Mercator Gold (AIM: MCR, OTC: MTGDY) has entered into a binding agreement to acquire an interest of up to 70% in all of Uranio AG’s (XETRA: UAI) exploration and mining licences in Argentina. A four-month due diligence period is underway, and it may be extended by a further three months subject to a US$30,000 payment. Under the terms of the agreement, Mercator has committed to spend US$200,000 on technical, legal, financial and other due diligence on the licences as it deems necessary to evaluate the property.
“Part of the rationale for the acquisition of Mercator’s shareholding in Uranio was to enable the company to begin to unlock the value of Uranio’s highly promising tenement portfolio, which I believe we can now do”, Mercator MD Patrick Harford commented. “Argentina is well known as an emerging uranium hotspot, being geologically exciting yet under-explored in comparison with other, more established uranium mining nations”.
Overall the licences total over 80,000 hectares of granted tenements, which will be evaluated for uranium as well as precious and base metal potential. The licences include one 4,000 hectare tenement located in close proximity to the historic Los Mogotes Colorados uranium mine. In addition to the granted tenement licenses, the exploration portfolio also includes in excess of 50,000 hectares of tenement applications in Jujuy Province.
At any time during the due diligence period, Mercator can earn-in to the licences with an upfront US$150,000 payment. Subsequently Mercator shall then have the right to earn a 20% interest through US$500,000 in expenditures within twelve months of the due diligence period. A further 20% can be earned with an additional US$1m in expenditures within twenty-four months of the arrangement's commencement date.
The company can then take its stake to 50% and 70% respectively with a further US$2m within thirty-six months and US$2m in forty-eight months of commencement.
Technical due diligence across the properties will include ground scintillometer surveys and surface sampling with a view to delineating areas of economic uranium mineralisation. Mercator said it will also assess the potential of the licences to host economic precious and base metal mineralisation. Mercator’s due diligence is expected to culminate in the completion of a desktop study on the licences, which would be shared with Uranio.
Also as part of the due diligence process, Mercator can recommend that Uranio reduce or relinquish some tenements and applications. Taking into account local geological, social, political and environmental conditions, the mineral explorer will ensure that future investigations are focused on tenements judged most likely to yield potentially exploitable deposits.
Uranio is a Swiss uranium exploration and development company, and this agreement builds on an existing relationship between the two companies. Mercator holds three million shares in Uranio following an asset swap with Suphansa Holdings in November 2009. Uranio’s primarily focus is the development of its Bakouma uranium project, which is located in the Central African Republic adjacent to tenements held by AREVA of France.
Disclosure: The author holds no positions in the company