Pinnacle Silver and Gold (PINN ) has appointed Auramet as lead project financier to arrange, or provide to Pinnacle, non-equity project financing of up to US$5 million for the development of the high-grade El Potrero gold-silver project in Durango, Mexico.
Auramet is one of the largest physical precious metals merchants in the world and has provided over $1.5 billion in term financing facilities to date
The agreement provides for Pinnacle and Auramet to work towards a mutually agreeable project financing based on, and subject to, due diligence, operational and financial progress during a seven month exclusivity period, and other conditions typical of transactions of this nature.
In addition, Auramet shall have the right of last offer to provide project financing, but is not obligated to do so.
The agreement contains a standard non-solicitation clause with respect to any competing proposal and a break fee of US$400,000 in the event that Pinnacle accepts another offer.
“This agreement is a significant step forward and we sincerely appreciate the support of Auramet as we advance El Potrero towards production,” said Robert Archer, Pinnacle’s chief executive.
“In keeping with our business model, our goal has been to secure a non-dilutive means of financing the development of the project in a timely fashion. Having a well-known metal trader and financier such as Auramet to partner with, not only brings a lot of credibility but will give us financial flexibility without being captive to the volatility of capital markets as we move through the various stages of development. Having enjoyed a long-standing relationship with the Auramet team, I am confident that they will be a reliable partner going forward. By participating in our last financing, they have already demonstrated strong support for our management team, business model and the Potrero project itself.”
Meanwhile, the development of El Potrero is advancing rapidly, with underground delineation drilling in progress, and recent metallurgical work implying robust head grades in the order of 7.7 grams per tonne gold and 116 grams silver, and potential recoveries in excess of 97% gold and about 70% silver.
View from Vox
This is a big win for Pinnacle, and for more than one reason. First non-dilutive financing is always welcome in the junior mining space, and US$5 million is a chunky sum in that regard. It ought to move the company a long way forward. That the provider is Auramet is doubly welcome, though, since Auramet is staffed by seasoned industry professionals who have plenty of experience in sizing up whether projects may or may not be viable. Auramet are already on the Pinnacle register, and are now coming round for a second and much bigger commitment. Auramet are clearly sticking around for the long haul, but in the near-term, watch this space for drilling news.