Canadian precious metals mining company Aya Gold & Silver has signed a binding agreement to acquire mineral exploration company Algold Resources.

Aya Gold & Silver will fund Algold’s proposal to its creditors and would become Algold’s sole shareholder at the closing of the deal.

Under the investment agreement, Algold will receive C$100,000 ($79,233) in cash from Aya and C$2.5m ($1.98m) in Aya shares to fund its proposal.

Additionally, Aya will provide C$2.4m ($1.9m) in Aya shares, which will be distributed to Algold’s current shareholders.

Last month, Aya acquired Algold’s approximately C$10m ($7.92m) secured debt to become the sole secured creditor of the company.

In a press statement, Aya Gold & Silver said: “Since then, Aya has made several secured advances and payments in the context of Algold’s restructuring that are expected to total approximately C$2.9m at the time of closing of the transaction.”

Aya expects the deal to provide a fully permitted, near-term gold asset, Tijirit Project, located in northwestern Mauritania.

The project would be added to Aya’s non-silver portfolio that includes Boumadine, Azegour and Amizmiz.

Aya Gold & Silver president and CEO Benoit La Salle said: “This transaction allows Aya to opportunistically acquire a near-term precious metals asset to add to our non-silver portfolio of assets at an attractive cost.

“We believe this is a rare opportunity to leverage our understanding of the Tijirit Project to unlock value for all shareholders through the development of the Tijirit Project as well as a right-sized exploration program in a proven gold district.”

Aya plans to invest $5.9m in the Tijirit project this year. This includes $3.5m for drilling and geology, as well as $1.5m for engineering and fieldwork.