Golden Minerals Co. entered into an option agreement to sell its right to acquire a 100% interest in the Santa Maria silver-gold project in Mexico to Magellan Gold Corp.
The agreement provides a 150-day due diligence period during which Magellan will also be able to secure financing for the project.
If Magellan exercises the option, it will pay US$1.0 million cash to Golden Minerals upon closing, according to an Oct. 17 release.
Golden Minerals will retain a 6.5% net smelter return royalty from all production at Santa Maria until US$3.0 million has been paid, after which it will retain a 3.0% royalty for the rest of the mine life.
If Magellan fails to achieve commercial production from the project within one year after closing, Golden Minerals will be able to retain its interest in the project without any payment to Magellan.
Golden Minerals President and CEO Warren Rehn said the cash stream from this transaction would be used to advance some of the company's other exploration projects.
The company recently terminated an option agreement granting Compañía Minera Autlán SAB de CV the right to acquire its Velardena silver property and other Mexican assets for US$22 million.