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Argonaut Gold (TSX: AR) has inked a deal with Heliostar Metals (TSXV: HSTR) to sell its Ana Paula gold project in Guerrero state, Mexico, for $30 million in cash and shares. The announcement comes 20 months after a planned sale of the asset to AP Mining fell through in April 2021.
Under the agreement, Heliostar will pay $10 million upfront; $5 million in shares upon renewing the open-pit mining permit or obtaining a new underground mining permit; $2 million upon completion of a feasibility study or July 1, 2024 (whichever comes first); $3 million in cash and $2 million in cash or shares preceding the construction announcement; and $5 million plus $3 million in cash or shares preceding the announcement of commercial production.
In return, the Vancouver-based exploration company will acquire all issued and outstanding shares of Aurea Mining, an Argonaut subsidiary that holds a 100% indirect interest in Ana Paula.
Larry Radford, Argonaut Gold president and CEO, commented in a news release that the sale would allow the company to focus on its Magino mine, located 40 km northeast of Wawa, Ontario, which it says will transform Argonaut into a “low-cost, intermediate producer.”
Argonaut acquired Magino in 2012 and the asset is currently under construction. The company raised C$195.3 million this year to help finance the over-budget project, which is now expected to cost C$920 million to complete. Magino has proven and probable reserves of 58.9 million tonnes grading 1.13 grams gold per tonne for 2.1 million contained ounces and a 19-year expected mine life.
Ana Paula is a developmental stage project with open pit and underground potential. According to a 2017 preliminary feasibility, it has a measured and inferred resource of 1.5 million oz. of gold and 3.3 million oz. of silver in 21 million tonnes grading 2.17 grams gold per tonne and 4.8 grams silver.
Heliostar, a junior with a C$13.3 million market cap, will still need to raise the necessary funds for the upfront payment, “which may pose a challenge, as was the case in 2021,” said Ryan Hanley, mining analyst for Laurentian Bank Securities, in a research note.
The companies also entered into an option agreement for Heliostar to acquire 100% of the San Antonio gold project, also in Mexico. Heliostar’s existing portfolio contains projects in Alaska and Mexico that focus on high-grade gold.
