Orko Silver Corp. (TSX: V.OK, Stock Forum) reported Tuesday that it has reached an agreement with Pan American Silver Corp. (TSX: T.PAA, Stock Forum) for the joint development of Orko’s La Preciosa silver project in Mexico.
The companies say they have agreed to form a joint venture to develop the project, with Pan American contributing 100% of the funds necessary to develop and construct an operating mine, in consideration for a 55% interest in the joint venture.
Over the next 36 months, Pan American has agreed to spend an estimated US$16 million at La Preciosa to conduct resource definition drilling, acquire necessary surface rights, obtain permits, and ultimately prepare and deliver a feasibility study. The company will also spend a minimum of US$5 million in the first 12 months of the development program to maintain its interest in the joint venture.
Pan American will be the operator for the joint venture, and has agreed to a "standstill" with Orko for as long as the joint venture is in operation. Pan American has also agreed to purchase, on a private placement basis, four million common shares of Orko at CDN $1.25 per share.
"We have long believed in the value of La Preciosa and it is rewarding to know that Pan American has recognized that same potential by committing both its capital and human resources to the project. We believe that with further exploration we should be able to define a significantly larger silver resource. Most importantly, we have structured a Joint Venture which is truly an open partnership. Orko's shareholders will benefit from the financial capacity and extensive mine development expertise that Pan American brings to the joint venture. As such, this transaction significantly reduces the financing and dilution risk for our shareholders," said Gary Cope, president and CEO of Orko.
Shares of Orko were down 2% to 98 cents Tuesday, while Pan American Silver shares climbed 1.9% to $20.55 on low volume.
On the Orko Silver Bullboard, Boolish said: “Hmmm...that is huge news IMO....market got it wrong this morning. Would not suprise me at all if the action steadily improves as the long term crowd grabs the inventory from the 'sell the news' traders[sic]”…
caffee1 added:
It is better deal than I had hoped for, with many bases covered ie.
1 PAA becoming .A 55% JV and the operator and financial support. ( PAA is a primo partner)
2 The standstill agreement during the JV period (which precludes a Mag Silver type takeover)
3 a premuim to market buy of $1.25. This has been written up very well and a great deal.
silvertrust replied:“Wow, a game changer! PAA is a major and obviously see the upside future of this project. Shrewd Orko managment negotiated a GREAT deal and agree with Boorish the market has yet to digest the magnitude of this deal[sic].”
