Mundoro Capital Inc. [MUN-TSXV; MUNMF-OTC; NGU-FSE] shares rallied Monday October 7 after the company said it has granted Vale Canada Ltd. an option to earn-in to four of Mundoro’s exploration licenses in the Timok Magamatic Complex in Serbia.
Vale Canada Ltd is a unit of Brazilian mining giant Vale SA [VALE-NYSE], which holds the nickel mining assets that were previously held by the company formerly known as Inco Ltd.
Timok is one of the most prolific metallogenic domains in the Tethyan Belt. It hosts the Cukaru-Peki deposit as well as the Bor (copper porphyry) mine and Veliki Krivelj (copper-gold-porphyry) open pit.
Mundoro shares advanced on the news, rising 18.2% or $0.02 to 13 cents. The shares are currently trading in a 52-week range of $0.09 and 24.5 cents.
Mundoro holds a portfolio of projects in Serbia and Bulgaria as well as an investment in a producing mine in Bulgaria.
The four exploration licenses covered by the agreement are Sumrakovac, Osnic, Dubrava, and Padina.
Under the agreement, Mundoro has granted Vale an option to earn, over two primary phases, up to a 75% interest in the Vale-Mundoro Projects by sole funding expenditures of up to $60 million.
Vale can earn a 51% interest in the Vale-Mundoro Projects by sole funding $7 million in expenditures over three years from the satisfaction of the due diligence. Mundoro will be the operator of the Vale-Mundoro Projects in Phase One.
Following Phase One, Vale has the right, exercisable within 60 days, to elect to enter Phase Two. At that stage it can earn an additional 24% interest in the Vale-Mundoro Projects, for a total 75% interest by sole funding an additional $53 million in expenditures by the fifth anniversary of the agreement.
If Vale elects not to enter Phase Two, or does not satisfy the Phase Two Option, then Vale will pay Mundoro an annual fee of $198,550. Under the agreement, annual payments cease upon commencement of commercial production.
The two companies have agreed to establish a new Serbian corporation as a legal vehicle representing the earn-in/joint venture and to hold the relevant licenses and permits. On completing Phase Two, Vale will have the right, exercisable for a period of 60 days, to purchase an additional 5% interest in the Vale-Mundoro Projects from Mundoro, raising its interest to 80%. The purchase price for the 5% interest will be based on a calculation of the fair market value as determined by an independent appraisal.
If Mundoro’s interest in the joint venture is reduced below 10% through dilution, Mundoro’s interest will be converted to a 2% net smelter returns royalty subject to Vale’s right to reduce to NSR to 1% by making a fixed payment to Mundoro.
“Mundoro is pleased to welcome Vale as our latest partner in Serbia, which reflects the prospectivity of Mundoro’s land package within the Timok region and demonstrates the growing interest in this region,” said Mundoro CEO Teo Dechev.