Shares of Tarsis rose more than 20% in early deals Wednesday as investors tuned into its stock, which gained 2.5 cents to sit at 14.5 cents on the TSX Venture Exchange.
The deal gives Osisko the right to earn up to a 75% interest by funding exploration and development of the property, and by making cash payments to Tarsis.
Its Erika property in Guerrero State, which spans 16,000 hectares, has seen “really encouraging drill results”, attests Tarsis CEO Marc Blythe, with 10 metres of just over a gram of gold. The property hosts Carlin-style mineralization – the type of gold that is seen in Nevada - says Blythe, and Tarsis believes it’s one of the only properties in Mexico with this style of mineralization.
The property is accessed by paved road via Federal Highway 95, which crosses the eastern boundary of the claims. Acapulco is 150 km south and Iguala is 47 km north of Erika.
“The asset has got everything in terms of infrastructure – roads, power line, and people. It’s very well set up, with Goldcorp sitting almost adjacent and Torex Gold one of our neighbours.”
Goldcorp (TSE:G) operating Los Filos gold mine, which is now Mexico's largest gold mine by output, lies 12 km south of the Erika property.
Under the terms of the deal, for an intial 51% stake, Osisko will pay Tarsis $1.0 million in cash over four years, and spend $4.0 million on property expenses over the same time period, including a firm first-year commitment of $500,000.
For an additional 24% stake, Osisko, which operates the Canadian Malartic mine in Quebec, will fund and deliver a feasibility study on the property within two years of earning the initial interest.
"We are very pleased to have attracted a well-financed and experienced mid-tier Canadian gold producer such as Osisko to our Erika project," added Blythe in a statement released late Tuesday.
"Completion of this option and joint venture agreement demonstrates the quality of the project and Tarsis' commitment to the 'prospect generator' business model supported by our shareholders."
Indeed, Tarsis is one of those “lucky few juniors with a little bit of cash”, says its CEO, whose company functions on a prospect generator model – meaning it seeks out prospective exploration projects to acquire, and then vends or options them to partners for development.
“It’s been really tough for junior companies to raise money that don’t have a niche, a management team with particular experience, or a project that is appreciated,” Blythe says.
“We have a strong group of supporters who like the prospect generator model, and for this reason, we haven’t had difficulties to date.”
Blythe points out that Tarsis has made efforts to maintain relationships with major companies that like its style of exploration or type of project, and could be sourced for financing.
Indeed, the company has strong backers. Kinross Gold (TSE:K) invested about a year and a half ago, and now has around a 9% stake, while Sprott’s Rick Rule has a more than 10% interest. Almaden Minerals (TSE:AMM) also holds over 10%.
And there is even more proof that Tarsis hasn’t had any trouble raising cash. Last October, it closed a financing for total proceeds of just over $1 million, raising double what it had originally anticipated. Backers in the offering included Sprott, and management, which holds a significant chunk of shares, among others.
Currently, Tarsis has nine properties in the Yukon, Canada and one in Mexico, where Tarsis today announced an option agreement. After completing the deal for Erika, the company's second priority this year is adding new properties in Nevada as well as in Mexico.