Silver Dollar Resources (CSE: SLV) and First Majestic Silver (NYSE: AG) (TSX: FR) signed a letter of intent wherein Silver Dollar has the option to earn an initial 80% interest following the exercise of which it may earn an additional 20% interest in First Majestic’s La Joya Ag-Cu-Au property in Mexico.
Located in the south-eastern portion of the state of Durango in the Mexican Silver Belt, the property consists of 15 mineral concessions totalling 4,646 hectares. It hosts the Main Mineralized Trend, Santo Niño and Coloradito deposits.
In 2013, Silvercrest Mines disclosed a resource estimate reported to conform to CIM definitions for resource estimation.
Assumptions were made based on 89 holes totalling 30,085 metres. Raw assay data were composited to 2 metres, capped at 550 gpt Ag, 5.5 gpt Au 6% Cu and interpolated into a block model using 5 m x 5 m x 5 m block size using inverse distance squared methodology. Inferred resources were estimated at 27.9 m/t grading 58 g/t Ag, 0.47% Cu, 0.28 g/t Au for a total 51.6 Moz Ag and 259 Koz Au.
“La Joya is an advanced exploration and development stage project,” Mike Romanik, Silver Dollar’s president, said in a media statement. “The property’s regional targets are of particular interest as they have never been followed up and their exploration potential remains untapped. The transaction also gives us an opportunity to work with First Majestic, one of the largest silver producers in Mexico.”
To exercise its first option and acquire an 80% interest in the La Joya property, Silver Dollar will pay First Majestic $1.3 million cash over four years, issue shares equal to 19.9% of Silver Dollar’s then-outstanding common shares within one year, incur $1 million of exploration expenditures within the first five years, and grant First Majestic a 2% net smelter returns royalty.
If Silver Dollar incurs the exploration expenditures within the first three years, First Majestic will waive the remaining $600,000 – or nearly half – of the cash option payments.
Silver Dollar may exercise its second option and acquire the remaining 20% of the La Joya property by providing notice to First Majestic within 30 days of earning the first 80% interest and issuing to First Majestic additional shares equal to 5% of Silver Dollar’s then-outstanding common shares within five years. If Silver Dollar does not provide such notice, Silver Dollar and First Majestic will enter into a joint venture.