Hochschild Mining, through its wholly-owned subsidiary, has exercised its option to take over the operatorship of the Snip gold project, located in Canada, from Skeena Resources.
The option exercise forms part of an agreement signed in September 2018. According to the agreement, Hochschild is required to spend twice Skeena’s investment on the project since March 2016.
Skeena originally optioned the project from Barrick Gold in March 2016.
In order to earn 60% of Skeena’s interest in the project, Hochschild Mining will have to incur $80.85m (C$100m) during the option period, which started on 14 October.
Hochschild is required to make $6.06m (C$7.5m) in exploration or development expenditures at the Snip gold project in each 12-month period of the option period.
Failure to make a spending commitment for the relevant 12-month period would result in Hochschild paying the shortfall in the minimum annual spend to Skeena.
Upon completion of the earn-in, the two firms will establish a joint venture for further development of the Snip project. Skeena is deemed to receive up to $12.1m (C$15m) in anti-dilution protection.
Skeena CEO Walter Coles Jr said: “Skeena’s shareholders will benefit from Hochschild spending a potential C$115m at Snip, before the company would be required to contribute.
“This will allow the Skeena management team to focus resources on aggressively exploring and advancing Eskay Creek.”
Upon completing $18.19m (C$22.5m) of minimum spend, Hochschild will have the option to extend the option period by another 12 months. This would be achieved by making a $1m payment in cash to Skeena.
Located in the Golden Triangle of British Columbia, the past-producing Snip mine consists of one mining lease and eight mineral claims. It covers an area of approximately 4,546ha in the Liard Mining Division.
From 1991 until 1999, the mine produced approximately one million ounces of gold at an average gold grade of 27.5g/t.