Canamax bids for 100% of Ketza

The Ross River, Y.T., gold mine recently became the subject of a lawsuit after Belmoral Mines (TSE) of Toronto elected not to proceed with the purchase of Canamax’s 50% interest in the property.

As part of the deal, Belmoral was also set to acquire the outstanding shares of Pacific Trans-Ocean (PTX) plus the $13 million which PTX owed to Lloyds Bank PLC and Central Capital Corp. of Toronto.

Belmoral has said that the mine’s production potential was misrepresented. Canamax says it is suing Belmoral for breach of contract.

When the new agreement closes, Canamax will become sole owner of the mine, which has produced 17,246 oz gold since it went into production last July.

Under agreements with PTX, Lloyds and Central Capital, Canamax will pay out $425,000 in cash, approximately 1.4 million Canamax common shares at about $3.50 per share and 950,000 Canamax share purchase warrants.

Of that amount, PTX is scheduled to receive 370,000 Canamax common shares and 325,000 share purchase warrants. Each warrant will entitle the holder to purchase one common share of Canamax at an exercise price of $4.75 for two years.

A $200,000 cash payment and additional payments of $35,000 per gold pour at the Ketza mine during April to a maximum of $70,000 will be paid to PTX as well pending regulatory and shareholders approval.

“Based on existing oxide ore reserves, we have an operating plan in place through to the end of 1990,” said Wayne Lenton, Canamax’s recently appointed president.

“Continued operation beyond 1990 is dependent on future gold prices, our success in increasing oxide ore reserves and the results of our ongoing evaluation of processing the substantial reserves of sulphide-hosted gold mineralization known to exist on the property,” he said.

After an incorrect specific gravity ratio was used to calculate reserves during the original feasibility study, oxide reserves were reduced to between 250,000 and 275,000 tons grading 0.35 oz gold per ton from the original 460,000 tons grading 0.45 oz.

The property also hosts an additional sulphide reserve inventory of 530,000 tons grading 0.312 oz.

When the transaction closes in about 10 days, Canamax will acquire PTX’s 10% net operating profits interest at Ketza, while undertaking to discharge all of the Alberta company’s obligations to Lloyds and Central Capital.

“The mine needs a single owner and the agreement takes a lot of the uncertainty out of the operation,” said Canamax spokesman John Pearson. PTX claims that the Ketza mine is capable of producing 36,000 oz gold this year, but Pearson declined to comment on that prediction.

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