Juniors take over New Britannia (October 10, 2006)

Vancouver-based juniors Garson Resources (GARR-C) and Piper Capital (PCL-V) have agreed to acquire the dormant New Britannia gold mine in Snow Lake, Man., from Kinross Gold (K-T, KGC-N) and High River gold Mines (HRG-T).

The acquisition is a three-part deal in which High River exchanges its 50% interest in New Britannia to a private company, Pegasus Mines, in exchange for Pegasus assuming High River’s share of New Britannia’s project debt. Pegasus, which is affiliated with the two juniors, then gets 1.1 million shares of Piper and 720,000 shares of Garson for High River’s half of the project.

For its half, Kinross gets 19.9% interests in both Piper and Garson, to include 19.9% of any convertible securities the two juniors issue between signing and closing a final purchase agreement. The purchasers also put up a $1.9-million assurance with the Province for closure obligations, and issue a $3.9-million letter of credit to Kinross. The letter of credit is refunded when the mine, which shut down in 2005, returns to commercial production.

Piper would hold 60% of the joint venture and Garson 40%. The two plan to drill the New Britannia No. 3 zone, where an inferred resource of 220,000 tonnes grading 7.1 grams gold per tonne has been outlined.

Kinross gets a seat on each company’s board, and has a back-in right in the event a 3-million-oz. resource is proven on the property.

At the end of 2004, the mine had an indicated resource of 2.2 million tonnes grading 5.1 grams gold per tonne and an inferred resource of 1.1 million tonnes grading 5 grams per tonne, including the No. 3 resource the partners plan to test.

The property is about 75 sq. km in size and adjoins Garson’s property at Squall Lake immediately to the north. There, an old resource calculation put the size of a separate gold deposit at 437,000 tonnes grading 5.3 grams per tonne. Resource estimates that comply with current securities regulations are being calculated.