Dundee Precious Metals Inc. plans to convert itself from an investment company to an operating gold miner. As a result, the company will pay $27.8 million to Dundee Wealth Management Inc. to terminate a management contract.

“The primary motivation for this change is to provide shareholders with advantages that will accrue from the quality of the company’s gold mining assets in Bulgaria,” Jonathan Goodman, president and CEO of Dundee Precious Metals, said in a news release.

The company acquired the Bulgarian assets last September, including Chelopech, an operating mine said to have measured and indicated reserves of 2.3 million ounces of gold and 6.5 million ounces of silver. Dundee plans to spend US$40 million to upgrade the mine in central Bulgaria, and is exploring a smaller play in eastern Bulgaria.

The company said changing from a closed-end investment vehicle to an operating company will benefit shareholders by realizing the potential of the Bulgarian assets and by reducing the discount between the share price and the net asset value of Dundee Precious Minerals.

The transformation involves terminating the company’s investment management contract with Dundee Wealth Management.

Dundee Wealth will receive 935,000 shares of Dundee Precious Metals with a current value of $27.8 million. Dundee Wealth also has an option to buy an additional 500,000 shares at $36.57 per share for 48 hours after the corporate transformation.

Dundee Wealth said its parent, Dundee Bancorp Inc., will buy the shares and the option for $27.8 million.