Australian companies in deal Control of Cinola changes hands

Barrack is a diversified mining company which plans to produce about 120,000 oz of gold this year from its three operating mines. The company also has investments in silicon metal and copper production and an extensive property portfolio.

City Resources Canada (TSE) owns 100% of the Cinola gold project, however a series of transactions will result in Barrack controlling about 54.1% of City Canada. The transactions will also provide Barrack with an option to directly acquire 50% of the Cinola project, however this is still subject to minority shareholder approval.

Through its 97%-owned subsidiary, Central Coast Exploration (CCE), Barrack agreed to buy 25.1% of City Resources Australia’s shareholding in City Canada and a further 24.6% of City Resources Asia’s shareholding in City Canada.

CCE also agreed to a placement of two million units (one share and one warrant) in City Canada at a price of $1.31 per unit. Companies in the City Resources group are reported to be experiencing financial difficulties.

Barrack’s agreement with the City Resources group also gives it control of City Australia and that company’s mineral project portfolio in Australia, Papua New Guinea and the South Pacific. David Paice, managing director of Barrack Mines, will serve as president and chief executive officer of City Canada on an interim basis. City Canada’s board will soon include three representatives from Barrack.

With mineable reserves of 27.3 million tons of 0.072 oz gold, City Canada was planning a 6,660-ton- per-day open pit operation with an over-all stripping ratio of 2.45:1 waste to ore. The mine was targeted to produce 185,000 oz of gold in its first year, 167,000 oz in its second, and about 146,000 oz per year thereafter.

A feasibility study completed late last year estimated that initial capital costs would be about $119 million, plus $52 million in deferred costs that would be expended over the 12 years of operation and two years of reclamation.

Heavy capital costs aside, the Cinola project has been under fire from environmentalists and some native groups because of its environmentally sensitive location on Graham Island in the Queen Charlottes. Concerns have been raised about the project’s impact on water quality and fisheries because of open pit mining and the treatment process required to liberate the gold from the refractory ores.

Because of these and other concerns, the British Columbia government has ordered a full public review of City Canada’s mining and environmental studies. The company’s work and the government’s technical commentary are to be discussed with a number of interested parties at a public meeting later this summer before a mine proposal goes to Cabinet for a decision.

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