Premier Gold Mines has signed an agreement to acquire an option to purchase a 100% interest in the San Felipe Property from Americas Silver Corporation.

Hochschild is the underlying owner of the San Felipe Property, which is located 55km from Premier Gold’s Mercedes Mine in Sonora State, Mexico.

Several claim groups form part of the San Felipe Property and consist of 16,265ha with multiple poly-metallic zones that host a historic mineral resource.

Premier Gold plans to add a parallel floatation circuit at Mercedes Mine to increase annual output in the near-term.

The company also plans to assess potential development options such as the construction of a stand-alone mill at San Felipe and bring San Felipe into development at the end of the Mercedes mine-life.

Premier Gold Mines president and CEO Ewan Downie said: “San Felipe represents a strategic asset, adding resources and providing a near-term development opportunity in close proximity to an existing operation.

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“We will assess options to bring San Felipe to production to complement existing production in Mexico.”

The San Felipe Property is partially developed with an existing ramp and other mining related facilities that are already in place at the site.

Premier Gold said that San Felipe has several existing deposits open for expansion and believes that there is potential for new discoveries.

As consideration for the acquisition, Premier will pay $7m to Americas Silver on closing, and will also make additional payments of $1.9m upon the making of a positive construction decision and after achieving commercial production.

“San Felipe represents a strategic asset, adding resources and providing a near-term development opportunity.”

Additionally, the company will make eight quarterly payments of $750,000 to Hochschild pursuant to the underlying option agreement.

The completion of the transaction is subject to customary closing conditions.

In a separate development, Premier Gold has divested several non-core properties including the Geisler Property and the Faymar Property in Ontario and the Santa Teresa Property in Mexico.