El Cubo is about 8km by road from VanGold's flagship, historically producing El Pinguico silver-gold project.

Under the agreement, which is subject to approvals, VanGold would pay $15 million in a mix of cash and shares within 12 months, with Endeavour to become its major shareholder with 16.1%.

VanGold would also pay up to a further $3 million in contingency payments, based on future production and gold price movements.

The junior, which had C$4.9 million in cash at September 30, said it had signed an indicative term sheet with a Swiss based metals trading firm to provide US$7.5m of financing in the form of a gold and silver loan to support the acquisition.

"VanGold estimates the amount of gold and silver required to repay this loan facility will represent approximately 33% of the projected gold and silver to be recovered by VanGold from operations at the El Cubo mill during the 12-month repayment period of the loan," it said.

Endeavour had suspended El Cubo in November 2019 after determining its reserves and resources were exhausted.

VanGold said it intended to restart the mill at about 750 tonnes per day, using mineralised material from its surface and underground stockpiles at El Pinguico as a significant portion of the estimated throughput for the first 36 months of operation.

El Pinguico had an underground stockpile estimated in 2012 by the Mexican Geological Survey agency at 148,966 tonnes, with 2017 trenching by VanGold returning a weighted average of 1.75g/t gold and 183g/t silver.

Director Daniel Oliver said described El Cubo as a transformational acquisition.

"Our preliminary internal financial model shows a swift path to restarting production, a favourable payback period, and robust cash flows with silver at US$23 and gold at US$1850/oz," he said.

Chairman and CEO James Anderson said after working well with the Endeavour team during VanGold's 1,000-tonne bulk sample in June 2020, "it became clear that El Cubo would be the perfect production fit for VanGold".

"The availability of mineralised material from El Pinguico's surface stockpile, El Pinguico's underground stockpile, El Pinguico's remaining high grade historical stopes and pillars, as well as El Cubo's historical resources gives us great flexibility in deciding where to source material for the mill, and how to sequence that throughput," he said.

In a January update, Endeavour had said El Cubo had a measured resource comprising 19,000t at 224g/t silver and 1.89g/t gold for 236,000oz silver-equivalent, plus an indicated 382,000oz Ag-eq and an inferred 4.67Moz Ag-eq.

VanGold shares (TSXV: VGLD) were in a trading halt on Friday. They last changed hands at C27.5c, valuing it $29.5 million (US$23 million).

Endeavour, which has three mines in Mexico, saw its share price close down 0.88%, capitalising it at $891 million (US$694 million).