09:14 AM EST, 03/05/2024 (MT Newswires) -- Cerrado Gold Inc. ( CRDOF ) earlier on Tuesday entered into an option agreement with Amarillo, a wholly-owned subsidiary of Hochschild Mining PLC, whereby Cerrado has granted to Amarillo the option to purchase a 100% interest in the company's Monte Do Carmo project located in the State of Tocantins, Brazil, for total consideration of US$60 million (approximately C$80 million), subject to the fulfilment of certain conditions.

According to a statement, the purchase price would be payable in the following stages:

1. US$15 million, initially advanced by way of a 10% interest-bearing secured loan, of which US$7 million has been advanced as of the date of the grant of the Option (March 4, 2024), US$1 million may be advanced within 60 days, and the balance of US$7 million may be advanced two days following the mailing by Cerrado to its shareholders of a notice of meeting and management information circular in connection with a meeting to approve the Proposed Transaction to be held by June 30, 2024. Upon the Cerrado Shareholder Approval being obtained, the Signing Loan, together with all accrued and unpaid interest thereon and expenses relating thereto, shall be deemed to be repaid in full by Cerrado by the concurrent set off of an amount equal to the Signing Loan due by Amarillo as part of the Purchase Price. If Cerrado fails to secure the Cerrado Shareholder Approval on or before June 30, 2024, the Signing Loan will mature on September 30, 2024.

2. An aggregate of US$45 million, payable in four installments over the next three years, approximately, as further described.

During the Option Period (as defined) Amarillo will take operational control of the MDC Project and has committed to spending a minimum of US$5 million in qualifying expenditures, the statement added.

Mark Brennan, CEO and Chairman, said: "The Proposed Transaction improves Cerrado's immediate short-term capital position and addresses short-term working capital needs while injecting development capital into the Minera Don Nicolas project. Going forward, Cerrado will be well capitalized with a strong gold production profile and leaves the Company positioned to pursue growth programs at our operating Minera Don Nicolas gold mine and our Mont Sorcier high grade iron project."

He added, "In just five years at MDC, the Cerrado team has defined a proven mineral reserve of approximately 1 million ounces of gold, has completed a robust Feasibility Study, is in the final stages of permitting approval, and has attracted strong capital partners for the majority of a potential project debt construction funding. Despite the achievement of these significant milestones, the company has been unable to raise the funds necessary to reach the final investment decision for construction. The lack of liquidity and capital available to junior mining companies over the last six to nine months has been unprecedented."