Pacific Bay Minerals (PBM.V) on Tuesday said it signed a non-binding letter of intent (LOI) with Appian Capital Advisory to buy all of the Pereira-Velho gold prospect in Alagoas State, Brazil, containing 11 mineral claims totaling 14,596 Hectares.

The company said the terms include paying $710,000 in cash payments and $700,000 worth of shares or cash, at the company's discretion, to be issued in two tranches.

The company said the area's mineralization consists of free gold hosted in hydrothermal quartz veins associated with a shear zone positioned between gneisses and a banded iron formation at the foot and hanging walls.

"My prior experience with the project underscored its outstanding economic potential and scale, making this acquisition a pivotal step forward. With this purchase, we are strategically positioned to advance the project and unlock significant value for our stakeholders," said Pacific Bay Minerals VP Exploration Elton Pereira. "I view Alagoas, Brazil, as an excellent mining jurisdiction, and I am eager to revisit and further explore this promising project."

The company said that the LOI gives the parties until Jan. 31, to complete a due diligence, determine the final structure of the acquisition and to enter into a binding, definitive agreement.

Under the proposed deal, Appian will retain a 1.5% net smelter royalty on production from the project that can be bought back by Pacific Bay at any time for US$3.5 million.

Appian will be subject to an ownership restriction of 19.9% and have agreed that, if at any time an issuance of shares pursuant to the option agreement would result in Appian holding more than 19.9% of the issued and outstanding common shares, Pacific Bay shall reduce the number of shares issuable to Appian and substitute cash consideration for the unissued shares, the company said in a statement.

Pacific Bay Minerals added that there will be no change of control nor change of management in connection with the acquisition.

Shares of the company were last seen flat at $0.050 on the TSX Venture Exchange.