Santa Fe Metals Corp. (TSX: V.SFM, Stock Forum) said that it has signed a letter of intent dated Oct. 29, 2012 with Gold Plata Mining International Corp., a company incorporated under the laws of Panama, to purchase 100% of the outstanding shares of La Muriel Mining Corp., a wholly-owned subsidiary of Gold Plata.
La Muriel owns nine mineral concessions known as the Murindo Project, a porphyry copper-gold-molybdenum system in northwest Colombia.
According to the Santa Fe Metals press release, historical sampling of stream sediments, soils and rocks, along with limited geological mapping and geophysics resulted in rock samples assaying as high as 2.4% copper, 2.5 grams per tonne gold and 10 to 700 parts per million molybdenum.
Under the proposed terms of the purchase agreement, the company will purchase from Gold Plata 100% of the outstanding shares of La Muriel in exchange for a cash payment of US$1.5 million and issue 30% of the outstanding common shares of the company to Gold Plata.
Pursuant to an agreement with La Muriel, Rio Tinto paid US$3.83 million in respect to the Murindo project as part of an option to acquire a 70% interest in the project.
The agreement now requires La Muriel to complete a pre-feasibility study or undertake US$20 million in exploration and development programs.
For a period commencing on Nov. 19, 2010 and expiring 60 days following completion of such expenditures, Rio Tinto has the option to acquire a 70% interest in the Murindo project on payment to La Muriel of US$60 million in cash.
If Rio Tinto does not exercise its option to acquire a 70% interest, it will retain a 1.7% net smelter royalty in the Murindo project in consideration for the US$3.83 million it has previously paid in respect of the Murindo project.
If Rio Tinto exercises its option, the parties will enter into a formal joint venture agreement on the Murindo project, on terms which have been agreed.
The Murindo project is also subject to a 1% net smelter returns royalty pursuant to an agreement between La Muriel and Phelps Dodge Exploration Corp., which can be purchased for US$1 million.
Santa Fe Metals is a junior mining company focused on gold, silver, copper zinc and lead.
On Monday, Santa Fe Metals’ stock was up 200% and was trading at $0.03 a share. The company has a market cap of $1.6 million, based on 51.5million shares outstanding. The 52-week high and low was $0.06 and $0.01 respectively.