Echo Bay, Muscocho face roadblock from Windarra

A partner in the operating Magnacon gold mine near Wawa, Ont., says it has the right of first refusal to purchase an increased interest in the project. Windarra Minerals (TSE), with an original 25% interest, says it is considering exercising the right in light of an offer by Echo Bay Mines (TSE) to purchase half of the interest in the mine owned by Muscocho Explorations (TSE) and Flanagan McAdam Resources (TSE).

Associated companies Muscocho and Flanagan McAdam combined have a 75% interest in the mine. Windarra says its right of first refusal would allow it to purchase a further 37.5% interest, giving it 62.5% ownership, and permit it to become operator of the mine.

Windarra, whose major shareholder is Hemlo Gold Mines (TSE), says it has hired Kilborn Engineering to inspect the mine and mill to establish a market value to assist company directors in making their decision on exercising the right.

The Magnacon project, officially opened in June, 1989, experienced a difficult startup period. The owners also faced a depressed gold price last year. Current reserves at the project stand at 1.4 million tons grading 0.248 oz. gold per ton.

In a deal yet to be approved by regulatory authorities, Echo Bay would acquire a 37.5% interest (half of the combined Muscocho-Flanagan ownership) in Magnacon, in return for its approximate one-third equity interest in each of Muscocho and Flanagan McAdam.

Included in the agreement are cash payments and loans by Echo Bay. A second operating gold mine in the same part of the province, the Magino, in which Muscocho is a 50/50 partner with McNellen Resources, is also part of the Echo Bay deal.