Taviche ownership
Put this issue to Bob. This is his response. I hope this puts this to rest once and for all. hulio. Got some emails on our ownership position at Taviche. Here's my response;
1. Intrepid has decided to back out of the JV to concentrate on their Indonesian property and their new property JV, Shyri in Ecuador. Since this decision, they have been diluted down to about 43% (of the 70%) as of the end of August. This leaves us with about 40% (57%of 70%) of the entire property. As it stands today Pan AM holds 30% and Intrepid 30% with Aura at 40%.
2. We (Intrepid and Aura) have spent just over the required $4.0 million on exploration to earn-in to the 70% JV but we (Aura) will have to pay $200,000 now and $250,000 option payments to Pan Am on or before Sept 2011 for the complete earn-in. Once we (Aura) pay these amounts plus a small land payment in Mexico our share of the 70% rises to 62% or, of the entire property to 43%. We are contemplating making both payments sooner so the JV is triggered sooner.
3. If Intrepid is diluted down to 7% (and we fully expect them to do so) they will have the right to convert this share to a 1% net smelter royalty. At this time we will have 70% of the property. Also if after the JV is formed with Pan Am, should Pan Am be diluted down to 15% they will be able to convert this to a net smelter royalty (nsr) of 2%. Should the foregoing happen we would retain 100% of the property.
4. Pan Am back-in right. Pan Am does have a back-in right of 40%, which would increase their entire stake in the property to 70%. However they can only back-in if we can demonstrate through a preliminary assessment (PA) (once all required payments are made) a measured and indicated resource of 50 million ounces of contained silver (i.e. not silver equivalent-adding in gold, copper etc). Even if we were to estimate an inferred resource of 100 million ounces they would not be able to back in.
Now on the back-in you know that our most relevant project is Higo Blanco on East Taviche. This is a very early stage project with relatively few drill holes. As such we would likely need to drill significantly more holes (perhaps triple the current number ) to prove up a measured and Indicated resource. Therefore, it is highly unlikely that after making both option payments and earning into the JV say over the next few months, PAN AM will be able to back-in for the extra 40%. Remember too that the back-in is only applicable to the initial PA. Once that is submitted and it does not show a M&I resource of 50 million oz. contained silver they will no longer have a back-in right.
In general, I think we have a good chance to earn-in to 100% of the property. Pan Am likes us as a partner as does Intrepid but neither wants to be stuck with a minority shareholding of Taviche. Both want a majority interest which at this stage looks not to be obtainable unless either takes Aura over entirely in the market. My guess is that both will end up going the nsr route.
Please let me know if you have any other questions but at this stage we are pretty happy with our prospects at Taviche and our potential ownership position.
Kind Regards
Bob