Surge Exploration has entered into a non-binding Memorandum of Understanding with Compañía Minera del Pacífico S.A. (“CAP Minería”) for an option to acquire up to 100% of the Atacama Cobalto Project in the prolific Atacama Region in Northern Chile.
This transaction is subject to additional due diligence by Surge, the negotiation and execution of a Definitive and Final Option Agreement between Surge and CAP Minería, as well as TSX Venture Exchange approval.
To read the news release, dated July 23, 2018, announcing the Atacama Cobalto Project, please click here
The Atacama Cobalto Project consists of 1,059 hectares and is located only 3 km East of the Cerro Iman Mine. To date, CAP Minería has drilled over 20,250 m (66,437 ft) on the Atacama Coblato Project.
The Surrounding Region
The area of interest hosts several other mining companies and is situated near the mylonitic corridor that is part of the Atacama Fault System that hosts many of the IOCG deposits in northern Chile. The Atacama Cobalto Project corresponds to a “cobalt anomalous IOCG” associated with the geographic area.
The Atacama Cobalto Project benefits from access to excellent infrastructure, including port access, energy supply, and access via the Pan American Highway.
Subject to completion of a comprehensive due diligence process by Surge, the Company and CAP Minería intend to enter into a Definitive Option Agreement (the “Agreement”), subject to TSX Venture Exchange (“TSX-V”) approval. The Agreement will contain three distinct (3) phases (“Phase 1”, “Phase 2”, and ”Phase 3”).
As part of the First Phase, the Company may choose to acquire 51% of the mining concessions with consideration in the amount of US$3,000,000 and 1,000,000 common shares of Surge Exploration Inc., in addition to certain work commitments on the property.
Once Surge fulfills Phase 1, a mining legal partnership will be created between Surge and CAP Minería (the “Newco”), in which the parties will participate with 51% equity in the case of Surge, and 49% equity in the case of CAP Minería.
Within two (2) years of completing Phase 1, the Company may elect to pursue Phase 2, whereby Surge can to acquire an additional 9%, for a total of 60%, of the Newco upon completion of a positive Preliminary Economic Assessment (the “PEA”).
Within two (2) years of completing Phase 2, the Company may elect to pursue Phase 3, whereby Surge can acquire an additional 10%, for a total of 70%, of the Newco upon completion of a positive Pre-Feasibility Study (the “PFS”).
Surge can earn up to 100% of the mining concessions by contributing in excess of its 70% obligation to the Newco, thereby diluting CAP Minería’s interest in Newco. In the event that CAP Minería’s interest is diluted below 10%, CAP Minería share will automatically convert to a 2% Net Smelter Return (“NSR”). Throughout the term of the agreement, CAP Minería shall maintain the right to convert its ownership percentage in exchange for a 2% NSR at any time. In either case, upon CAP Minería’s conversion to NSR, Surge shall achieve 100% ownership of the Newco, and therefore, 100% ownership in the Atacama Cobalto Project.
As mentioned above, this Transaction is subject to formal TSX Venture Exchange approval. As per the terms of the non-binding MOU, a binding Definitive Option Agreement will be negotiated within the next 90 days by both parties, and is subject to the terms contained within the non-binding MOU.
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