In March 2013, Bear Creek Mining entered into an option agreement to acquire a 100% of the 3,500 hectare Maria Jose gold property, located in Ancash, Peru. Bear Creek subsequently signed an option agreement with AMS, a Peruvian tunneling contractor and gold producer, providing for a future joint venture to explore and develop the Maria Jose gold-quartz vein system. AMS is required to complete 2,000 meters of tunneling and cross-cuts in the vein systems, at its cost, to earn a 51% undivided interest in the mineral concessions. Following AMS earning its 51% interest, the two parties will form a joint venture agreement. This arrangement allows Bear Creek to minimize its exploration costs while maintaining a meaningful ownership interest in the property with a reputable operating partner.
In December 2015, Bear Creek and AMS acquired a 100% interest in the underlying owner of the Maria Jose property and as a result, now jointly own the Maria Jose concessions with no underlying royalties. Under the property purchase agreement there is an obligation to pay an additional $2.1 million to the former property owner upon commencement of commercial production. The $2.1 million is payable by the Company and AMS in proportion to their respective joint venture interests.
To date, AMS has secured surface rights agreements with the local community and built an access road to the planned tunnel portal sites. AMS recently received the required permits and expects to begin the tunneling work during the fourth quarter of 2018.