Shares of Evrim Resources (TSXV: ERM) surged 18.5% to $1.28 on news that Newmont Mining (NYSE: NEM) is acquiring 4.85 million shares of the company at $1.50 per share for a 5.2% stake.
It's the first time Newmont has taken a position in the junior, although the two companies have been working together on generative exploration in North America for the last year, and had an earlier exploration alliance from 2012-2014 in the Trans Mexican Volcanic Belt.
Eighty percent of the $7.27 million in proceeds from the Newmont private placement will be spent on Cuale, a high-sulphidation epithermal gold project in Jalisco, Mexico.
The early stage project is about 185 km west of Guadalajara in the Cordillera Madre del Sur and a two-hour drive from the resort town of Puerto Vallarta.
Agnico Eagle Mines' (TSX: AEM; NYSE: AEM) Barqueno project is about 50 km to the east of Cuale, and Endeavour Silver's (TSX: EDR; NYSE: EXK) Terronera project is about 50 km to the northeast.
Paddy Nicol, Evrim's president and CEO, said the company signed confidentiality agreements and completed site visits with seven different companies, including Newmont.
"It came down to a matter of negotiations," he says in a telephone interview from Vancouver. "Obviously we have a great working relationship with [Newmont], but they demonstrated they really wanted to be involved in the company and provide funding to see where we could go with Cuale, and for that they also got a right of first offer on the project, but there's no hooks or any sort of rights on the project specifically other than the right of first offer."
In addition to the ROFO, Newmont will retain participation rights in any future equity financings to maintain its pro rate ownership interest. Under the investment agreement, the two companies will collaborate through a joint technical committee to advance the project.
Evrim has nearly completed trenching, CSAMT geophysics, detailed mapping and rock-chip sampling, as well as a broad soil geochemical survey.
Permit applications for drilling have been submitted and Nicol expects to start drilling in mid-October. Evrim plans to complete a 3,000-metre drill program on the property before the end of 2018.
The business model at Evrim is joint-venture exploration partnerships and the company currently has seven with the likes of companies like First Majestic Silver (TSX: FR; NYSE: AG), Coeur Mining (NYSE: CDE) and Antofagasta (LON: ANTO; US-OTC: ANFGF). Under its current exploration partnership looking for gold projects with Newmont in North America, Evrim and Newmont co-fund a US$1.84 million exploration program through a 30%-70% funding allocation.
Cuale is the only project Evrim wanted to drill and develop on its own.
In addition to the technical work Evrim completed on the project, it also secured a five-year agreement with the local community for access to the property. "That is a big deal," Nicol says, "and we're happy to have gotten that at this stage of the game .... It puts both parties on an equal footing going forward in terms of information exchange and transparency."
Cuale is situated within the Talpa de Allende area of Jalisco and the project is subject to a 1.5% net smelter return royalty (NSR) for precious metals and a 1% NSR for base metals payable to Altius Minerals (TSX: ALS).
Evrim has just over 79 million shares for a market cap of about $100.9 million.
Over the last year, it has traded within a low of 20 ? (December 2017) and a high of $1.70 (April 2017).