Junior miner Prodigy Gold (CVE:PDG) reported on Wednesday that it has entered into a pact with private company Goldstream Exploration to option-off its Hardrock East project in northern Ontario.
The project, which consists of a land package over 350 square kilometres in the eastern portion of the Beardmore-Geraldton gold camp, covers Prodigy's Milestone, Adel, Solarus and Pagwachuan Lake properties, as well as claims previously staked by the company.
"The agreement with Goldstream enables Prodigy to participate in the upside exploration potential of the Hardrock East gold project while minimizing our monetary and personnel commitment enabling Prodigy to concentrate on the development of the Magino Mine gold project," Prodigy’s chief executive Brian Maher said.
Under the terms of the deal, Goldstream can acquire a 100 percent stake in the Hardrock East project by completing an equity financing by the end of the month worth at least $3 million, issuing Prodigy shares representing 30% of Goldstream, incurring exploration expenses of $1.0 million by December 31, 2012 and a further $1.0 million a year after that, or completing an IPO by December 31, 2013.
Goldstream, a privately-held company founded by Bayfront Capital Partners, said it has already completed the financing in accordance with the agreement, and has also issued 10.8 million common shares to Prodigy, representing 30% of Goldstream on a fully diluted basis.
Prodigy said that it will be represented on Goldstream’s five member board by two Prodigy appointees, and also on Goldstream’s management committee, which oversees exploration activities.
"Our equity interest in Goldstream captures tangible value for our shareholders by leveraging our expenditures in the Hardrock East area and potentially adding significant value through additional drilling," Maher added.
The Vancouver-based company’s flagship property is the Magino Mine project. It has indicated gold resources of 1.94 million ounces, grading 1.16 grams per tonne, as well as 587,100 ounces of inferred gold resources grading 1.04 grams per tonne.