Zacatecas Silver Corp.'s Lourdes option sets US$825K purchase terms

Zacatecas Silver Corp. CVEZAC OTCMKTSZCTSF said Monday it signed an option to acquire all of the Lourdes gold-silver project in Mexico for US$825,000 over two years. US$600,000 of the consideration is payable in Zacatecas shares, with the number of new shares determined by prices set for three instalments.

Ahead of the announcement, Zacatecas shares CVEZAC fell 8.3 per cent to C$0.055 at the Oct. 2 close in Toronto, according to Google Finance at 4 p.m. EDT.

The agreement with Guanajuato Silver Company Ltd. CVEGSVR and its subsidiary Mina Bolanitos calls for US$75,000 in cash and US$200,000 in stock upon TSX Venture Exchange acceptance. Identical instalments are due on the agreement's first and second anniversaries.

The 509-hectare property has at least six mapped vein structures, but only seven shallow holes totalling 1,424 metres have been drilled. On exercise of the option, Zacatecas must grant Mina Bolanitos a two per cent net smelter return royalty in addition to an existing three per cent royalty.

Zacatecas can buy back one percentage point of the new royalty for US$1 million before production and two points of the existing royalty for US$2 million. During the option period it will operate Lourdes and cover the cost of keeping the concessions in good standing. The agreement carries no minimum exploration spending requirement.

The first share tranche will be issued at the Market Price defined by TSX Venture Exchange policy. The later tranches will use the greater of a permitted discount to the announcement-day Market Price and the 10-day volume-weighted average price before issue, with any shortfall between the average price and Market Price payable in cash. The consideration shares carry a statutory hold of four months and one day from issue.

The El Tigre vein, the main target, has been mapped for about 770 metres at surface. Its footwall stockwork extends about 400 metres, and the company says historical holes did not reach it.

The strongest historical drill intercept was 0.7 grams per tonne gold and 82 grams per tonne silver over 0.4 metres of core. Zacatecas said vein-zone core recovery was below 50 per cent and that it has not verified the earlier drilling or sampling results.

"Lourdes has the ingredients we look for: historical mining, a mapped vein system with grade at surface, and almost no meaningful drilling," Zacatecas chief executive Eric Vanderleeuw said in the release.

The company plans to review the historical core and assay records, sample the El Tigre vein and its footwall stockwork, and identify deeper drilling targets. Its Oct. 5 release did not set a date for drilling or new assays.

The next instalment falls on the agreement's first anniversary, after exchange acceptance triggers the initial payment.