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Baroyeca Gold & Silver Inc (2)
Symbol BGS
Shares Issued 7,376,994
Close 2020-11-02 C$ 0.205
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Baroyeca enters formal option for Colombian projects

2020-11-02 19:02 ET - News Release

Mr. Richard Wilson reports

BAROYECA SIGNS FORMAL OPTION AGREEMENTS FOR TWO COLOMBIAN MINING PROPERTIES

Baroyeca Gold & Silver Inc., further to its news release of April 22, 2020, has entered into two formal mineral property option agreements with Malabar Gold Corp., a private British Columbia company, whereby Malabar has granted Baroyeca options to acquire a 100-per-cent interest in the Santa Barbara property and the Falan property, two mineral properties located in Colombia, South America, along with all of the machinery, equipment, surface rights, licences, permits, data and records relating to the properties and held by Malabar. Following its April 22, 2020, news release, the company undertook a due diligence review of the properties, secured a legal opinion regarding title to the properties from Colombian legal counsel and commissioned a National Instrument 43-101 technical report from the company's geological consultant for each property.

The company is entering into these agreements in order to acquire a property of merit to satisfy tier maintenance requirements with respect to the company's listing with the TSX Venture Exchange. In the circumstances, the transactions are categorized as "reviewable transactions" under the exchange policies, and, as the share issuances to the vendor provided for in the option agreements could result in a possible change of control of the company, the exchange policies require the approval of the majority of disinterested shareholders of the company to the transactions.

The particulars of and the consideration to be paid with respect to the reviewable transactions are as follows.

The Santa Barbara property

The Santa Barbara property consists of 110.86 hectares located in the municipality of San Martin de Loba, in Bolivar department, Colombia. The purchase includes a facility that is being used to carry out bulk sampling on the property. All permits are in place to conduct the sampling activities on the property. The property is subject to a 2.5-per-cent net smelter return royalty retained by the vendor. The property interests, equipment, operations and permits are all held through a group of four subsidiary companies of Malabar, two incorporated in Panama and two incorporated in Colombia.

Pursuant to the terms of the option agreement, to earn a 100-per-cent interest in the Santa Barbara property, subject to the royalty, Baroyeca must make cash payments of $1.75-million to Malabar, issue seven million Baroyeca common shares to Malabar and must incur expenditures of $500,000 on the property, as shown in the attached table.

                            SANTA BARBARA PROPERTY

                  Cash payments  Share issuances  Exploration expenditures

Year 1                 $900,000        3,500,000                  $500,000
Year 2                 $425,000        1,750,000                         -
Year 3                 $425,000        1,750,000                         -
Total                $1,750,000        7,000,000                  $500,000

During the term of the option, Baroyeca will have full access to enter and operate the property.

The Falan property

The Falan property consists of 2,585.94 hectares, located in the municipality of Falan, in Tolima department, Colombia. Although substantially larger than the Santa Barbara property, the Falan property is less advanced, work being at the exploration stage. The Falan property is subject to a 3.5-per-cent NSR payable to an underlying vendor of the property to Malabar.

Pursuant to the terms of the option agreement, to earn a 100-per-cent interest in the Falan property, Baroyeca must make cash payments of $1.05-million and issue five million Baroyeca common shares to Malabar over the term of the option, as shown in the attached table.

                                FALAN PROPERTY

                  Cash payments  Share issuances  Exploration expenditures

Year 1                 $500,000        2,500,000                         -
Year 2                 $250,000        1,250,000                         -
Year 3                 $300,000        1,250,000                         -
Total                $1,050,000        5,000,000                         -
 

During the term of the option, Baroyeca will have full access to enter and operate the property.

Preconditions to closing

The option agreements described above each have certain conditions that are required to be satisfied prior to closing, including:

  • Completion of a private placement financing in the order of $5-million by Baroyeca;
  • Acceptance for filing of the transactions from the TSX Venture Exchange.

Shareholder approval of possible change of control

As stated above, for these reviewable transactions being undertaken by the company, the exchange policies require shareholder approval, by the vote of a majority of the disinterested shareholders, to the possible change of control that could result from the issuance of the shares provided for pursuant to these mineral property option transactions. Accordingly, directors, officers and insiders of the vendor, as interested parties, would not be entitled to vote at the shareholder meeting. The company has not set a date yet for the meeting at which this matter will be considered.

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