Junior Golden Crescent strikes survival’ deal with Placer Dome

Among the juniors fortunate to make a deal with a senior is Golden Crescent Resources (ASE), which is earning a 49% interest in 26 exploration properties in northern Ontario belonging to giant gold- producer Placer Dome (TSE).

Golden Crescent must spend $7 million over a 3-year period on exploration work to earn the 49% interest (or a 30% net profits royalty should it so choose). In return, Placer has bought 600,000 shares of the junior at 50 cents per share and has the right to acquire up to 5 million shares of Golden Crescent over five years at prices ranging between $1.50 and $7.50 per share.

“It’s good for them and great for us,” William Dickie, vice-president of Golden Crescent said of the agreement signed earlier this year. “We take the risk out of the front end.”

For President Vance White, the deal with Placer is an investment for the future aimed at the survival of his company into the 1990s and beyond. It is a recognition, he said, flow-through financing for exploration would be in short supply unless a company had an interest in a property or properties of merit.

Flow-through financing, which gives tax benefits to the investor, was in its heyday in 1987 and 1988. Changes to the scheme introduced by the federal government beginning this year have seen a drastic reduction in the amount of flow- through money coming available.

White said he expects the prospects for flow-through financing will improve this autumn with the end of the tax year approaching, and because of the recent publicity surrounding the Aur-Louvem and Calpine-Consolidated Stikine projects and other exploration plays.

With an emphasis on gold exploration, Golden Crescent plans an initial expenditure of $1.5 million exploring seven of the optioned properties. It is hoping to raise most of that funding, $1.2 million, through a private placement of flow-through shares.

Successfully raising those funds and completing the planned work, with hopefully encouraging results, should make it easier next year to obtain additional exploration financing, White said.

Under the agreement, Placer is the operator of the work programs. Among the early exploration targets are the Talbot Lake, Key Lake Option (former producer), Border/ Hopper and Dome Twp. properties.

The deal also allows Placer to earn (a back-in arrangement) a 51% interest, by initiating a production feasibility study, in Golden Crescent property hosting two former gold producers (the Golden Gate and Crescent mines) in the Kirkland Lake gold camp. Golden Crescent spent $650,000 on exploration on the Swastika property in 1988.

“We don’t know of any junior which has such a dynamic package,” Dickie said.

John Morganti, Placer’s manager exploration for eastern Canada who sits on the board of directors of Golden Crescent, said striking up exploration agreements with juniors “is a method of ensuring our success.”

Placer Dome, created in 1987 through the amalgamation of Dome Mines, Campbell Red Lake Mines and Placer Development, has some 200 “active” projects out of about 430 explorations properties in eastern Canada.

Two other recent Placer exploration agreements of note are the ones signed with QPX Minerals (TSE) and VSM Exploration (ME).

In the former’s case, Placer (along with MindQuest Exploration Associates and GoldQuest Partners) chose to form a new public company called QPX which has a small portfolio of (mainly gold) properties in British Columbia, Ontario and Quebec. The QPX agreement features a Placer back-in option and a plan for 100% production financing by Placer.

Main property target is the QR gold deposit near Quesnel, B.C., in which QPX is earning a 50% interest.

In northwestern Quebec, Placer became the majority shareholder in VSM by subscribing to six million flow-through shares of the junior at 50 cents each. VSM struck a deal with Serem-Quebec, a French- controlled mining company, giving VSM an option to acquire a 50% interest in 54 properties in Quebec in return for spending $8 million on exploration work.

VSM is concentrating its efforts on four of the properties. In particular, drilling continues on the promising base-metal Grevet M project near Matagami, Que.

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