Unable to come up with an additional US$1.1 million to increase a reclamation bond, BacTech Mining (BM-V) has forfeited its 55% stake in the Tonkin Springs open-pit gold project in Nevada.
The Nevada Bureau of Land Management ordered the increase to boost the bond to US$2.8 million. The increase reflects an audit of the project that took into account inflation.
BacTech’s stake reverts back to the original owner U.S. Gold (USGL-O); BacTech also relinquishes any obligations on the property.
BacTech originally acquired its stake in the formerly producing project from U.S. Gold for US$1.7 million in July of 2003. Under the deal, BacTech was also responsible for the first US$12 million worth of project funding; the company had spent US$3.9 million by the end of 2004.
Earlier this year, cash-strapped BacTech said it was pursuing restructuring options, including merging or selling its stake in Tonkin Springs.
In January, the former partners tabled a new operating plan for Tonkin Springs that envisaged initial annual production of 17,000 oz. gold from the Rooster deposit’s oxides; thereafter mining would target refractory sulphides at 1,500 tons per day. The production plan spans eight years, with average annual production pegged at 30,000 oz., based on 85% gold recovery (T.N.M., Jan. 21-27/05).
BacTech CEO Ross Orr says that at current prices the project is a wash: “you need a gold price of US$500 per oz. to make it work properly.”
“One of the issues we ran into was that metallurgical work on material from one of the pits didn’t yield recoveries matching those in the feasibility study completed by Micon,” says Orr. “That removed around 200,000 oz. of gold from the 525,000 oz. of gold on the production side.”
Micon previously estimated the project’s total reserves at 10.7 million tons averaging 0.06 oz. gold per ton, or 646,000 oz. gold.
The Tonkin Springs project covers 93 sq. km immediately south of the Cortez joint venture between Placer Dome (PDG-T) and Rio Tinto (RTP-N). Placer is the operator and 60%-owner of that joint venture.
Orr says BacTech continues to pursue several options including a possible merger or share placement. “We’ll pick ourselves up by the bootstraps and move on now.”
Denver-based U.S. Gold says it has several parties interested in a possible stake in the project; the company is also considering a merger itself.
BacTech shares have been on the slide since mid-March, when the Bureau of Land Management ordered the increase to bond. The shares were off a penny at a new 52-week low of 5.5 in late afternoon trading in Vancouver following the news on April 12. Shares in U.S. Gold were US11, or 31%, better at US46 in over-the-counter trading.
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