Alta looking at deal with Magma excluding Echo Bay

A letter of intent may lead to an agreement between Alta Gold (NASDAQ) and Magma Copper (AMEX) for the purchase of the Robinson mining district from Kennecott. The district is a package of land encompassing about 12,000 acres near Ely, Nev. The deal with Magma would not include the gold leases on the property under joint venture between Alta and Echo Bay Mines (TSE). Echo Bay and Alta expect to produce about 115,000 oz. of gold from the Robinson heap leaching operations this year.

Echo Bay held the original option to purchase the property but let it lapse in June of this year. This gave Alta the option to buy the property for US$20 million up to the expiry on Dec. 14.

If a deal is consummated, Magma will pay US$10.2 million to acquire a 51% interest while Alta will retain a 49% interest at a cost of US$2.8 million. Alta’s purchase price takes into account royalties paid to Kennecott which have accrued to the purchase price.

Terms of the proposed deal also include the purchase by Magma of 15% of Alta’s interest in the gold operations on the property for US$4 million, plus an option to purchase a further 15% for US$6 million by Dec. 31, 1991. Magma would also be required to purchase US$1.5 million in Alta common stock by Aug. 31, 1991.

The proposed deal hinges on a US$1.5-million feasibility study which Magma hopes to complete by Nov. 15. The study will further define preliminary studies on the Robinson property which indicated the presence of an estimated 248 million tons of material grading about 0.5% copper and 0.008 oz. gold per ton.

Deadline for the deal to close with Magma is Nov. 15.