Canadian mineral exploration company Element79 Gold has signed a letter of intent (LOI) to acquire Calipuy Resources.

The LOI stipulates that the Canadian company will buy all of the issued and outstanding securities and the assets and undertakings of Calipuy, subject to completion of due diligence and the signing of a definitive agreement.

Calipuy Resources owns two past-producing high-grade gold-silver mines in Peru, which include the Lucero mine and the Machacala Project.

Element79 Gold president and CEO James Tworek said: “Element79 Gold believes Lucero has the potential to be a world-class deposit. Lucero and Machacala being recent past producing mines have the potential to be producers again in the near term.

“Peru has mining-friendly legislation that allows up to 350tpd production while larger scale production permitting is underway. Element79 Gold intends to pursue the opportunities aggressively.”

Upon completion of the deal, Element79 Gold will issue its common shares to shareholders of Calipuy holding a total deemed value of $15m at an issue price of C$1.07 per share.

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Shares issued to those shareholders who hold more than 8% of the issued and outstanding shares of Calipuy, will become freely trading in two equal portions after holding periods of six and 12 months following the signing of the definitive agreement.

With regard to shares issued to shareholders who have less than 8% of the issued and outstanding shares of Calipuy, these would become freely trading after a holding period of four months and one day from the signing of the definitive agreement. 

Calipuy directors will also be permitted to recommend two directors to the Element79 Gold board of directors, upon completion of the deal.

Tworek said: “The Peruvian projects complement our recent Nevada acquisitions.

“Whereas Nevada brings scale with Maverick Springs’s NI 43-101 compliant 3.7Moz Au Eq Open Pit inferred resource, Peru brings high-grades and the potential for near term production.”

Formerly known as the Shila mine, the Lucero Project operated from 1989 to 2005 and comprises several historic high-grade gold-silver mines.

The project hosts 74 recognised epithermal veins. Of these, 14 have been partially exploited. It also hosts unexplored high-sulphidation style mineralisation.

Covering more than 4,000ha in the district of Carabamba of Julcan province, the Machacala mine was most recently explored between 1997 and 2004 by Gold Hawk and Meridian Gold.