Austral subsidiary Austral Gold Canada has agreed to sell a 100% stake in SCRN Properties Limited (SCRN) to E2 Metals for $10m.

The primary asset of SCRN is the Pinguino silver-gold-zinc-lead-indium project in the Deseado Massif, Santa Cruz Province, Argentina.

The Pingüino advanced silver-gold project is located 30km from E2 ‘s Conserrat project.

Under the agreed terms, E2 will acquire SCRN by paying $5m in cash and issue shares equating to a 19.99% shareholding in E2, on a non-diluted basis.

Austral will also have 15 million options in E2 if it maintains a 19.99% interest in the latter.

Upon completion of the transaction, Austral Canada will become E2’s largest individual shareholder.

It will also secure the right to appoint one person to the E2 board as long as it has at least a 9% voting power in E2.

Austral Gold CEO Stabro Kasaneva said the proceeds from the sale will be used to fund the firm’s exploration activities in Argentina and Chile.

Kasaneva added: “In addition, E2 Metals’ flagship Conserrat project is close to Pinguino and upon completion, we will become the largest shareholder in an ASX-listed company with a sound shareholder base and strong position in the mining-friendly Argentine province of Santa Cruz.

“We will also retain our 51% interest and option to acquire an additional 49% interest in the Sierra Blanca project, which is adjacent to the Pinguino project.”

Austral will also have the option to purchase either half or all the existing net smelter return royalty of 2% on the Pinguino project.

Subject to a number of conditions, including E2 shareholder and regulatory clearance, the deal is scheduled for completion in February 2023.

E2 chairman Peter Mullens said: “This is a transformational acquisition for E2 and the Pingüino project, consolidating two large silver and gold vein districts under one company, forming an emerging pure play silver company on the ASX.”

The Pingüino Project comprises four mining titles that cover 9,986ha in the central-south Deseado Massif geological province.