Investors cheered Condor Resources' (LON:CNR) deal to acquire the Espinito Mendoza concession in the heart of the La India gold district - sending the shares up more than seven percent.
As at 11.21 am, the firm's share price stood at 5.50 pence - 7.32 percent higher than yesterday's close.
The US$1.62 million purchase consolidates Condor's position at the La India project and means it now controls all of the 2.4 million ounces of gold defined 20 years ago by a Soviet sponsored programme across the district.
In today's statement, the gold company said the acquistion had increased the commercial viability of the La India project in Nicaragua.
The purchase of the 2 square kilometer concession also takes Condor a step closer to achieving a 2 million ounce JORC gold resource for the district. Condor's existing JORC resource at La India stands at 1,029 million ounces of gold at 5.4 grammes per tonne with 832,000 ounces attributable.
Espinito Mendoza hosts 513,000 ounces of gold at 11,1 g/t but of that, 205,000 ounces at 10.8 g/t are in the more confident C1 + C2 Soviet classification, which Condor expects to be able to convert into the JORC inferred category without further verification.
The company and EmpresaMinera La Mestiza S.A. struck the deal on August 18 this year, which sees 100 percent of the concession transferred to Condor's wholly owned Nicaraguan subsidiary - Condor SA.
Condor will pay US$1,625,000, which includes US$275,000 worth of new shares at 9 pence each - a significant premium to the current Condor share price (5.13 pence).
Analyst Yuen Low, at broker Shore Capital, who has looked at the detail, says the concession purchase represents a bargain.
In a note, he reckons the terms of the deal values the additional 513,000 ounce resource at US$3.17, or US$7.93 per ounce for the 205,000 ounce soviet C1 + C2 resource.
"The company also has to complete a US$1 million, 5,000 metre drill programme within 48 months, raising the cost for the 513,000 ounces (assuming this is verified by the drilling) to US$5.12 per ounce," he added.
In addition, gold price-related bonuses will be payable on conversion to reserves, and a net smelter royalty of 2.25 percent on gold produced from the concession, he said.
Analyst Low summarised: "We see this addition to Condor’s existing JORC resource of 1.029 million ounces (0.832koz attributable) as positive for the company."
Espinito Mendoza covers a 2 sq km area containing one of the highest concentrations of epithermal veins in the district, said Condor.
Four parallel quartz veins have already been tested at surface through extensive trench sampling by a previous explorer, with gold mineralisation demonstrated over a combined strike length of around 3.8km.
As in elsewhere in the district, the gold is low sulphidation epithermal mineralisation contained within quartz veins, breccias, stockwork zones and fault gouge clay, the company said today.
Most of the exploration data available was undertaken as part of a district-wide Soviet sponsored exploration and resource evaluation between 1986 and 1990.
Executive chairman and CEO of Condor Mark Child said today: "The acquisition of 100 percent of the Espinito Mendoza concession completes the acquisition of all concessions in La India Mining district that host a total of 2.4 million ounces gold at 9.5g/t to Soviet classification."
Child went on to say that Condor had already digitised the 4,339 metres of drilling and 1,595 metres of trench sampling completed on the concession and passed it to SRK Consulting who will be asked to convert to a JORC code resource before December 31 this year.
Strategically, he said that buying the concession, which hosted one of the highest concentration of four parallel epithermal veins in the middle of Condor's existing concessions made sense as several of the larger veins, notably the Espinito and Tatiana veins crossed the La India and Espinito Mendoza concessions making potential extraction of gold from these veins more feasible when owned by one company.
"It increases the commercial viability of La India project," he added.