London-based Patagonia Gold (AIM:PGD) announced that it has signed a definitive agreement to acquire Pan American Silver's Calcatreu deposit, located 60 km south of the town of Ingeniero Jacobacci, in the Argentinian province of R?-o Negro.
To move forward with the deal, Patagonia will acquire all shares of Minera Aquiline Argentina, a wholly-owned subsidiary of Pan American, for a total consideration of $15 million. Upon closing of the acquisition, which is expected to take place on or before January 31, 2018, the company will make an initial payment of $5 million. Four months later, the UK firm will have to disburse the remaining $10 million.
The Calcatreu deposit, which presents gold mineralization as low sulphidation epithermal veins, has been on care and maintenance since the mid-2000s. According to a corporate press release, Patagonia intends to start developing it right away by exploring the area immediately around the existing resource with the aim of increasing the resource. Management believes that they only need up to 18 months to generate and drill off known targets.
A 2008 mineral resource estimate revealed the current resource contains 8 million tonnes at 3.04 g/t AuEq for 780,000 oz in the Indicated category and a further 255,000 oz at 2.32 g/t AuEq in the Inferred category.
Patagonia's plans, however, have reignited a long-standing debate in R?-o Negro, related to the environmental risks of open-pit operations that use of cyanide leaching technology and that consume water resources. According to local media, between 2003 and 2005 community concerns around Calcatreu ended up with the passing of the so-called "anti-cyanide law," which affected the project despite the fact that it was repealed later in 2011.
Yet, the R?-o Negro newspaper says farming is not creating many employment opportunities in the region and therefore local residents and politicians might be more welcoming with Patagonia. Such openness might be also encouraged by the fact that a Municipal Charter is being created and it contains specific sections that pay special attention to the links between economic development and environmental protection.