Privately owned junior miner Cerrado Gold announced Tuesday it had completed the acquisition of Argentina’s Minera Don Nicolas SA, adding a producing gold asset to the Toronto-based company’s arsenal of projects.
Located in the mining-friendly Santa Cruz province, Minera Don Nicolas consists of over 272,000 hectares in an area home to multiple prolific producing deposits.
Don Nicolas is targeting production of around 50,000 ounces of gold per year, with significant blue sky value in the form of exploration opportunities, Cerrado told shareholders.
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Cerrado CEO Mark Brennan said the acquisition marks a major step forward for the company, adding a strong operating asset with significant upside potential to complement the firm’s ongoing exploration work at its Monte do Carmo operations in Brazil.
“MDN has one of the largest land positions in Santa Cruz Province (272,000 h/a), with many unexploited greenfield and brownfield opportunities that have seen positive results from drilling,” Brennan said in a statement.
Current production at the project has been limited to open pit operations, where most mines in the region have evolved from open pit to underground, according to Brennan, but the property has enormous upside that could add value in the form of ounces.
“There is also a potential opportunity for heap leach operations as the initial mine gold resource grade of approximately 5.19 grams per tonne, provides ample room for heap leach production from existing low grade stockpiles that don’t pass cut-off grade to the mill,” Brennan said.
Under the terms of the deal, Cerrado paid the sellers an initial payment of US$15 million at closing, with future payments of $10 million in 24 months, $10 million in 48 months and US$10 million in 60 months from closing.
The sellers are also entitled to a performance bonus based upon an increase in reserves in the future, Cerrado said.
Brennan is confident that Minera Don Nicolas will contribute “substantial” free cash flow for the company to expand its operations both in Argentina and Brazil, home to its development project Monte do Carmo.
Armed with the two assets, Cerrado is on track to become an intermediate gold producer in South America within a fairly quick timeline.
Contact Angela at angela@proactiveinvestors.com
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