McFinley buying back in Red Lake gold project

McFinley Red Lake Mines, which holds a 50% stake in the McFinley gol d project, will purchase the remaining 50% stake from partners Phoenix Gold Mines and The Coniagas Mines. The purchase price is $3 million and 500,000 common shares of McFinley. Coniagas will also hold a 10% net profits royalty to a limit of $5 million after McFinley has recovered its costs.

The property, located near Red Lake, Ont., hosts geological reserves of 334,007 tons grading 0.2 oz gold per ton. In order to finance the 50% purchase and the construction of a 150-ton-per-day mill, the company is planning to issue 1.5 million shares to Kleinwort Grieveson and Co., a British investment house. The shares trade in the $4 range on the Toronto Stock Exchange. Another $3.2 million will be raised via a flow-through issue of shares.

Costing $1 million, the mill will enable McFinley to complete a bulk sampling program. If the testing of a 5,000-ton sample confirms the ore grades, the mill will be modified for production, the company says.

In the past, the company has encountered problems in determining grades due to a strong nugget effect caused by coarse gold.

McFinley hopes that bulk sampling in the company’s own facility will help determine a confident grade.