Velocity Minerals Ltd. entered into a definitive option agreement with its Bulgarian partner, Gorubso-Kardzhali AD, for an exclusive right to acquire a 70% interest in the Sedefche gold deposit in the country.
Velocity said Oct. 7 that it can exercise the option by completing 5,000 meters of drilling on the project before March 31, 2020, and that drilling will start immediately as the project is fully permitted for mining.
President and CEO Keith Henderson said the company will evaluate the feasibility of mining at Sedefche during the course of the drilling program while continuing to progress toward feasibility and mine permitting for its larger projects such as Rozino, also in Bulgaria.
If Velocity does not reach a decision to exercise its option after completing the initial drilling, it can extend the option by completing additional drilling within 12 months.
If the company exercises the option, it will establish a joint venture and pay an US$800,000 fee to Gorubso, payable in shares. Gorubso will also secure a 2% net smelter royalty on the project, limited to historical Bulgarian resources, with Velocity able to purchase half of the royalty for US$2 million.
Upon production of initial doré from ore extracted from the property, another US$800,000 will be payable to Gorubso in Velocity shares.
During the term of the option, a joint operational steering committee including two Velocity nominees will be formed to oversee minesite preparation activities conducted by Gorubso.
Gorubso can choose to continue minesite preparation during the option term at its expense. Velocity will be responsible for covering 70% of up to 500,000 Bulgarian leva in site preparation costs incurred by Gorubso.
If Velocity drops its interest in the joint venture after acquiring a 70% interest, it will be entitled to a 1% NSR on all gold and silver mined from the project that was identified or estimated as a result of its drilling, in excess of a historical resource estimate, or a 1% NSR on all resources and reserves discovered at Sedefche after two years have passed from the joint venture formation and subject to Velocity spending 2 million leva on the project before terminating the deal.
If Velocity chooses not to exercise the option, it will be entitled to a 1% NSR on any gold and silver mined from the project that was identified or estimated as a result of its drilling, in excess of the historical resources. The company can sell half the royalty to Gorubso for US$1 million.
In June, Velocity secured an option to acquire a 70% stake in the Obichnik gold project as part of its exploration and mining partnership with Gorubso in Bulgaria.
As of Oct. 7, US$1 was equivalent to 1.78 Bulgarian leva.
