Discovery Metals Corp. [DSV-TSXV; AYYBF-OTC] on Thursday April 25 announced details of an amended property option agreement related to its Puerto Rico polymetallic project, which is located in Coahuila State, Mexico.
The company also said it has concurrently signed a 30-year exploration and mining agreement with the Boquillas del Carmen Ejido, a local Indigenous group.
Under the amended agreement, Discovery Metals can exercise the option to acquire 100% of the Puerto Rico Project from the property owners by making a cash payment of US$300,000 in monthly installments of US$20,000. The payments commence 30 calendar days after the project drilling permit is received by the company.
Discovery has also agreed to issue four tranches of 500,000 common shares on each anniversary of the closing date of the transaction (August 17, 2017). The first tranche is due on the second anniversary of the closing (August 17, 2019) provided that when the first tranche becomes due, the drill permits have been received.
In addition, the company has agreed to issue additional common shares to the property owners, equivalent to the greater of 20% of the market value of the project as determined by an independent valuation, or 18 million common shares, taking into account the common shares already issued to the property owner.
In order to exercise the option, the company is required to complete 12,000 metres of drilling within three years after the drill permit is received.
Discovery shares were unchanged at 22 cents on Thursday. The shares trade in a 52-week range of 16.5 cents and 42 cents.
“Discovery has renegotiated terms of the Puerto Rico option agreement to make it more beneficial to all stakeholders,” said Discovery President and CEO Taj Singh. “In addition to spreading the drill permit milestone payment over 15 months, we have reduced share dilution and changed the purchase option to allow us to spend more exploration dollars on what is most important: drilling,” Singh said.
“The cost of the purchase option is now more in line with the current markets while also allowing the property owners to participate in the value of the company’s other projects through share ownership,” Singh added.
Discovery said the 30-year land occupation agreement will allow Discovery staff and contractors full access to the property for all exploration and potential future mining activities.
Discovery Metals is focused on discovering and advancing high-grade polymetallic deposits in a recently assembled land package of approximately 300,000 hectares over a large and historic mining district in northern Coahuila State. The portfolio of seven key properties, all with shallow high-grade silver-lead-zinc mineralization, is situated on a world class CRD belt that stretches from southeast Arizona to central Mexico.
The land holdings contain numerous historical direct-ship ore workings with approximately 4 km of underground development. No modern exploration or exploration drill testing has been carried out on the properties prior to Discovery’s involvement.
Discovery recently released results from a detailed channel sampling program at the Puerto Rico Mine, one of three historic mines that exist on the Puerto Rico project.