Heliostar Metals has agreed to buy the Mexican gold mining assets of Florida Canyon Gold, which were recently spun out of Argonaut Gold, for US$5 million.

The transaction makes Heliostar a gold producer via the San Agustin and La Colorada mines in Durango and Sonora, and adds to its Ana Paula development project in Guerrero, Mexico. It also grows its measured and indicated resource base to 3.5Moz, in addition to the Cerro del Gallo historical resource.

The transaction also eliminates up to $20 million in contingent milestone payments on Ana Paula, which became payable to Florida Canyon under the agreement through which Heliostar acquired it, improving its economics. It also cancels up to $150 million in conditional option payments and a 2% net smelter returns royalty on San Antonio, which might have become payable under the agreement through which Heliostar acquired an option on San Antonio.

"This acquisition is transformative for Heliostar.  … The addition of the two producing gold mines provides cash flow to bring new production online," said Heliostar Metals' chief executive Charles Funk.

La Colorada produces gold from residual leaching while on care and maintenance. San Agustin is an open pit heap leach gold mine and a closed open pit heap leach gold mine. Cerro del Gallo is an advanced gold development project in Guanajuato. San Antonio is an advanced gold development project in Baja California Sur.

Heliostar is in discussions to enter a loan facility to borrow $5-10 million to fund the transaction. It intends to service and repay the loan through cash flow from operations.

Earlier in July, Alamos Gold acquired Argonaut Gold for the Magino gold mine in Ontario, Canada, and spun the assets in the USA and Mexico into Florida Canyon Gold. The Heliostar transaction leaves Florida Canyon with the Florida Canyon gold mine in Nevada, USA.

Florida Canyon Gold began trading on the TSXV under the ticker FCGV on July 16. Alamos Gold owns a 19.99% stake in Florida Canyon.