TDG Gold has agreed to acquire Kingsgate Consolidated’s Nueva Esperanza gold-silver project in northern Chile for $52m (A$69m) in cash and equity.

A related letter of intent (LOI) has been signed between the parties outlining the terms for the acquisition.

As part of the non-binding deal, TDG will acquire Kingsgate’s shares in Chilean subsidiary Laguna Resources Chile Limitada.

Kingsgate will receive $20m (C$25m) in cash from TDG Gold upon completion of the transaction.

TDG will also provide Kingsgate with 14% of TDG’s outstanding common shares that is calculated on a post-closing basis.

The transaction is subject to signing a legally binding agreement by the two parties. It is also subject to board approval, due diligence, and completion of at least $28.2m C$35m by financing by TDG.

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In a press statement, Kingsgate said: “The completion of a successful transaction on Nueva Esperanza would ensure the financial security of Kingsgate going forward while still giving excellent exposure to the gold and silver markets through its holdings in TDG.”

The Nueva Esperanza advanced gold-silver exploration and development project is in the Maricunga Belt of the Atacama Region.

Kingsgate noted that this deal will provide its optionality around the ongoing talks with the Thai Government around its Chatree gold operation.

The Chatree mine is being opposed by the local community, who claimed that the mine’s arsenic and manganese have poisoned the regional crops and livestock.

Kingsgate plans to use proceeds from the sale to refurbish and restart the Chatree Gold Mine, subject to settlement of negotiations.