Canadian gold exploration company Soma Gold Corp. (SOMA.V) Friday said that it has signed a definitive agreement with Red Rock Resources Plc to acquire, in full, the net smelter returns royalty, which has restricted the operations of the El Limón gold mine since the property was originally purchased by its wholly owned subsidiary, Colombia Milling Limited, in 2015.
Under the original purchase agreement, Red Rock held a royalty interest on production revenue from El Limón. This included a net smelter returns royalty, fixed at C$2.77 million or $2.0 million, after which the royalty would be reduced to C$1.38 million or $1.0 million.
To improve the long-term economics of the mine, Soma Gold and Red Rock have now agreed to end this arrangement with Soma Gold buying out and cancelling the royalty for C$1.88 million or 1.0 million pounds in cash. The company will also issue 200,000 common share purchase warrants of Soma Gold to Red Rock.
According to Soma Gold, each warrant will allow the holder to buy one common share of the company at an exercise price of C$2.00 for a period of three years from the date of issue. The completion of the transaction and the issuance of the warrants will get underway after approval is secured from the TSX Venture Exchange.
On closing, the company said that it will fund the cash component of the purchase price from its existing working capital.
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