Deak secures feed from Astoria

Toronto-based Deak Resources (TSE) recently signed two deals designed to secure future feed for its Kerr mill at Virginiatown, Ont.

In Quebec, the gold miner has negotiated an option-royalty agreement to acquire Yorbeau Resources’ (TSE) Astoria mine and adjoining property near Rouyn-Noranda.

Starting in the fourth quarter of this year, Deak will process the Astoria ore at Virginiatown to yield an estimated 35,000 oz. gold per year. The mine has proven, probable and possible diluted reserves of 1.18 million tons grading 0.2 oz. gold per ton over an average mining width of 13.4 ft. In a separate deal, Cyprus Canada has agreed to spend $3 million on underground exploration at the Kerr mine in return for a 50% interest in specific portions of Deak’s claim group at Virginiatown.

Cyprus, a division of Cyprus Minerals (NYSE), will target four gold-bearing structures known to extend for 7,500 ft. along the length of the Kerr property. These structures parallel the main Kerr structure and have returned gold mineralization over their entire strike length and to a depth of more than 4,000 ft.

Facilities at Astoria, where more than $30 million have been spent to date, include a production shaft, a headframe and a 700-ton-per-day hoist. Once Deak has established that it can process the Astoria ore economically, it has 30 days to exercise its option to acquire 100% of the properties. Deak will then be obligated to incur development and mining expenditures of $2 million by Sept. 30, 1993, and a further $1 million by March 31, 1994. A total of $750,000 must also be spent on exploration by March 31, 1994. Yorbeau, which will be granted a $200,000 promissory note from Deak and 500,000 Deak common share purchase warrants once the deal has closed, will receive 40% of the net profits from the property up to a total of $3 million. Yorbeau will then revert to a 2% net smelter return royalty subject to a minimum of $200,000 per year for five years and can elect to convert its royalty into a 40% participating interest.

After commissioning a state-of-the-art effluent treatment plant at Virginiatown, Deak secured approval in June from the Ontario Ministry of the Environment to process ore at a rate of 2,200 tons per day .