Globex to buy stake in Tonkin Springs

Globex Mining Enterprises (TSE) has entered into an agreement that could see the company acquire a controlling interest in Gold Capital Corp., which operates and owns a 60% interest in the Tonkin Springs gold project.

Gold Capital and its parent, Royalstar Resources (VSE), report that the project, in north-central Nevada, has minable, proven and probable gold reserves of 956,000 oz. plus a possible resource of 409,000 oz. Included in this reserve is an oxide zone of 4 million tons averaging 0.033 oz. gold per ton. Royalstar states the sulphide reserves are minable by open-pit methods.

According to Globex President Jack Stoch, several factors led to the deal. “Along with the almost 1 million oz. in reserves, we’re also getting a 33-sq.-mile land package on the Battle Mountain trend,” he explains. “Only 3.5 sq. miles have been explored there, so there’s a lot of blue sky potential.”

Globex will also acquire the existing infrastructure, valued at US$56 million, including a milling complex with a carbon-in-leach capacity of more than 1,500 tons per day. “The infrastructure is really what makes this deal go.”

Ore will be processed using bio-oxidation heap-leaching technology before being processed at an on-site mill. Preliminary tests suggest gold recoveries will be in the order of 80-85%. All permits are in place and the predevelopment work, including prestripping, has been completed.

The agreement is subject to a 90-day due diligence review in addition to any necessary regulatory or shareholder approvals. “Were looking at completing due diligence in 45 days and, if it holds up, we should be mining 85,000-110,000 oz. per year soon,” Stoch says.

To earn Royalstar’s interest in Gold Capital, Globex will issue 3.5 million shares to Royalstar, which will then be distributed to Royalstar shareholders under a plan of arrangement. It is expected that shareholders will receive one Globex share for every 4.25 Royalstar shares held.

Globex is also required to spend US$8-12 million on development at the Tonkin Springs site. In addition, it will immediately invest US$150,000 in Gold Capital by way of a private placement in the U.S.

According to Ken Berry, director of Royalstar, the deal is a good one for shareholders. “Basically, our original investment of US$5 million has increased in value to about US$17.2 million,” he says. “Tonkin Springs needs US$5-6 million to be put into production, and Globex has committed to spending at least US$8 million, so we will have the necessary funding to develop the project.”