Franco-Nevada buys Interlake’s Hemlo property

Toronto-based Franco- Nevada Mining (TSE) has acquired what it considers to be a promising long-term prospect to supplement its royalty interest in American Barrick Resources’ (TSE) Goldstrike gold mine in Nevada. By spending $1.65 million to purchase International Interlake Industries’ (VSE) 100% stake in 31 Hemlo, Ont., gold claims, Franco-Nevada is betting that the Interlake property will come into production just as Goldstrike passes its peak.

Franco-Nevada holds a 4% net profits and 5% net smelter royalty stake in Goldstrike where Barrick is spending $365 million to increase production to 900,000 oz. annually from last year’s 207,000 oz.

The 620-acre Interlake property is thought to host the deep extension of at least two gold zones that are currently being mined by Hemlo Gold Mines (TSE) at the Golden Giant mine and partners Teck (TSE) and Corona (TSE) at the Williams mine. Last year, Golden Giant and Williams produced about 900,000 oz. gold.

Teck and Hemlo Gold have spent around $7 million since they optioned the Interlake project in 1983. During a 5-hole program in 1988, they intersected 29.5 ft. of grade 0.26 oz. gold per ton from 7,995.3 ft. to 8,024.8 ft. down the hole at a vertical depth of 7,380 ft. within the stratigraphy of the Williams mine.

But the depth of the intersections and a 40% net profits royalty held by International Interlake persuaded Teck and Hemlo to give up the option even though the property is estimated to host three million tons of grade 0.24 oz. between the 3,280 ft. and 8,500 ft.

Although Franco-Nevada has no plans to drill the Hemlo property, a deal may eventually be worked out in which the claims are mined as an extension of either the Williams mine or Golden Giant mine.

Under the new agreement, Franco-Nevada’s 100% interest is subject to a 2 1/2% net smelter royalty to the company’s sister company Euro-Nevada Mining (TSE).