Riley Gold rises on $20M earn-in with Kinross for Nevada project

Kinross Gold (TSX: K; NYSE: KGC) has signed an option to earn up to a 75% interest in Riley Gold‘s (TSXV: RLYG; US-OTC: RLYGF) Pipeline West/Clipper (PWC) project in Nevada. The gold major will spend at least US$20 million on exploration in two stages, and is also taking a 9.9% stake in Riley.

Under the agreement, Kinross can earn an initial 60% interest and assume operatorship of PWC by spending at least US$10 million.

It can earn an additional 15% interest (for a total 75% interest) by spending another US$10 million within two years of exercising its initial option.

The news sent shares of Riley Gold up 45% to 22¢ by early afternoon, near the high end of its 52-week range of 9¢-24¢ range. The gold junior has a market capitalization of $6.3 million.

Located in Lander County, PWC consists of 24.7 sq. km in the heart of the gold-producing Cortez District, also known as the Battle Mountain-Eureka trend. The property is prospective for Carlin-type, disseminated and replacement gold deposits, and adjoins Nevada Gold Mines, a joint venture between Barrick Gold (TSX: ABX; NYSE: GOLD) and Newmont (TSX: NGT; NYSE: NEM).

Once Kinross earns its initial stake, a Nevada-registered joint venture company will be established. Once the second phase of the option is exercised or terminated, the parties will fund ongoing operations based on their proportionate interests.

“We are excited to partner with Kinross on our PWC project. Their global proven track record speaks for itself as well as specific regional expertise that includes ownership and operations of two gold mines in Nevada (Round Mountain and Bald Mountain),” Riley Gold’s CEO Todd Hilditch said in a release.

There is a dilution provision stating that should Riley’s interest in the JV company be reduced to 10% or less, the company’s interest will then be converted to a 2% net smelter return royalty.

In addition to the earn-in, Kinross will also take a 9.9% equity interest (on a partially diluted basis) in Riley through a private placement. In total, the placement consists of 8 million units priced at 15¢ each for total proceeds of $1.2 million.

PWC project

Drilling on the PWC project was first conducted in 1992, but since 1994, other operators such as Agnico Eagle Mines (TSX: AEM; NYSE: AEM) and Barrick Gold (Placer Dome) generally focused on offsetting early drilling that intersected gold mineralization in the lower plate of the Roberts Mountain thrust. 

Results from the historical drilling include 4.6 metres grading 2.59 grams gold per tonne at 324 metres, including a high value of 3.84 grams gold per tonne at 283 metres.