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Kingsgate to sell Chilean project to TDG Gold

Nueva Esperanza is one of five gold projects set to begin operations in Chile by 2023. (Image courtesy of Kingsgate Consolidated.)

Australia’s Kingsgate Consolidated (ASX: KCN) said on Wednesday that Canada’s TDG Gold Corporation (TSX-V: TDG) has agreed to buy the Nueva Esperanza gold-silver exploration project in Chile, for A$69 million ($52m).

As part of the non-binding deal, TD Gold would pay C$25 million ($20m) in cash to Kingsgate once the transaction closes.

The Aussie junior will also receive 4% of TDG’s outstanding common shares calculated on a post-closing basis, with a further C$6.25 million ($5.9m) in cash becoming payable within three months of the completion of a definitive feasibility study.

Additionally, Kingsgate will get C$10 million ($8m) in cash or 10 million TDG shares if and when a decision to mine is made. 

 Kingsgate said it may use the transaction proceedings to possibly restart operations in Thailand 

The Sydney-based company said the completion of a transaction for the Nueva Esperanza project would ensure its financial security.

It added that the flexibility of the agreement with TD Gold would provide Kingsgate options around the ongoing negotiations with Thailand related to its Chatree gold mine.

In 2016, the Thai government closed Chatree, the country’s only operating gold mine, over allegations of arsenic contamination.

The company noted it may use the transaction proceedings to possibly restart operations in Thailand if a negotiated settlement could be achieved and all licences and permits were granted.

Chile’s gold hope

Nueva Esperanza (meaning New Hope) is one of five gold projects set to begin operations in Chile over the next two years. The other ones are Kinross Gold’s (TSX: K; NYSE: KGC) La Coipa Restart, Yamana Gold’s (TSX: YRI; NYSE: AUY; LSE: AUY) El Peñón expansion,  Rio2’s (TSXV: RIO; US-OTC: RIOFF) Fenix.

Together they promise to revive the Maricunga gold belt, one of South America’s top mining districts, and reverse the sharp decline in Chile’s gold industry over the last decade.

Chile’s gold production peaked in 2000 at 54.1 tonnes, data from the country’s copper commission, Cochilco, show. The nation, the no.1 copper producer and second-largest lithium producer after Australia, was one of the world’s 20 top gold producing nations between 2011 and 2013 but has since been displaced by neighbours Peru and Argentina.

With the closure of Kinross Gold’s La Coipa and Maricunga mines in 2013 and 2016, respectively, gold production dropped from more than 1.8 million ounces in 2013 to less than 1.3 million ounces last year.

Copper mines now account for the bulk of the country’s bullion production rather than primary gold mines.