UK-based mining company Patagonia Gold has signed a definitive agreement to acquire the Calcatreu deposit in Argentina from Pan American Silver.

The acquisition will be achieved through the purchase of all shares of a wholly owned subsidiary of Pan American for $15m.

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The development comes after Patagonia Gold secured an exclusive option to purchase the Calcatreu deposit in April 2017.

Under the agreement, Patagonia Gold will complete the payment in two tranches.

In the first tranche, the company will make a payment of $5m once the acquisition is complete.

The remaining $10m is expected to be paid on 18 May this year.

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“The deposit is understood to contain eight million tonnes at 3.04g/t AuEq for 780,000oz in the indicated category.”

This year, the company aims to advance the Calcatreu project by exploring the area immediately around the existing resource in order to enhance the resource.

According to the company, it would require around 12 to 18 months to generate and drill off known targets.

Upon closure of the acquisition, Patagonia Gold intends to carry out geophysical and geochemical surveys, which is expected to help in increasing the strike length of the system currently at more than 8km.

The company expects to undertake the development of the project using the proceeds obtained from a recent fundraising.

Based on an independent mineral resource estimate in 2008, the deposit is understood to contain eight million tonnes at 3.04g/t AuEq for 780,000oz in the indicated category, and an additional 255,000oz at 2.32g/t AuEq in the inferred category.