Alamos, National Gold seek merger

Vancouver — Attempting to move the large Salamandra project forward, National Gold (NGT-V) is proposing to merge with fellow junior Alamos Minerals (AAS-V).

The combined entity would be called National Gold.

The companies have inked a letter of intent. It would see Alamos shareholders getting one National Gold share for every three Alamos shares held.

With $430,000 in its treasury, Alamos has advanced National Gold $100,000 on a promissory note and has agreed to provide, either by a promissory note or arrangement of additional funding, a further $250,000. This would be payable after National Gold arranges a deferral in capital payments for the acquisition of Salamandra and before the completion of the merger.

National Gold took over the advanced Salamandra project late last year from Placer Dome (PDG-T) and Kennecott Minerals, a unit of Rio Tinto (RTP-N). The $10.5-million deal was originally slated to close at the end of February.

However, regulatory hurdles forced National Gold to bump the date ahead to mid-March. Financial problems then resulted in a second extension, forcing Placer and Kennecott to defer $2.75 million of the closing payments to July and to agree to pay the $1.6-million refundable IVA tax. This enabled National Gold to close the deal.

The Canadian Ventures Exchange has requested that National Gold complete a $1.6-million financing before July 15 and an additional $2-million financing by Aug. 30. If these obligations are not met, the company may run afoul of the exchange’s maintenance requirements and be downgraded to the status of inactive trading.

National Gold is negotiating with Placer and Kennecott to restructure the hefty capital repayment arrangement, which calls for payment of $3 million in the first year. The remaining $7.5 million is secured by a debenture and payable at the end of the fourth year. The debenture carries a 7% interest, which is payable semi-annually.

The vendors retain a 2% net smelter royalty on the first 2 million oz. gold produced.

The 151-sq.-km property is located 400 km south of Tucson, Ariz., in the Mexican state of Sonora. It hosts the 3.4-million-oz. Mulatos gold deposit.

Within this deposit is Estrella, a high-grade core that holds a measured and indicated resource of 11.5 million tonnes grading 3.16 grams gold per tonne, using a 2-gram-per-tonne cutoff.

National Gold has hired Nevada Mining Consultants and Mintec to prepare a scoping study for production from the high-grade zone.

According to National Gold, the preliminary report shows that the Mulatos deposit contains more than 4.7 million oz. gold, in all categories, at a 0.5-gram-per-tonne cutoff. This is an increase from the originally reported 3.4 million oz. at a 0.8-gram-per-tonne cutoff.

Since 1993, Placer and Kennecott have spent more than $50 million exploring the property. Based on a cutoff grade of 0.8 gram gold per tonne, a 1997 feasibility study pegged the measured and indicated resource at 68.3 million tonnes grading 1.57 grams gold.

A 1999 feasibility study envisioned a 17,500-tonne-per-day, open-pit operation. Capital costs are pegged at US$120 million. Operating costs for a heap-leach operation are estimated to be $5 per processed tonne at a gold recovery rate of 66%.

Mineralization is hosted in a large, high-sulphidation gold system, which is found preferentially stratabound in felsic volcaniclastics and porphyritic flows. Alteration is well-zoned, extending from a gold-bearing core of silicic and pyrophyillite clays to kaolinite-illite-dickite clays and finally to a propylitic zone.

An updated scoping study is expected shortly.