Honey Badger Silver has signed a non-binding term sheet to acquire a 100% stake in the Cachinal De La Sierra Silver-Gold project from Canadian mining company Aftermath Silver.

Under the terms of the proposed transaction, Honey Badger will acquire all the issued and outstanding shares of Minera Cachinal, a subsidiary of Aftermath, which owns the silver-gold project.

The company will issue its shares worth C$1m ($0.8m), and an upfront payment of C$400,000 ($311,150) upon closing.

Honey Badger will pay C$452,000 after six months, C$400,000 on 21 May 2023 and C$400,000 18 months after the closing of the acquisition.

In addition, it is expected to grant a 1% Net Smelter Return (NSR) Royalty with an option to buy back for a purchase price of C$8.5m.

Honey Badger and Aftermath are expected to sign a definitive agreement for the acquisition, within the exclusivity period, that ends on 15 August 2022.

Honey Badger director and non-executive chair Chad Williams said: “We are very pleased to announce a further accretive addition to our growing portfolio of silver assets.

“Cachinal is a significant known silver resource located in a favourable jurisdiction. Moreover, its proximity to Austral’s Guanaco mine and mill complex may offer substantial synergies to advancing Cachinal to production in a timely manner.”

Cachinal is a low-sulphidation epithermal deposit located in the Cachinal de la Sierra area in the Antofagasta region (Region II), Chile.

The project is located about 40km east of the Pan American Highway, at an elevation of around 2,700m above sea level in the Paleocene Gold Belt of northern Chile.

The Paleocene belt hosts several significant gold and silver deposits, including Yamana Gold’s El Penon gold-silver mine and Austral Gold’s Guanaco gold-silver mine complex.

Shallow drilling at Cachinal defined the current mineral resources principally to a depth of 150m below the surface.

The drilling provides evidence to interpret the presence of high-grade shoots within the vein system extending below the base of a potential open pit.