The Toronto-based company and Mineros, a Colombian gold exploration firm, will focus on the Guintar and Niverengo concessions and its Margaritas title application, collectively known as the GNM project, in Antioquia District, Colombia.
The two companies first announced their intent to work together in December 2019.
READ: Royal Road Minerals inks letter of intent with Mineros SA for Colombia gold mining joint venture
Royal Road’s CEO Tim Coughlin said the firm was “pleased” to have finalized the definitive agreement for the strategic alliance with Mineros in Colombia.
“The GNM project is a worthy objective and hosts what management believe is tangible potential for a significant gold discovery,” Coughlin told investors in a statement.
“This agreement expands on and aims to replicate our already close and successful relationship with Mineros in Nicaragua," said Tim Coughlin, Royal Road's President and CEO.
Royal Road currently operates in Nicaragua under a separate exploration strategic alliance formed in September 2017 with Mineros' subsidiary, Hemco Nicaragua SA.
The now-formal alliance sees Mineros paying Royal Road US$1 million upon signing to set up a joint venture with Royal Road as operator of GNM.
Under the terms of the agreement, Mineros will have the option to acquire 25% of GNM if it pays Royal Road another US$1 million for exploration. Mineros may acquire an additional 25% interest in the project, for a total of 50%, by providing Royal Road with an additional US$1.5 million.
The two companies will agree to an initial exploration program and budget at GNM and a second exploration program before Mineros decides whether to increase its ownership in the project.
DEEP DIVE: Royal Road Minerals on the hunt for Tier 1 gold and copper mines in Nicaragua and Colombia
If Mineros decides to keep its interest at 25%, the company may decide to transfer its rights and titles to GNM into a special purpose company with Royal Roads as its 75% owner.
If Mineros increases its interest level to 50%, titles and rights to GNM will then be transferred into a special purpose company with both parties as 50-50 owners and jointly funding operations. The agreement would be subject to dilution under a standard formula, provided that if any party dilutes to 30%, it would have a one-time right to contribute any funding shortfall and restore its pre-dilution ownership interest.
If a party's interest is diluted to below 15%, such interest would convert to 1.5% net smelter royalty.
Royal Road will be the operator of the exploration of the GNM project for so long as it maintains no less than a 50% ownership interest in the project.
In the last 15 years, more than 50 million ounces of new gold have been discovered in Colombia, where all major mining groups have a presence.
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