To acquire the mine project, Rea Gold will now pay Cassiar Mining $3.2 million in cash (up from $1 million in the original agreement), issue two million of shares at $5 per share, and by debt of $1.8 million (down from $4.0 million) secured by a convertible debenture with interest at 8% annually.
The debenture has a term of five years and is convertible into common shares of Rea Gold at $5.50 per share for the first 18 months, and $6.75 per share for the balance of the term. The debenture will be secured by a fixed and floating charge on the Bissett Gold assets with Rea Gold having the right to give prior charges to secure financing for the proposed development program and production. In addition, Rea Gold has the right to call (for 12 months after the close of the purchase) a loan from Cassiar to Rea Gold of up to $6.2 million (up from $4 million) to be secured by an additional convertible debenture on the same terms as above.
The purchase and sale is conditional upon satisfactory due diligence by both parties, regulatory and board approvals and Cassiar having the right to participate at least pro-rata in any future equity financing by Rea Gold.
Rea Gold has engaged a number of firms to assist in its investigation of the economics of the mine project. The review will include an audit of ore reserves, investigate mining methods, review the milling process and waste management and estimate operating and capital requirements.
The Kilborn Engineering feasibility study commissioned by Cassiar in February 1988 reports that proven and probable reserves are 1,320,000 tons grading 0.233 oz gold at an in-place dilution of 10% at zero grade. The study recommends production at 500 tons per day from the existing mine and new (1982) mill facilities. The Bissett gold mine, formerly known as the San Antonio mine, produced 1,360,000 oz gold from 4.9 million tons of ore from 1932 to 1968.
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