Solitario Exploration & Royalty Corp. (“Solitario;” NYSE Amex: XPL; TSX: SLR) announced that Ely Gold & Minerals Inc. (“Ely;” TSX.V: ELY) received shareholder approval and TSX-Venture Exchange acceptance for the previously announced Letter of Intent (“LOI”) to joint venture Ely’s Mt. Hamilton advanced gold project situated at the southern end of the prolific Battle Mountain gold trend in eastern Nevada. Solitario may earn up to an 80% interest in the project by completing various staged commitments. In addition, Solitario has funded the second tranche private placement in Ely of CDN$250,000 for units, described below. This placement is part of a previously disclosed Letter of Intent between Solitario and Ely signed on August 26, 2010. Chris Herald, President and CEO, stated, "With the approval of the LOI by Ely’s shareholders, and the anticipated signing of a definitive joint venture agreement in accordance with the terms of the LOI, we can now focus on rapidly advancing this very attractive advanced stage gold project. Within the next two weeks we intend to mobilize two drill rigs to conduct additional deposit definition drilling on the Centennial deposit, as well as several geotechnical and hydrologic holes required for completion of a bankable feasibility study.” Terms of the LOI Solitario has funded the second $250,000 tranche for 1,666,666 units at a price of CDN$0.15 per unit of the previously announced private placement of 3,333,333 units of Ely, which brings the total aggregate consideration for both tranches to CDN$500,000. Each unit consists of one common share and one-half share purchase warrant entitling the holder of a whole warrant to purchase an additional share of Ely for CDN$0.25, with such warrant expiring two years from the subscription date. Upon signing the LOI in late-August 2010, Solitario subscribed to the first tranche of the agreed to two-stage financing under terms identical to the second tranche. The shares received in this second tranche will have a four-month hold period which will expire on February 21, 2011.
Solitario is committed to spend $1.0 million on exploration and feasibility work and to pay US$300,000 in an advanced royalty payment as part of the LOI. After completing these initial commitments, Solitario may elect to terminate its interest in the Mt. Hamilton project at any time and will have no further earn-in obligations on the project.To earn its full 80% interest in the project and fulfill other LOI commitments Solitario is further required to:
- Make cash payments to the subsidiary of Ely which will hold Ely’s joint venture interest totaling US$2.75 million in cash, issue 300,000 shares of Solitario common stock, and subscribe to US$2.50 million worth of Ely common stock at market, all of which are scheduled from 2011 through mid-2015.
- Make payments of US$300,000 per year in advanced royalty payments that are deductible against future production royalties to the underlying royalty owner, and prior to commercial production, pay $5.0 million to reduce the NSR royalty rate from 8% to 3%.
- Complete a bankable feasibility study.
- Upon request, arrange 100% project financing for development of the Mt. Hamilton project after completion of a bankable feasibility study. Construction and permitting costs incurred after feasibility will be shared pro-rata, however, Ely may elect to have Solitario fund all costs with such costs, plus interest, to be repaid by the joint venture to Solitario out of 80% of Ely’s share of net proceeds from the joint venture.