veining, stockwork zones and pervasive silicification. Some of the veins have been traced for up to 2 km on surface.
Drilling on the Mercedes zone has identified a 1-1-metre-wide zone with a strike length of about 800 metres. The zone averages about 16 gold equivalent grams per tonne.
Some 2 km to the north, drilling on the Klondike vein returned grades of up to 30 grams gold over 1.9 metres. Surface sampling of a lower-grade envelope returned grades between 2-4 grams.
Several other gold and silver targets remain untested.
The deal is subject to regulatory approval, and the company expects the deal to lift it from its current inactive status.
A finders fee is payable to an arms length party in conjunction with the transaction.
In early-afternoon trade on the TSX Venture Exchange, Tournigan’s shares were off a penny at 3.
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