Comet Resources set to acquire highly prospective extension to Santa Teresa Gold Project

Comet Resources Limited (ASX:CRL) has executed a binding heads of agreement (HOA) with American International Ventures Inc (AIVN) for the proposed 100% acquisition of the La Sorpressa III tenement in Mexico.

The tenement lies to the northwest of Comet’s Santa Teresa Gold Project tenement, sharing a tenement boundary proximate to the area of historical drilling at the Santa Teresa project.

Comet has a 90-day exclusivity period under the HOA to conduct due diligence in return for payment of a non-refundable exclusivity fee of US$25,000 and upon completion of the transaction, the La Sorpresa III tenement will be transferred from AIVN’s Mexican subsidiary into a newly established Mexican company.

Notably, La Sorpresa III was historically mined at recovered grades of up to 280 g/t gold and produced between 100,000 and 200,000 ounces with mineralisation interpreted to be an extension of the system that hosts the company’s existing JORC resource at Santa Teresa – providing scope for a potential resource upgrade.

Resource upgrade potential

The Aurora and Princessa veins are both on the La Sorpresa III tenement which Comet managing director Matthew O’Kane said made the addition of the tenement to the project very exciting.

He said: “The addition of La Sorpresa III to the Santa Teresa Project is potentially transformational.

“Our existing JORC resource is in the northwestern corner of our existing tenement package and it’s open at the boundary with La Sorpresa III.

“With La Sopresa III we will have the opportunity to test the interpreted northwestern extension of mineralisation for inclusion into future resource updates.”

The mineralised system of quartz veins upon which Comet’s existing JORC mineral resource estimate for the project is based is interpreted to extend onto the tenement being acquired, providing a clear opportunity for resource upside.

Santa Teresa Gold Project showing the historical drilling and JORC resource locations, as well as the location of the La Sorpresa III tenement and the location of historical underground workings on that tenement.

Drilling planning underway

The drilling permit for the Santa Teresa Gold Project has recently been issued by the Environmental Impact and Risk department of the Baja California Sub-Delegation for Environmental Protection and Natural Resources.

This milestone paves the way for the commencement of diamond drilling at the project.

Comet is now finalising the details of its proposed Santa Teresa drilling program and engaging a drilling contractor to perform the works, with the aim that the program begins as soon as possible.

Acquisition terms

The terms of the acquisition include:  

• (Comet has the right to acquire a 51% interest in the tenement through acquiring 51% of the shares in the new company (first option shares), free from encumbrances, in consideration for Comet paying AIVN a total of A$600,000 to be satisfied with $400,000 in Comet Shares at an issue price equal to the 20-day VWAP prior to first completion; and $200,000 in cash, at first completion;
• The Comet shares issued in accordance with clause (a) will be subject to a voluntary holding lock and may only be traded as:
  • One third – freely trading from first completion;
  • One third – escrowed for 6 months from first completion; and
  • One third – escrowed for 12 months from first completion.
• Pursuant to the HOA Comet will have the right to acquire the remaining 49% interest in the tenement, at any time after first completion, through acquiring the remaining 49% of the shares in Newco (second option shares), free from encumbrances, in consideration for Comet paying AIVN a total of A$500,000 to be satisfied as follows:
  • $300,000 in Comet shares at an issue price equal to the 20 day VWAP prior to second completion; and
  • $200,000 in cash, at second completion and, in addition to the above, Newco granting to AIVN a 1.5% net smelter return royalty.
• The Comet shares issued in accordance with clause (c) will be subject to a voluntary holding lock and may only be traded as follows:
  • One third – freely trading from second completion;
  • One third – escrowed for 6 months from second completion; and
  • One third – escrowed for 12 months from second completion.
• Subject to first completion occurring, Comet agrees to free carry AIVN in relation to all company expenditure incurred by the new company for three years following first completion (the dilution formula in the formal agreements will apply); and
• A standard form shareholders agreement or JV agreement will be entered into as part of the formal agreements, which will cover, amongst other things, Comet being appointed manager of the tenement throughout the term of the formal agreements, board or management committee representatives, rights of pre-emption, funding calls to shareholders from the manager, dilution for non-participating shareholders at a rate of 1% for each A$12,000 and matters requiring unanimous consent etc.

The agreement will also provide that, if a shareholder reduces its interest to 10% or less in the new company through dilution, that shareholder will immediately transfer its remaining shares to the other shareholder and will be granted a 1.5% net smelter return royalty.

Story by ProactiveInvestors