New Pacific Metals Corp announced that it has signed a binding letter of agreement with Silvercorp Metals Inc to acquire majority interest in its wholly owned subsidiary,Fortress Mining Inc.Pursuant to the terms of the Agreement,the Company will pay USD 3.5 million to acquire an 80%interest of FMI,with an option to acquire the remaining 20%within two years for USD 5 million after the Company has spent USD 15.9 million on the project.Since the Transaction is a related party transaction it is subject to approval from the Toronto Stock Exchange.
In 2007 FMI and the Qinghai Geological Survey Institute established a Sino Foreign Co Operative Company;Qinghai Found Mining with a term of 30 years.FMI owns an 82%interest and QGSI owns an 18%carried interest in QFM.Currently,QFM's assets consist of approximately USD 2.0 million in net cash and a 67%interest in the RZY exploration project.
In April 2011,QFM entered into an exploration agreement with its shareholder,QGSI to jointly explore its RZY project,an early stage exploration project located in Qinghai Province,China.The major terms of the agreement are:
1.The RZY project exploration permit is held by QGSI.QFM has a 67%interest in the RZY project by funding exploration and drilling in 2012.
2.The exploration permit will be transferred to QFM when one of two events occur QFM completes funding of CNY 30 million(USD 4.8 million)on RZY project exploration or capital expenditures;or the RZY project matures to a development stage project.Once transferred;QFM will have a 100%interest in the RZY project,giving FMI an 82%interest in the project.
3.QFM,funded 100%by FMI;is then committed to invest an additional CNY 170 million(USD 27.2 million)on RZY project exploration and capital expenditures to have a total investment of CNY 200 million(USD 32.0 million)in exploration and capital expenditures on the RZY project.
4.If QFM does not fund the required exploration and capital expenditures,the Exploration Agreement will be terminated while QFM maintains its interest in the Project.
To date,pursuant to the Exploration Agreement,FMI has invested USD 3.5 million in QFM and QFM has spent USD 1.5 million on exploration and development expenditures in the RZY Project.
