Soma Gold (TSX-V:SOMA) has agreed to acquire the royalty on production revenue from its El Limón gold mine in Colombia from Red Rock Resources in a deal paid for with cash and warrants.
The company will earn back the royalty for a total consideration of C$1.88 million ($2.04 million), simultaneously issuing 200,000 purchase warrants to Red Rock.
Warrants offer the holder the option to purchase shares at an exercise price of C$2 for a three year period of the issue date.
Red Rock originally retained a 3% royalty on net smelter returns for a maximum of C$2.77 million worth of product revenue sourced at the El Limón property, with a 1% royalty following completion to a maximum of C$1.38 million.
CEO Geoff Hampson explains that by eliminating the royalty, the company expects to see a positive return on the operating margins once production is resumed at the plant.
“The agreement not only streamlines the asset’s cost structure but also demonstrates the company’s commitment to unlocking the full value of its Colombian portfolio for the benefit of all stakeholders,” Hampson says.
Meanwhile, the company recently raised an aggregate C$17.25 million through a two tranche placement for its Colombian assets.
As reported by Mining.com.au, Soma will use the proceeds to fund an ongoing mill expansion at the El Limón property, while also cashing up for exploration at Nechi Mine and the installation of ore sorting facilities.
Soma Gold is a gold explorer and developer focused on its 43km2 worth of mineral concessions in Antioquia, Colombia and two fully permitted mills, located within 25km of each other.
Write to Maddison Elliott at Mining.com.au
Images: Soma Gold
