Endeavour Silver to Sell El Cubo Mine to VanGold

Endeavour Silver has signed a binding Letter Agreement to sell its El Cubo mine and related assets to VanGold Mining Corp. The agreement will be beneficial for both companies; Endeavour will become VanGold’s largest shareholder, meanwhile, VanGold will benefit  from the mine’s proximity to the El Pinguico project.

El Cubo complex is located in Guanajuato and includes two operating underground mines and a flotation plant. The mine has a rated capacity of 15,000 tonnes per day and before its operations were suspended in November 2019, the complex had more than 350 employees and 200 contractors.

President of Endeavour Silver, Goldfrey Walton, said to MBN the company invested a significant amount of capital in El Cubo mine to discover new orebodies, expand reserves and resources, redevelop the property and rebuild the plant and surface infrastructure. Walton said that after these improvements, El Cubo generated healthy positive cash flow.

In a press release, VanGold reported that besides acquiring the El Cubo Complex, the company also bought  the remaining historical resources, the El Cubo mill and 7,000 ha of prospective mining concessions located close to the mill. Vangold seeks to re-start the mill at 750 tonnes per day by using mineralized materials from its surface and stockpiles from El Pinguico project.

El Pinguico project is a high-grade gold and silver deposit that includes El Pinguico and El Carmen veins. These veins are associated with a mega fault that outcrops for 25 km and is considered the most important source of precious metal mineralization in the region. These vein structures are excellent exploration targets that may provide metals with significant sizes and grades, reported VanGold.

VanGold Director, Daniel J. Oliver, said El Cubo complex was a transformational acquisition for the company and that its preliminary internal financial study shows a positive production restart, a favorable payback period and a strong cash flow.

In a press release, Endeavour explained the company will receive US$7.5 million in cash, US$5 million in VanGold shares and US$2.5 million in unsecured promissory notes, totaling US$15 million. Endeavour CEO, Bradford Cooke, said the agreement with VanGold is ideal , given the proximity of the Pinguico project to the El Cubo complex.

Endevaour said the company will become VanGold’s largest shareholder with a 16 percent of its updated share capital. Endeavour reported  the company agreed to abstain from voting its shares other than the recommended by VanGold for a period of two years and a one year restriction on the resale of any VanGold shares.

Moreover, VanGold has also agreed to pay Endeavour US$3 million in contingent payments: US$1 million when VanGold produces 3 million silver equivalent ounces from the mill; US$1 million if the price of gold closes at or above $2,000/oz for 20 consecutive days within two years after closing, and another US$1 million if gold prices are at or above US$2,200/oz for 20 consecutive days within three years.

The agreement still has to comply with certain conditions such as including the final due diligence by VanGold, financing and receipt of all requisite third party and regulatory approvals including the acceptance of the TSXV before March 17, 2021. In case these conditions fail any of the companies could terminate the agreement.