Canadian mining company Denarius Metals intends to acquire a stake of up to 80% in the Toral Zn-Pb-Ag Project (Toral Project) in Leon Province, Spain, from Europa Metals.

The two firms have signed a related letter of intent for a two-stage option and joint-venture (JV) arrangement.

Europa Metal and Denarius will set up an unincorporated JV for the development of the Toral Project, which comprises the existing investigation permit area and potentially the adjacent, historic Antonina Mine area.

The proposed deal is planned to be completed in two phases subject to confirmatory due diligence by Denarius, the signing of a definitive agreement and securing related shareholder and regulatory approvals.

Europa Metals executive chairman and acting CEO Myles Campion said: “The Board has for some time been evaluating a range of options to advance the Toral Project towards development in a manner that minimises dilution for the company’s shareholders as far as possible while also providing exposure to the significant future value inherent in the project.

“This proposed investment by Denarius is a significant step forward in the advancement of not only Toral, but also our ambition to secure potential further concessions in the surrounding region.”

Under the first-stage option, Denarius will have the option to acquire a 51% stake in the project’s intermediate holding company, Europa Metals Iberia (EMI), or the project’s underlying permits by investing $4m for up to three years in the Toral Project.

The Stage II option will involve Denarius paying $2m in cash to Europa Metals in exchange for an additional 29% interest in EMI or the project’s underlying permits.

This would need to be done within 12 months of exercising the Stage I option.

Denarius would also need to carry out an additional pre-feasibility study over the proposed enlarged project demonstrating positive economic results.