Mandalay Resources Corporation ("Mandalay" or the "Company") is pleased to announce that it has entered into a binding Option Agreement with Equus Mining (“Equus”) regarding the previously announced transaction whereby Equus has an option to explore at the 29,495 hectare Cerro Bayo mine district in Region XI, Southern Chile.
The option will extend for a 36 month period (“Option Period”) from the Commencement Date, defined as the date that is the earlier of six months (which period may be further extended three months on agreement by the Parties, acting reasonably) from the Effective Date and the date when Equus receives all required approvals and authorities to set up and drill from at least 60 Platforms on the Property.
Equus can exercise its option to acquire all the issued share capital of Compania Minera Cerro Bayo Ltda. (“CMCB”), including its mining properties, resources and mine infrastructure at Cerro Bayo as well as the 1,500 tpd processing plant, which is currently on care and maintenance at any time during the Option Period. If the option has not been exercised by the Review Date, being 18 months after the Commencement Date, and the option agreement has not been terminated, Equus will contribute US$50,000 per month towards care and maintenance expenses until the end of the Option Period.
Should Equus exercise its option to acquire CMCB, consideration to Mandalay consists of:
- the issue to Mandalay of 19% of Equus’ share capital; and
- a 2.25% net smelter royalty on production from the Cerro Bayo mining claims once the mine has produced at least 50,000 ounces of gold equivalent, subject to a re-purchase option in favour of Equus.
In addition, Equus will assume 50% of the approved site closure costs at Cerro Bayo, and will reimburse Mandalay for any previously paid costs in this regard.