Victoria sells assets to focus on Eagle

Victoria Gold (VIT-V) is trading in Nevada for the Yukon.

The company is leaving the warmer climate of the southwest so that it can better focus on its Eagle Gold project in Canada’s far north.

Just two weeks after announcing it was selling off its Relief Canyon project Victoria now says it will also sell its Cove project, although this time it is fetching a richer price.

While Relief Canyon was sold to Perishing Gold for US$6 million, Cove is being sold to Premier Gold Mines (PG-T) for US$28 million.

The higher price for Cove is a reflection of its higher level of development as the project comes with inferred resources of 355, 253.44 tonnes grading 20 grams per tonne for 231,300 oz. of gold.

The project had been Victoria’s most developed project in Nevada, although that high grade tonnage didn’t entirely belong to the company. In acquiring the asset Premier will also inherent Victoria’s partner at Cove: Newmont Mining (NMC-T, NEM-N). The gold producing senior has the right to take a 51% stake in Cove by delivering a positive feasibility study for the property based on at least 500,000 oz. of gold.

The deal between Premier and Victoria breaks out into cash and stock components with US$8 million in cash due on closing. The rest is due over the next three years and Premier has the right to payoff 50% of the remaining balance in stock.

Victoria could also net itself another $20 million if the project in the heart of Nevada’s Battle Mountain-Eureka Trend finds its way into production. Premier gets to decide whether those payments will be made in cash or shares.

From Premier’s point of view the acquisition is about building a stronger presence in the United States while sticking to its mantra of building a portfolio of projects in low-risk jurisdictions with high-grade discovery upside.

As for Victoria, the sale is all about drumming up capital to plow into its flagship Eagle project in the Yukon. The company says the funds will go straight into construction of the mine which is expected to get underway in the third quarter of this year.

The open pit mine will cost $430 million to build and once production comes in late 2014 or early 2015 the mine should turn out 192,000 oz of gold per year at cash costs of US$614 per oz. over an 8 year mine life.

A recent feasibility study done on the project came up with a pre-tax NPV of $381 million using a 5% discount rate and a US$1,325 per oz. gold price.

In Toronto on April 10, Victoria Gold shares were flat at 30¢ on 2.06 million shares traded while Premier Gold shares were up 5% or 24¢ to $4.95 on 382,553 shares traded.