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KINNGUAK/BATHURST INLET - Sabina Silver Corp has entered into a $7-million purchase agreement with Dundee Precious Metals, snapping up the company's assets near Sabina's Hackett River Project, located roughly 100 km south of Bathurst Inlet.

While Dundee indicated last October all lights were green on its Back River Project, the company's president said it decided to sell its Wishbone and Back River claims to focus on its core exploration projects in Bulgaria.

"We really do like the Back River assets, but you have to recognize something about developing an asset in the North: you need a critical mass," said Jonathan Goodman, president and CEO of Dundee.

"With all the infrastructure and costs, you have to have something that's going to be able to cover the large up-front costs," he added.

In other words, you need a big project backed by a company with oomph before it's financially feasible to build needed infrastructure such as roads and ports.

While Sabina's Hackett River Project is large enough to stand alone, the company is hoping the new, substantially larger project will become an economic driver in the TK region.

"Right off the bat the combined project has a better shot than either their project or our project alone," said Goodman.

The company has indicated as it continues to build infrastructure on the project, it will consider ways - possibly through a service fee or toll system - to allow otherwise uneconomic projects access to facilities they cannot afford to build on their own.

The deal "not only gives Sabina the opportunity to positively impact the economics of our own projects, but also potentially have a strong influence on mining in the region," according to a company report.

The new combined properties will cover about 3,000 square km along a largely unexplored greenstone belt, home of many base and precious metal deposits such as gold.

Under the conditions of the agreement, Dundee will continue to own a small share of the project's assets. The company also received 17 million shares in Sabina as part of the agreement.

"From our perspective, (it's) would we rather own a smaller percentage of something much bigger or a 100 per cent of something much smaller?" said Goodman.

"Given that the thing much bigger has a much better chance of making the grade or making the cut over the long term," the answer should be clear, he added.

Goodman said he is confident in Sabina, which developed Miramar Mining's Hope Bay greenstone belt in the same area.

"We think they're one of the top exploration groups in Canada, particularly when you're looking at Northern Arctic exploration," he said. "They know what they're doingand they know how to do it."

Goodman agreed the new, bigger project will also be better for the surrounding communities.

"The surrounding communities they get their big benefit when their project proves itself to be economic," he said, adding the chance for success is much better now after the Back River sale.

"We're very excited about this deal. We think it's a win-win for everybody," said Goodman.

Sabina did not return calls for comment by press time.