Seeking to become a mid-tier producer,
The Hunter Dickinson-led junior has inked a deal allowing it the right to buy a private South African entity, which holds an option to earn an 80% stake in the Burnstone gold property. The property covers 400 sq. km in the Witwatersrand goldfields and lies 100 km southeast of Johannesburg. Indicated and inferred resources total about 34.7 million tonnes grading 15.53 grams gold per tonne.
Under the deal, Great Basin can exercise its option and complete its purchase of the South African company by paying US$3.25 million in cash, and issuing 21 million shares and 10.5 million warrants in two staged tranches. The first tranche, which gives Great Basin a 49% stake in the company, involves US$2 million, 10 million shares and 5 million warrants payable by April 30, 2003. The junior can then acquire the remaining 51% by issuing 11 million shares and 5.5 million warrants by the end of January 2004. US$1.25 million is due on signing a definitive agreement, and the warrants are exercisable at US75 for one year. Great Basin has also agreed to fund an initial, US$1.5-million exploration program and is required to issue additional shares depending on the amount of gold reserves and production costs stated in an upcoming feasibility study.
The new program entails infill drilling, with results to be incorporated into the feasibility.
Great Basin’s Ivanhoe gold property, in Nevada, hosts an inferred resource of 719,000 tons grading 1.29 oz gold and 7 oz silver. Idaho-based
The partners are focusing on the Clementine-Gwenivere vein system, in the Hollister portion of the property. Hecla can earn a half-stake in this portion by spending US$21.8 million on a 2-stage development program. The first stage is to consist of a US$10.3-million program of underground development and drilling aimed at upgrading the resources into reserves. The second, US$11.5-million stage will attempt to develop the vein systems.
Great Basin envisions a 5-year underground operation capable of mining 600 tons per day and treating ore at a local mill. This would result in production of 170,000 oz. gold and 920,000 oz. silver annually. Cash costs are pegged at US$114 per oz. gold-equivalent, with total costs slated at US$134 per oz. gold-equivalent.
The economic model uses 50% mining dilution and carbon-in-leach processing with recoveries of 95% for gold and 90% for silver. Underground mining costs are estimated at US$55.50 per ton, and toll-mining charges would be US$25 per ton.
The capital cost for the proposed mine is projected to be US$22 million.
Hecla is engaged in engineering and permitting work in preparation for underground exploration of the gold veins. After permits are received, the company has one year in which to complete the first stage. The company then has 45 days in which to begin the second, which would last another year.
Once a final agreement is signed, Hecla will issue 2 million warrants to Great Basin and, in return, receive 1 million warrants in the junior. Hecla will also issue 1 million warrants upon completion of each work stage, and it will match that with 500,000 of its warrants.
The resource comprises seven veins hosted by Ordovician Formation rocks thrust over younger carbonate rocks.
Great Basin has working capital of $17 million, no debt, and 47 million shares outstanding.
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