Vista Gold Corp. ("Vista" or the "Company") today announced that it has signed a non-binding letter of intent (the "LOI") to option its interest in the Guadalupe de los Reyes gold and silver project in Sinaloa, Mexico (the "GdlR Project") to Cangold Limited ("Cangold").
The LOI provides that a non-refundable US$50,000 payment be made to Vista for which Cangold will have a 90 day period of exclusivity (the "Exclusivity Period") to complete due diligence and negotiate and enter into a definitive option agreement with Vista (the "Option Agreement").
The LOI contemplates that the Option Agreement (if entered into) will provide that Cangold may earn a 70% interest in the GdlR Project by:
- making payments totaling US$5,000,000 in five payments over a three-year period, with payments totaling US$1,000,000 in the first year, US$1,500,000 in the second year and US$2,500,000 in the third year;
- operating the GdlR project, maintaining the concessions comprising the GdlR Project in good standing; and
- fulfilling all of the obligations of Vista's wholly-owned subsidiary, Minera Gold Stake, S.A. de C.V. ("MGS") to the Ejido La Tasajera (the "Ejido") as set out in the temporary occupation contract between MGS and the Ejido.
The Option Agreement is expected to further provide that all cash payments are non-refundable and optional to Cangold, and in the event Cangold fails to pay any of the required amounts on the scheduled dates or fails to comply with its other obligations, the Option Agreement will terminate and Cangold will have no interest in the GdlR Project. Provided it is not in breach of the Option Agreement, Cangold may at its discretion advance the above payment schedule and exercise the initial option for a 70% interest in the GdlR Project any time during the three-year period.
Subject to Cangold earning a 70% interest in the GdlR Project, pursuant to the Option Agreement Cangold will be granted an additional option to earn the remaining 30% interest in the GdlR Project, by notifying Vista of a production decision and by making a cash payment to Vista of US$3,000,000 plus an additional cash payment based on a formula that includes the growth, if any, in estimated NI 43-101 compliant Measured and Indicated mineral resources of the GdlR Project, and the then prevailing spot gold price ("Escalator Payment").
Should Cangold determine not to put the GdlR Project into production, the Option Agreement will provide Vista the right to buy back Cangold's 70% interest in the GdlR Project for a cash payment of US$5,000,000 plus an additional cash payment based on the same formula for the Escalator Payment described above. If Vista does not exercise its buyback option, Vista will still retain a right of first refusal should Cangold elect to sell its 70% interest in the GdlR Project to a third party.
The Option Agreement will also contain terms to provide that Cangold will be the operator of the GdlR Project and set forth the responsibilities and obligations of Cangold in this respect.
Cangold is a junior exploration company engaged in the exploration and development of gold projects in Mexico and Canada. Cangold trades on the TSX Venture Exchange under the symbol CLD.
The LOI and the Option Agreement are subject to the approval of the TSX Venture Exchange and to the Board of Directors of Cangold and Vista.
About Vista Gold Corp.
Vista's principal assets include its flagship Mt. Todd gold project in Northern Territory, Australia, and a 24.9% holding in Midas Gold Corp. In addition to non-core projects in Mexico and California, Vista holds royalty interests in projects in Bolivia and Indonesia. For more information about our projects, including technical studies and resource estimates, please visit our website.