Toronto domiciled Royal Road Minerals Limited (TSXV:RYR) last week announced that its Colombian subsidiary, Exploraciones Northern Colombia SAS has entered into formalization agreements and related earn-in option and royalty agreements with the proprietors of the La Candelaria and San Miguel informal gold mines located in the municipality of Los Andes-Sotomayor, Nariño district, Colombia. The La Candelaria and San Miguel mines are located within concession contract HH2-12001X held by AngloGold Ashanti, pending assignment to Exploraciones Northern Colombia pursuant to a Stock Purchase Agreement dated March 4, 2019.

Currently Royal Road has entered into four mining formalization agreements in Nariño The agreements were negotiated and entered into under the framework of the Colombian government’s National Policy for Mining Formalization wherein specific portions of the area held under concession by Exploraciones Northern Colombia will be returned directly to informal miners so that new concession contracts over such returned areas may be granted, enabling legal and responsible mining operations to take place. In exchange, Exploraciones Northern Colombia will receive a quarterly royalty equivalent to 3% of the doré extracted from the Formalized Concessions and has been granted the exclusive right to carry out all exploration activities on the formalized concessions and the right to acquire 70% of the formalized concessions, subject to the completion of certain exploration milestones as summarized below. In-case the company assists in further optimizing mine operations on formalized concessions, Exploraciones Northern Colombia may increase the royalty to be received by a further 1%.

The company also announced that it has executed a Heads of Agreement with Colombian mining company Latminco S.A.S. Latminco is a resource company established to develop traditional gold mines using modern mining and treatment technologies with the aim of improving the efficiency of mine operations for the benefit of local miners and surrounding communities. The HOA anticipates that Latminco and Exploraciones Northern Colombia will collaborate and agree with certain formalized concessions to identify opportunities where production may be optimized and processing may be centralized to the benefit of all parties. In such cases, the relative royalty payments due to Exploraciones Northern Colombia from the Formalized Concessions are payable by Latminco and the contractual security held by Exploraciones Northern Colombia over the Formalized Concessions shall be transferred for the benefit of Latminco.

About the La Candelaria and San Miguel Gold Mines

The La Candelaria and San Miguel gold mines are located in the east of concession contract HH2-12001X and unlike the majority of gold deposits in the region are hosted in a silicified and folded sedimentary succession. Gold mineralization is predominantly related to steep to moderately dipping and northeast trending brittle shear zones and is concentrated in 25 to 30 centimeter wide vein centers, surrounded by vein-stockwork zones of an unknown width. rock-chip channel and grab sampling completed by AngloGold Ashanti at La Candelaria in 2010, returned best results of 2.0 meters at 50.4 and 2.0 meters at 16.1 grams per ton gold (32 samples, mean 3.0 grams per ton gold, lowest result below laboratory detection limit). The presence of gold related to vein stockwork mineralization in the sedimentary wall-rocks at La Candelaria and San Miguel, imply the possibility of gold mineralization over wider, more economic widths.

“The Company has now executed four formalization agreements over promising gold operations in Nariño and there will be more to follow.” Said Tim Coughlin, Royal Road’s President and CEO. “The cash we anticipate earning from royalties due as part of this process will of course be significant, but we do not want to lose sight of the fact that we are an exploration company. The agreement we have executed with Latminco can allow us to effectively hand over the mine management component of the formalization process and ensure that our expert teams are focused on the job of finding large, Tier 1 gold and copper deposits, either as a component of the earn-in aspect of these agreements, or elsewhere in our extensive and prospective land package throughout Colombia.”

Image courtesy of Royal Road Minerals

Highlights of the Formalization Agreements

Company to return a specific area within the Concession and permit a new mining concession over such area to be issued for the benefit of informal miners
Informal miners at La Candelaria and San Miguel to satisfy requirements of Colombian mining regulations, including in respect to environment and workplace health and safety
La Candelaria and San Miguel to allow Exploraciones Northern Colombia to have access at any time and to assist with sustaining social licenses at the project and elsewhere in the district

Option Agreement

Exploraciones Northern Colombia has the right to earn 70% of the La Candelaria and San Miguel Concessions by completing a minimum 3000 meters of drilling, underground sampling and an internal feasibility study with respect to each within five years of the date on which the formalization process is complete
La Candelaria and San Miguel’s 30% interest to be free-carried through to commercial production and at such point to be converted to a 30% net profit interest
La Candelaria and San Miguel to receive an additional 5% net profit interest royalty from mine production within a 100-meter buffer zone around the La Candelaria and San Miguel Concessions and within the Concession HH2-12001X

Royalty Agreement

From the time of granting of the La Candelaria and San Miguel Concessions, Exploraciones Northern Colombia to receive a royalty of 3% of the doré extracted from the La Candelaria and San Miguel Concessions payable in kind on a quarterly basis
In-case Exploraciones Northern Colombia assists in increasing production at the La Candelaria and San Miguel Concessions beyond the average production calculated from the first two quarters of mine production, Exploraciones Northern Colombia may increase the royalty to be received by a further 1%
The royalty is payable until the earlier of Exploraciones Northern Colombia relinquishing its entire interest in Concession HH2-12001X, Exploraciones Northern Colombia exercising its option to earn 70% and delivering notice to La Esmeralda that it intends to commence mine construction and Exploraciones Northern Colombia developing and securing to its satisfaction a global JORC-compliant resource on a single stand-alone project of no less than 3 million ounces gold on the HH2-12001X Concession area surrounding the La Candelaria and San Miguel Concessions

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About the Author

Loren Moss is the founder and publisher of Finance Colombia. He has over 20 years of international business experience, including over a decade of experience in securities, insurance, and commercial real estate, at the institutional and international level.