VANCOUVER, BC, Jan. 26, 2023 /CNW/ – Tarachi Gold Corp. is pleased to announce that it has signed a binding letter agreement (the “Letter Agreement”) with Compañia Minera de Atocha S.A. de C.V. (“Atocha”), a private Mexican mining company with producing mines in the states of Durango and Zacatecas, for the sale of the Company’s Magistral Project in Durango, Mexico (the “Magistral Project”). The Company will also be canceling its private placement, previously announced on December 14, 2022.
Upon closing the transaction proposed in the Letter Agreement (the “Transaction“), Tarachi will transfer 100% ownership of its TGMEX Silver S.A. de C.V. (“TGMEX“), which owns all of the Company’s assets related to the Magistral Project, to Atocha. In exchange, Atocha will make cash payments of approximately US$5,700,000 (approx. C$7.6 million).
“This transaction represents an opportunity for Tarachi to convert our interest in the Magistral Project to hard dollars at a strong valuation,” commented Cameron Tymstra, Tarachi President and CEO. “It has been a challenging year for the junior gold sector and difficult to raise money through traditional means for project development, particularly for assets with shorter mine lives such as the Magistral Project. We are excited to be moving forward following the close of the Transaction with a strong cash position which will provide us with the flexibility to pursue other gold assets in North America with superior value-creation potential.”
Terms of the Letter Agreement
As consideration for the transfer of TGMEX, at closing of the Transaction, Atocha will make a cash payment to Tarachi in the amount of US$4,050,000 (the “Initial Payment“). The following additional cash payments (collectively the “Additional Payments“) will also be made to Tarachi:
1. US$500,000 when 50% of the tailings located on the Magistral Project (the “Magistral Tailings“) have been mined, sold and/or processed or after the first complete calendar year of operation at the Magistral Project, which ever occurs first;
2. US$500,000 when 100% of the Magistral Tailings have been mined, sold and/or processed or after the second complete calendar year of operation at the Magistral Project, which ever occurs first; and
3. the amount of value added tax (“IVA“) currently owing to TGMEX as that tax benefit is realized by Atocha during operations and product sales from the Magistral Project or other Atocha-controlled assets if Atocha merges TGMEX with Atocha or another entity they control, estimated to total approximately US$650,000. Tarachi anticipates the IVA tax benefit will be realized by Atocha and paid to Tarachi within the first year of commercial operations at the Magistral Project.
Atocha has agreed to advance to Tarachi the amount of US$1,000,000, which will be held in escrow and act as a deposit against the Initial Payment. Atocha has further agreed that, prior to any sale, transfer or other disposition of its full interest in TGMEX or the Magistral Project prior to the aggregate amount of the Additional Payments reaching US$1,650,000, it will pay Tarachi an amount equal to US$1,650,000 less the cumulative Additional Payments already paid to Tarachi.
Tarachi will seek to settle all outstanding obligations owing to Manto Resources S.A. de C.V. (“Manto“) in relation the Company’s original acquisition of the Magistral Project from Manto in 2021 (see press release dated February 8, 2021). In exchange for the elimination of Manto’s 15% net profit interest royalty on the Magistral Tailings, US$2,000,000 in production bonus payments and any other obligations owed to Manto or rights for Manto to participate in the Magistral Project, Tarachi will pay to Manto 15% of all payments received from Atocha in the Transaction as those payments are received.
The payments Tarachi expects to receive from the Transaction, net of payments made to Manto, total US$4,845,000 (approx. C$6.5 million).
Tarachi and Atocha expect to sign a definitive agreement (the “Definitive Agreement“) within 60 days. During this period Atocha will also conclude its due diligence. Completion of the Transaction will be subject to, among other things, the signing of the Definitive Agreement and extension of existing tailings leasing agreements. The Parties expect to close the Transaction within 30 days of the signing of the Definitive Agreement. Upon Closing, TGMEX will become a wholly-owned subsidiary of Atocha.
About Tarachi Gold
Tarachi Gold is a Canadian-listed junior gold exploration company focused on exploring and developing projects in Mexico. Tarachi acquired the Magistral Mill and tailings project in Durango, Mexico in 2021. Magistral includes a 1,000 tpd mill and access to a tailings deposit with Measured and Indicated resources of 1.26 million tonnes at a grade of 1.93g/t Au (December 2021 PEA, NI 43-101 compliant).
Source: Newswire CA