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ASX-listed Middle Island Resources has executed a heads of agreement (HoA) relating to divesting its 100% interest in the Reo gold project in Burkina Faso, West Africa to TSXV-listed Tajiri Resources Corp.

If completed, the Reo project transaction would represent the divestment of Middle Island’s remaining gold interests in West Africa, allowing the company to fully focus on its advanced Sandstone gold project development in Western Australia.

The transaction will be undertaken via an option to purchase agreement in which Tajiri Resources will pay Middle Island Resources US$35 000 on execution of the HoA in return for a three-month exclusivity period in which to complete its due diligence.

On satisfactory completion of due diligence and signing of a formal option to purchase agreement, the essential terms of which are set out in the HoA, Tajiri is required to pay a further $150 000 and issue to Middle Island 2.5 million Tajiri shares.

By that agreement, Middle Island will grant Tajiri an exclusive option to purchase Middle Island’s entire interest in the Reo project.

The term of the option is 18 months. During the option term Tajiri must pay all expenses associated with maintaining the Reo Project permits in accordance with Burkinabe law.

Should Tajiri elect to exercise the option, it will pay a further $150,000 and issue Middle Island with a further 2.5 million Tajiri shares.

If Tajiri has not exercised the option within 12 months, it will be required to pay $50,000 to Middle Island as a non-refundable advance on the option exercise cash consideration, with the balance of $100 000 payable if the option is exercised during the remaining six months of the option term.

If the option is exercised within the first 12 months the full $150,000 is payable on exercise.

The stipulated number of shares the subject of the two tranches to be issued to Middle Island were calculated on a fully diluted basis based on Tajiri’s current capital structure, with additional shares to be issued to Middle Island at no cost if Tajiri issues further shares or options prior to exercising the option.

If the option is exercised by Tajiri, Middle Island will retain a 2% net smelter return (NSR) royalty on any minerals derived from the Reo project. Tajiri will have the right to acquire that royalty from Middle Island for US$5 million. If the option is not exercised by Tajiri, Middle Island will retain all consideration already paid to Middle Island and it will continue to own its 100% interest in the Reo project.

“The transaction structure allows Middle Island shareholders to retain a significant indirect interest in the upside potential of the Reo project via the Tajiri equity and royalty components,” says Middle Island MD Mr Rick Yeates.

The full equity component, which will represent some 8% of Tajiri’s issued capital on a fully diluted, post issue basis, also offers shareholders considerable exposure to Tajiri’s highly prospective gold project interests in Guyana, South America.

“Middle Island looks forward to working closely with Tajiri to facilitate remaining aspects of the due diligence and documentation, in order to complete the transaction and progress the Reo project towards feasibility,” says Yeates.