Rea options advanced project in eastern Nevada

Under an option agreement, Rea Gold (TSE) can acquire the Mount Hamilton gold project in eastern Nevada.

Rea is completing a due diligence review which should be finished early in the first quarter. It will include 14,000 ft. of reverse-circulation infill and exploratory drilling.

About 11,000 ft. of drilling is planned for the NE Seligman 1 & 2 deposits, plus 3,000 on the southward extension of the Centennial deposits. Minable reserves at Centennial are estimated at 4.4 million tons grading 0.049 oz. gold and 0.49 oz. silver per ton. Minable reserves for the entire project are estimated at 9.04 million tons grading 0.052 oz. gold and 0.37 oz. silver, with an overall stripping ratio of about 5-to-1. Rea can maintain the option for up to a year by paying US$200,000 per quarter. To exercise the option, Rea must pay US$5.25 million plus a 2.5% net smelter return capped at US$2.5 million.

The project is in an advanced stage, with all major permits in place, and could be in production as early as the fall of 1994. The vendor, Costain Minerals, completed a detailed feasibility study which pegged the capital cost of a 1.2-million-ton-per-year heap-leach operation at about US$12 million. Cash operating costs are estimated at US$260 per oz. and yearly production is projected at 50,000 oz. gold and 193,000 oz. silver. Rod Shier, chief financial officer, is confident financing for purchase and development of the project can be arranged and noted that the company has already been approached by brokerage houses.

Meanwhile, at the company’s Bissett Gold project in Manitoba, Rea has received new mine status under Manitoba’s Mineral Exploration Incentive Program.

The company is raising $3 million for Bissett through a flow-through private placement of common shares at $1.60.