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Batero Gold Pens Strategic Alliance With Peruvian Gold Producer Consorcio Minero Horizonte, To Raise Up To $20 Mln For Development Of Colombian Project

Batero Gold Corp. (CVE:BAT) has inked a strategic alliance with private Peruvian gold producer Consorcio Minero Horizonte, which will see Horizonte take a 35 per cent in Batero, raising up to $20 million for the development of the Batero-Quinchia project in Colombia.

The agreement includes equity private placement financings, as well as an agreed loan of $2.2 million to Batero from Horizonte, all together raising up to $20 million for Batero.

The deal will also see Batero gain a strategic alliance partner in Horizonte, which is the fifth largest gold producer in Peru, and advance the junior gold explorer's efforts in developing its Batero-Quinchia project toward a production decision.

Batero said the financings will generate sufficient cash to fund the development of its project through to completion of a technical study, compliant with Colombian legislation for production.

It will also benefit from Horizonte's operational expertise, as well as the premium at which the financings will be transacted - minimizing dilution for Batero's shareholders.

In addition, Batero will mantain its 100 per cent royalty-free stake in the project.

"Batero is pleased to have gained a partner of Horizonte's stature," said the company's president and CEO, Brandon Rook.

"Horizonte's expertise will serve as an invaluable asset as we focus upon moving the La Cumbre deposit through to a production decision.

"In addition to its more than three decades of mining experience, Horizonte possesses exceptionally high technological, safety, and environmental standards."

The initial share financing with Horizonte will consist of 8.9 million common shares at 65 cents each - a premium of around 46 per cent to the volume weighted average closing price of Batero's shares in October. This would raise roughly $5.8 million for Batero, subject to the approval of the TSX Venture Exchange.

Once this initial financing is complete, Horizonte will own almost 20 per cent of Batero.

The next financing will consist of 18.5 million subscription receipts at a price of 65 cents each, also a premium of 46 per cent, for additional proceeds of almost $12 million. After this, Horizonte will take a 35 per cent stake in Batero, or over 39 per cent assuming the exercise of all convertible securities.

Each subscription receipt will automatically convert into one unit, which is made up of one common share and a "relevant fraction" of one share purchase warrant. Every whole warrant is good for three years for an additional share, at a price of 90 cents. This latter financing is also contingent on the approval of Batero's shareholders, as well as the TSX Venture Exchange.

Also under the deal, two nominees of Horizonte will join Batero's board of directors, with one of these individuals to be selected specifically based on "technical acumen", the parties said.

Horizonte will also supply Batero with any required technical personnel under the terms.

"Horizonte is pleased to have the opportunity to work alongside Batero in Colombia," added Horizonte's managing director, Felix Navarro.

"Since Batero commenced exploration on the Batero-Quinchia Project in 2010, the company has quickly outlined a large mineral resource and focused its attention on the promising opportunity at La Cumbre. We believe the addition of our insight and experience will assist in establishing the La Cumbre deposit as a successful gold mining operation."

The project has an initial resource estimate of 3.5 million ounces of indicated gold and 2.6 million ounces of inferred gold. The open pit resource estimate is based on a 0.16 grams per tonne (g/t) cut off, with 70 per cent of the project remaining unexplored.

La Cumbre is one of the three porphyry deposits at the Batero-Quinchia project, with at and near surface oxidized gold mineralization grading greater than 1.0 g/t gold in the central core of the deposit, as well as lateral and vertical continuity of gold mineralization.

The company's 4,947 metre completed drill program this year was aimed at infill drilling to upgrade the indicated mineral resources at La Cumbre to the measured resource category, and to test for potential extensions.

In September, the Vancouver-based gold explorer reported initial drill results from its 2012 program at the La Cumbre, citing "significant" gold mineralization at the end of all holes.

Notable results include grades of 1.14 g/t gold and 2.37 g/t silver from 3.4 to 100 metres in hole LC036.

The company is evaluating the "most efficient and cost effective" mine scenario for the project, including a leach processing circuit, and starter pit production from the surface higher grade mineralization of the oxide and transition zones at the La Cumbre deposit.

The deal with Horizonte means that the Peruvian company will have the right of first refusal in respect of any sale of all or any part of the project, and will have a pre-emptive right to maintain its interest in any future financings as long as it holds at least a 10 per cent stake.

Horizonte's shareholdings are also limited to no more than 45 per cent of Batero on an undiluted basis, until the earlier of the start of commercial production or three years from closing of the initial financing.

Rook added: "We believe that Horizonte's investment and the creation of this strategic alliance lends tremendous credibility to the Batero-Quinchia Project, and further increases its potential to become a producing asset."

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.