TomaGold Corp (CVE:LOT) said Monday it has signed a Letter of Intent to acquire Red Metal Resources Ltd. (OTCMKTS:RMES).
Red Metal owns, or has the option to own, 100% of three projects (Farellon, Perth and Mateo) located in the prolific Candelaria iron oxide copper-gold (IOCG) belt of Chile's coastal Cordillera, host to Freeport McMoRan's Candelaria Mine and Anglo American's Mantoverde Mine.
The deal would give TomaGold additional assets outside of their joint venture partnership with IAMGOLD Corporation (NYSE:IAG, TSE:IMG), the Monster Lake project in Quebec. It would also diversify TomaGold geographically.
"This is a great transaction for TomaGold, as we are adding high-quality assets with strong exploration potential to our portfolio of properties,” said David Grondin, President and CEO of TomaGold.
“We are also diversifying our asset base into copper-gold properties in the world's leading copper producing country. Moreover, this transaction will enable us to become a producer and generate cash flow on a short-term horizon," he added.
TomaGold will acquire 34,290,302 common shares, as well as all of the common shares of Red Metal that may be issued upon the exercise of any options, warrants or other convertible securities after the formal filing of the transaction but before its closing.
The proposal would be that Red Metal shareholders receive in exchange an aggregate consideration of C$3,250,000 payable through: the payment in cash of the Red Metal's debts for a maximum amount of C$500,000; and for the remainder of the aggregate consideration, the issuance of class "A" common shares of the capital stock of TomaGold at a price that is the higher between the average market price over the 20 days before the execution date of the Definitive Agreement and of C$0.15, subject to a maximum price of CAD$0.20.
The Letter of Intent includes customary provisions, including non-solicitation of alternative transactions, the right to match superior proposals and the closing by TomaGold of a financing of C$700,000 before the closing of the Transaction.
The parties have agreed to a break-up fee of C$175,000.
TomaGold shares were up 7% at C$0.15 on Monday. Meanwhile, Red Metal shares surged by 162% to $0.07.