Kuya Silver (CSE: KUYA) announced that it has entered into a letter of intent with First Cobalt (TSXV: FCC) to purchase a portion of its silver mineral exploration assets – known as the Kerr assets – in northeastern Ontario, Canada.
The idea behind the purchase is also to create a joint venture on the balance of First Cobalt’s silver mineral assets in the camp. The transaction will allow Kuya access to explore the largest package of properties in the Cobalt camp.
The Kerr Assets include eight historic silver mines on a contiguous 900-hectare area. The mines are Crown Reserve, Kerr Lake, Lawson, Drummond, Conisil, Hargrave, Silver Leaf and Bailey, which produced over 50 million ounces of silver and 900,000 pounds of cobalt, mainly between 1905 to 1950.
Also included in the Kerr assets is the nearby Silverfields property, which was mined by Teck until 1989 to a depth of 300 metres and produced over 17 million ounces of silver.
“After careful review of historic data, we clearly see considerable opportunity to make a new discovery at Cobalt,” Quinton Hennigh, Kuya’s chairman, said in a media statement.
“This camp has long suffered from fragmented, myopic exploration campaigns. We plan to change that by undertaking holistic, property-wide data-gathering and drill targeting. It is a delight to take control over what is one of the highest-grade silver districts on earth on the cusp of a major bull market in silver.”
Under the teams of the agreement, Kuya will pay First Cobalt $4 million on closing for a 100% interest in the Kerr area properties. The figure is comprised of $1 million in cash and $3 million in Kuya common shares.
Subsequent payments over a three-year period in cash and shares, as well as in expenditures are considered in the transaction if Kuya decides to acquire an interest in the remaining Cobalt camp assets.
Upon completion of a maiden mineral resource estimate of at least 10 million silver equivalent ounces on the remaining assets, Kuya will have to make a milestone payment to First Cobalt of $2.5 million in cash or shares or $5 million should the resource exceed 25 million silver equivalent ounces.
From a C$1.96/share in mid-December, Kuya’s shares rose over 5% following the announcement and reached C$2.40 on Monday.