Hecla to exercise Mooseland option (March 07, 1988)

Hecla Mining Co. of Canada has optioned the Mooseland gold property owned by Acadia Mineral Ventures. Under the terms agreed to by both companies, Hecla can earn a 60% interest by financing the project to production. Hecla must also pay Acadia $2 million in staged payments over a 30-month period and purchase 200,000 Acadia shares.

The Mooseland property, which is located in Nova Scotia, hosts reserves of 2.1 million tons grading 0.39 oz gold per ton. Hecla, which has become the project operator, will complete an underground evaluation of the deposit and a feasibility study. If the American company decides to end its involvement, its interest will be diluted to nil.

An invitation to earn a 60% interest in Acadia Mineral Ventures’ Mooseland property in Nova Scotia has proved too good to refuse for Hecla Mining Co. of Coeur d’ Alene, Idaho.

After taking five months to think it over, the U.S. outfit says subsidiary Hecla Mining Co. of Canada will exercise its option on one of the Maritime province’s most promising gold properties.

Located 45 miles northeast of Halifax, the property hosts possible reserves of around 2.05 million tons averaging 0.38 oz gold per ton.

But a backlog of around 1,000 drill samples, still waiting to be assayed, prevented Hecla from making a decision on whether to exercise its option by the original Jan 10 deadline. Due to the backlog, Acadia granted the U.S. company an extension.

“We felt the agreement was going to go through but you never know until the last minute,” said Acadia President Donald Smith.

As reported (N.M., Feb 15/88), results from a recent 45-hole drill program on Mooseland’s east zone have shown the best results from any gold property in the province.

Under a previous agreement, Hecla will assume project management and spend approximately $50 million needed to bring the property to a production decision by July, 1989. Production decision

But if at any time prior to a production decision, Hecla decides to bail out, it will do so without retaining any interest in the property.

“We were not in a position to deal with the heavy financing and share dilution needed to develop this project,” explained Smith who regards the agreement as a real boost to the region.

“Bringing a big company into the picture instills a great deal of confidence into the area as a possible gold producer,” he said.

After making an initial cash payment to Acadia of $200,000, and purchasing 200,000 Acadia shares, Hecla will make a series of payments totalling $1.8 million, representing 80% of the expenses that Acadia has incurred so far.

In addition, Hecla has the option to buy another 200,000 Acadia shares at $6 per share for up to one year, and another 200,000 Acadia shares at $7.50 within two years.

In the event of a positive production decision, Hecla will hold a 90% profits interest, while Acadia retains 10% until payback when profits will depend on the price of gold

Under the agreement, at a gold price of $460(US) and above, Hecla will share profits on a 60/40 basis. At a price of $400 to $460 the percentage changes to 68% and 32% respectively. Whereas at below $400, Hecla can earn 72% of profits while Acadia’s share drops to 28%.

After the necessary environmental permits are obtained, future work at Mooseland may include more surface drilling and an underground exploration program, says Smith.