Rio Algom acquires foothold in Continental Gold

The major mining company recently agreed to buy 573,353 shares of Continental Gold at $8 per share from Homestake Mining (NYSE) for a total consideration of $4.58 million.

When added to its previous open market purchases of 54,700 shares, Rio Algom will hold a total of 628,053 shares, or 8.6% of Continental Gold.

The agreement allows Homestake to receive (for a 9-month period subject to certain conditions) 75%-100% of the bid price in excess of $8 per share should Rio Algom or any other party complete a formal bid for shares of Continental Gold.

In addition, Rio Algom can purchase other rights held by Homestake, including rights to board representation and a pre-emptive right to buy about 8% of future Continental Gold share issuances.

Rio Algom is a partner with Teck Corp. and Cominco Ltd. in Highland Valley Copper which operates Canada’s largest open pit base metal mine near Kamloops B.C. The company, and its parent Rio Tinto Zinc, are considered world leaders in the operation of large-scale open pit mines.

Robert Dickinson, president, said drilling with four rigs is continuing at the Mt. Milligan property. Two of the rigs are continuing to outline a gold-copper deposit which at last report was 4,300 ft long, up to 3,100 ft wide and up to 880 ft thick.

Continental Gold said the deposit’s geometry and massive reserves make it well suited for large scale open pit development.

The company recently completed an airborne geophysical survey over the entire 42-sq-mi Mt. Milligan property, followed by ground geophysical and magnetic work to refine specific targets. With preliminary data from this work in hand, the company has two drill rigs at work testing the first of several new exploration targets on the property.

Meanwhile as in-fill drilling on the deposit continues, Cominco Engineering Services has started a pre-feasibility study for the Mt. Milligan project which is expected to be completed in October. The report will include the first independent reserve calculation for the deposit.

BP Resources Canada owns a 30% interest in the Mt. Milligan project.

]]>