Queenston drills at Kirkland Lake

Fresh on the heels of a $5-million financing, Queenston Mining (QMI-T) has closed the purchase of Newmont Mining‘s (NEM-N) half-interest in the Kirkland Lake joint venture in Ontario and launched a new round of exploration drilling there.

Queenston now holds a 100% interest in the project after paying Newmont $3 million in cash and issuing 1 million Queenston shares and warrants for a further 543,000 shares exercisable at 95 per share over 18 months.

However, Newmont retains a sliding-scale net smelter return royalty that varies from 1% at gold prices below or equal to US$300 per oz., up to 2% when prices are above US$400 per oz.

To pay for the acquisition, Queenston placed 6.25 million units priced at 80 apiece. Half of these units can be exchanged for common shares, and the other half, for flow-through shares. Each unit comes with half a purchase warrant; a full warrant entitles the holder to buy, for 95, another common share within 18 months.

With the acquisition completed, Queenston is engaged in a 22-hole, 12,000-metre program of diamond drilling. Ten targets will be tested on the 115-sq.-km property.

During the first phase, Queenston will drill at least 10 holes at the Anoki Deep, 180 Splay, Biroco and Esker gold zones.

The property hosts five gold deposits with measured and indicated resources of 4.1 million tonnes grading 5.6 grams gold per tonne, plus inferred resources of 4.5 million tonnes averaging 5.3 grams gold, for a total of 1.5 million contained ounces.

The property includes warehouse facilities, a former mill and a tailings complex.

Taking into account the Newmont deal, Queenston has 35.7 million shares outstanding, no debt and $13 million in working capital, consisting of $9.7 million in cash and $3.3 million in investments.

Newmont now holds 3.6 million Queenston shares plus 542,812 warrants, representing 10.05% of the junior’s outstanding shares, or a fully diluted 11.4% interest.