Barrick buys 9% stake in Carpathian for $20 million

Carpathian Gold (CPN-T) has received a big credibility boost from Barrick Gold (ABX-T, ABX-N) after the major gold miner agreed to purchase $20-million worth of the junior’s shares for an approximate 9% interest.   

The Romania- and Brazil-focused gold explorer will sell Barrick 38.4 million shares at 52¢ apiece in a private placement, as well as give Barrick a right to participate in any future equity offerings and a right of first refusal – at the asset level only – on any future sale of the company’s Romanian assets.

Though the past few years have seen Carpathian advancing its smaller Riacho dos Machados gold project in Brazil, where construction is targeted to begin later in mid-2011, Barrick seems to only have its eyes on Carpathian’s Rovina Valley Project (RVP), a gold-coppery porphyry system which lies within the Metalliferi Mountains of west-central Romania. Carpathian says it will exclusively use the private placement proceeds to increase its 2011 drill program at RVP to 50,000 metres from 35,000 metres, in addition to expediting an ongoing prefeasibility study there.

The extra drilling will focus on expanding the Ciresata deposit, one of three separate deposits from which drilling recently returned 668 metres grading 0.86 gram gold per tonne and 0.17% copper. Surrounding targets and other satellite areas of the project will also be tested “as prescribed by Barrick,” according to a statement released by Carpathian. Exploration direction will come in part from a newly created advisory technical committee comprising two Barrick representatives and three Carpathian executives, in addition to two Barrick employees who Barrick may elect to work at the project.

RVP lies in prospective territory, being roughly 25 km southwest of Gabriel Resources‘ (gbu-t) Rosia Montana gold-silver project, which boasts over 10 million oz. gold in proven and probable reserves and close to 15 million oz. gold measured and indicated. As a mining jurisdiction, however, Romania has yet to prove it has legs. Gabriel’s Rosia Montana project has faced countless political and environmental delays over the past decade, including a three-year suspension of its environmental permitting process by the Romanian government and over a hundred lawsuits from various NGOs and other ‘stakeholders’.

Dino Titaro, Carpathian’s president as well as a director of Yamana Gold (yri-t, auy-n), said in a prepared statement he views the transaction with Barrick “as a significant endorsement of the Rovina Valley Project, our exploration team and Romania as a country with world-class mining potential.” Carpathian has had little trouble so far with stakeholders at RVP and plans to start the very detailed permitting process sometime in the third quarter of 2011. Unlike Rosia Montana, which contains a vast network of mining tunnels dating from the Roman Empire, among other things, Carpathian says RVP’s proposed mine site footprint does not include any known protected heritage sites or archaeological occurrences and has been designed to minimize impact in the nearby communities of Rovina and Bucuresci.

As per a late 2008 resource estimate, RVP has measured and indicated resources totalling 193.1 million tonnes grading 0.49 gram gold and 0.18% copper for 3.07 million oz. contained gold and 759 million lbs. copper.  The company is looking to update the estimate early next year after completing the current drill program, in time for the prefeasibility study.

A preliminary economic assessment completed for the project in early 2010 used conventional open-pit mining methods for the Colnic and Rovina deposits, with the Ciresata deposit later being mined by bulk-underground methods in an operation that would produce around 200,000 oz. gold and 50 million lbs. copper per year for 19 years.

Shares of Carpathian rose as high as 65¢ on July 18 before closing up 1¢ to 59¢ on 2.72 million shares traded following the announcement. The company has approximately 389 million shares outstanding (not including the recently proposed financing with Barrick) and $33 million in working capital, with a 52-week range of 28¢-77¢.