Vancouver — A letter agreement sets the stage for
The proposed $25.9-million acquisition comes as the vendor
Subject to due diligence and other conditions, Century will acquire the mine complex by paying $5 million on closing, and the balance of $13.5 million in 16 equal semi-annual payments starting in 2006. The payments will consist of cash, shares and long-term debt assumptions.
Century President Margaret (Peggy) Kent (previously Witte) says the proposed deal is “the first step” in building Century into a mid-tier gold producer through acquisitions of current and past-producing mines, as well as advanced projects.
“We’re excited about the opportunity because the cash component of the purchase price is only $6.3 million,” Kent says, “and we believe we could have the mine up and running within three to four months of closing.”
The proposed deal is a coming-home of sorts for Kent and long-time partner Ross Burns, who spent most of the late 1980s and 1990s acquiring and turning around struggling mines held by their then- flagship company, Royal Oak Mines. But it’s a strategy with inherent risks, as Kent discovered when Royal Oak was forced into bankruptcy through a combination of weak metal prices and various operating and mine-building problems.
Asked whether Royal Oak’s mixed track record would hamper Century’s efforts to raise $10 million to acquire and revive Sigma-Lamaque, Kent appeared confident this would not be the case. She noted that the gold price was US$254 per oz., and copper prices, a mere US68 per lb., when Royal Oak was forced into bankruptcy during the start of production at the Kemess gold-copper mine in northern British Columbia. The mine is now operated by
“We feel vindicated because Kemess is a success story that exceeded our cash-flow projections,” Kent says. “We had the misfortune of low metal prices, and being caught with a lender intent on acquiring the asset.”
Kent concedes there will be challenges reviving Sigma-Lamaque, given the previous operator’s experiences of head-grades well below what had been indicated by drilling.
“It’s identical to problems we [Royal Oak] faced at Colomac,” Kent says. “We understand what we have to do in terms of re-modeling the deposit, because we’ve done it before at Colomac, and at the Super-Pit in Timmins. We have experience mining challenging orebodies, and we’re confident our team has properly assessed the potential of the Sigma and Lamaque deposits.”
Century projects that the Quebec mine complex could produce more than 100,000 oz. gold annually at a cash cost of under US$290 per oz. Kent notes that considerable prestripping has already been done, and that the mill has been modified and well-maintained.
Assuming the deal closes in July, as expected, Century would first carry out a surface program of infill drilling over the pit area, and then re-model the deposit so as to get a better handle on grade. Changes to some of the mining equipment will be examined, along with various options to reduce operating costs.
Kent says Century will also examine custom milling and joint-venture opportunities in the Val d’Or mining camp. At the same time, the company intends to explore the land package surrounding the Sigma-Lamaque mine complex.
Century has already acquired gold projects in Alaska, including the past-producing Treadwell gold mine, and has an option to acquire the dormant Carolin mine, near Hope, B.C.
“Those are projects with a long lead time,” Kent says. “Sigma-Lamaque gives us the opportunity to be back into business again, and we’re excited about that.”
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