Mako Mining Corp. [MKO-TSXV] said Tuesday December 17 that it has entered into a non-binding letter of intent with Goldplay Exploration Ltd. [GPLY-TSXV; GLYXF-OTCQB; GPE FSE] in relation to the proposed sale to Goldplay of Mako’s Mexican operations.
The sale would allow Mako to focus on its San Albino gold project in Nicaragua, where the first gold pour is anticipated by late summer of 2020. Life-of-mine production at San Albino is expected to be 675,345 gold equivalent ounces or 41,300 ounces annually.
Under the proposal, Goldplay would have the right to acquire 100% of the common shares of Mako subsidiary Marlin Gold Mining Ltd., a private British Columbia company that owns Oro Gold de Mexico, S.A. de C.V., which in turn holds the La Trinidad open-pit, heap leach gold mine in Sinaloa State, Mexico.
The La Trinidad facilities are currently being decommissioned.
Oro Gold also controls 100% of nine concessions, covering 104,094 hectares that lie adjacent to Goldplay’s existing portfolio in the historic Rosario gold-silver mining district in Sinaloa.
The final transaction structure will be determined by the parties, subject to receipt of all necessary legal, financial and tax advice.
“We are happy that we have entered into an LOI to sell our Mexican operations to our neighbour,” said Mako CEO Akiba Leisman. “We are nearly finished producing gold at La Trinidad, and the sale of our Mexican operations will allow us to focus solely on our San Albino gold project, currently under development in Nicaragua.”
“Subject to the successful completion of this transaction, a substantial tax liability currently ring-fenced at our Mexican subsidiaries is expected to be removed from Mako’s balance sheet,” Leisman added.
Mako has said the La Trinidad mine was severely damaged by Hurricane Willa in October, 2018.
However, the company has yet to receive any insurance proceeds from its claims against its insurers and reinsurers, which currently exceed US$7 million. “Finally, it is proposed that Mako will retain a small NSR royalty on a district scale land package to benefit from future exploration success,” Leisman said.
When trading in Mako resumed on Tuesday, the shares were unchanged at 23.5 cents. They are currently trading in a 52-week range of $0.09 and 24.5 cents.
Goldplay advanced on the news, rising 2.8% or $0.005 to 18.5 cents. The shares traded in a 52-week range of 10.5 cents and 30 cents.
The definitive terms of the transaction are subject to negotiations and are expected to include a nominal cash payment and the issuance of a small net smelter royalty to Mako on the concessions currently owned by Oro Gold.
All proceeds from the previously lawsuit that Mako, Marlin, and Oro Gold have filed against their insurers and reinsurers related to damages from Hurricane Willa, will be for the benefit of Mako, and Mako will be responsible for the costs of this litigation.
Meanwhile, after Mako receives a $50,000 payment from Goldplay, the two companies have agreed to a binding exclusivity and non-solicitation period from the date of the signing of the LOI until December 31, 2021 or potentially a later date that the parties can agree on.
Under the LOI, Mako has also agreed to a binding $50,000 break fee that would be payable to Goldplay upon certain agreed-upon circumstances.
Mako said Goldplay is now moving forward with its legal, financial and technical due diligence review of Marlin, Oro Gold and La Trinidad, as well as other assets owned by Marlin.