Cornerstone Metals Inc. said Aug. 11 that it entered a nonbinding letter of intent with privately held Americas Gold Exploration Inc. to acquire a 100% interest in its underlying option agreement on the Carlin vanadium project in Nevada, kicking off a 60-day due diligence period.
Americas Gold, which has an option to acquire the Carlin property from a third-party owner, will assign its interest to Cornerstone under the letter agreement. As consideration, Cornerstone will pay Americas Gold an aggregate US$50,000 in cash and issue 2 million post-consolidation shares in two tranches.
In connection with the deal, Cornerstone will consolidate its shares on a 2-for-1 basis before executing a formal assignment agreement.
Upon executing the formal assignment agreement, Cornerstone will assume all of the optionee's obligations under the underlying five-year deal, which include an aggregate US$75,000 in cash payments and US$400,000 in work commitments over 2.5 years.
The underlying option also includes a US$2 million payment, after which Cornerstone would acquire a 100% interest in the project. The owner will retain a 2% net smelter royalty, which can be bought out concurrent to the exercise of the option for US$4 million.
Under the agreement with Americas Gold, Cornerstone must complete a preliminary economic assessment, or PEA, on the Carlin project within four years. Once the underlying option is fully exercised by Cornerstone, Americas Gold will be granted a 1.5% net smelter royalty, which Cornerstone can purchase for US$3 million.
Upon completion of the PEA and until Carlin goes into production, Americas Gold will receive US$250,000 annually in cash or cash and shares at Cornerstone's discretion. The payments will be credited to the buyout of the royalty or any future royalty payments due to Americas Gold.
"As vanadium plays an increasingly important role as a component of batteries used in the renewable energy industry, the Carlin vanadium deposit with its apparent size, grade and location, provides our company with a unique and strategic entry into this promising sector," Cornerstone President and CEO Paul Cowley said.