- Junior gold explorer Los Cerros (LCL) has signed a $2 million contract with Hongkong Ausino Investment today
- Under the deal, Ausino will give Los Cerros drilling equipment, Induced Polarisation equipment, and a specialist geophysics team
- Los Cerros can choose whether to pay the $2 million in cash or company shares
- However, up to 15 million Los Cerros options could be headed Ausino’s way if the investor outperforms its work obligations laid out in today’s contract
- Los Cerros Managing Director Jason Sitrbinskis said today’s contract is about long-term advantages
- Los Cerros shares gained 7.89 per cent today on close, worth 4.1 cents each
Colombian junior gold explorer Los Cerros (LCL) has signed a $2 million contract with Hongkong Ausino Investment for work across Los Cerros’ project portfolio.
The deal comes with a six-month trial period which, if successful, will extend into 18 months of work from Ausino.
The investment company will give Los Cerros some fresh drilling and mining equipment, including a full diamond core drill rig, drill rods, and other consumables.
On top of this, Ausino will give Los Cerros two sets of specialist Induced Polarisation (IP) equipment and a geophysics team to conduct the surveys.
Finally, under the terms of the deal, Los Cerros will have the option to pay the $2 million either by cash or in company shares.
Los Cerros said some of the key reasons for seeking out the deal with Ausino are to drive down exploration costs, improve efficiency, and maintain cash.
Optional share issue?
While Los Cerros claims there is “no obligation” for it to issue any shares to Ausino under today’s deal, the company said it will give the investor up to 12 million options if it satisfies minimum performance obligations laid out in the contract.
The option issue is subject to shareholder approval.
Further, if approved, the options will be exercisable at either four cents each or seven cents each depending on whether Ausino can complete up to 10,000 metres of drilling over the duration of the contract.
Another three million options will be issued to Ausino on the same terms if it outperforms its obligations.
Thus, while it may not be an obligation for Los Cerros, it seems some dilution could be on the way if Ausino keeps its word.
Los Cerros Managing Director Jason Stirbinskis said today’s partnership is about long-term advantages for the company.
“We see this strategic partnership and bringing more exploration capability in-house giving Los Cerros a significant long term advantage as well as giving us flexibility to navigate the immediate COVID-19 induced pressures that junior explorers are facing, and many will continue to face, as markets exit global restrictions and return to a form of normalcy,” Jason explained.
Shareholders seem to support today’s deal, too, with Los Cerros shares gaining 7.89 per cent on close, worth 4.1 cents each.