In Greek legend, Bellerophon offended the gods by trying to ride the winged horse Pegasus to heaven. More recently, anyone who tried to ride Pegasus Gold to profit incurred the wrath of the market.
It is a measure of the change in the sentiment surrounding gold that
International Pursuit’s own recent history illustrates the up-and-down nature of junior mineral exploration in the 1990s. In the middle of that decade, it was one of the high-flying juniors in the Southeast Asian gold rush, and had recently merged with a company called Dayak Gold to bring in a large portfolio of gold properties on Kalimantan. It also held the Hinoba-an copper property on Negros Island in the Philippines.
But the wave Pursuit, and many another junior, was riding crested and broke in the spring of 1997, when the Bre-X Minerals fraud made headlines. Pursuit, which had been trading in the $5 range when the year opened, dropped to the $1 range. As junior exploration melted down, the company looked at investments in the dot-coms but escaped that second disaster when none of its deals went through.
Looking for ways to conserve cash, the company put its exploration projects on hold. At the end of 2001, it succeeded in finding a buyer for the Hinoba-an project — Australian-based Hinoba Holdings, which paid 7.5% of its treasury shares for an option to take over the project for US$5 million.
The Indonesian projects, though, were not so easily marketable, and Pursuit wrote down their value to zero in 1999.
At the beginning of 2002, Pursuit briefly flirted with oil and gas, but a deal to buy a 5% interest in an Egyptian drilling play was cancelled when the partners could not get regulatory approval for the transfer of an interest to Pursuit.
Then came the gold rally, and Pursuit, looking for ways to salvage some shareholder value, was quick to seize an opportunity. The Florida Canyon and Montana Tunnels mines were the last going concerns that remained from the Pegasus Gold bankruptcy in 1999. They had been running quietly for the benefit of creditors and were operated by Apollo Gold, a company privately owned by a syndicate of banks — former Pegasus lenders who had been stiffed by the old company.
Lenders, as a rule, don’t like running an operation, and, for the right price, are usually inclined to let it go. A private company formed by three one-time Getchell Gold executives (David Russell, Getchell’s former chief operating officer; Donald Robson, its former chief financial officer; and Richard Nanna, its former vice-president of exploration) put together a proposal to buy Apollo from the bankers, and had only to find the money to do it with.
Thus Pursuit had its deal, at last: a reverse-takeover by the private company Nevoro Gold and a private placement of US$23 million in International Pursuit debentures, convertible to shares and purchase warrants. Armed with the US$10 million of the financing, Nevoro bought Apollo Gold in April.
The other side of the equation, the reverse-takeover, will go before Pursuit shareholders in mid-June. The two companies agreed on a plan of arrangement under which the merged company — which is to carry the name Apollo Gold — will have 31.5 million shares. Old Pursuit shareholders will have 2.6% of the merged company; Nevoro shareholders, 6.2%. The rest will belong to the debenture-holders, as the loans automatically convert to shares and warrants once the deal closes.
The deal will require a consolidation of Pursuit shares, with 43.57 shares in the old company converting to one new share of publicly listed Apollo Gold.
Florida Canyon, near Winnemucca, Nev., produces about 150,000 oz. gold annually from an open-pit mine and heap leach plant. At year-end in 2000, the mine had reserves (all in oxide material) of 24 million tonnes grading 0.6 gram gold per tonne, and in 2001, it produced its gold at a cash cost of US$225 per oz.
Nevoro and Pursuit also see potential in a deposit 6 km to the south, Standard-Cordex, which Apollo acquired in 2000. As at Florida Canyon, the mineralization is in oxides; an earlier operation mined grades of around 2.7 grams gold per tonne in the early 1950s, running the ore through a conventional mill and leach process. An exploration hole drilled by Apollo intersected a 6-metre zone of mineralization grading 30.9 grams gold per tonne, which Apollo geologists believe to lie near the intersection of a classical Nevada thrust fault with a vertical shear zone.
Nevoro and Pursuit also plan to look more closely at sulphide mineralization below the oxidized zone. Apollo blocked out a zone of sulphide mineralization below the Florida Canyon pit, and initial metallurgical tests suggest conventional milling and flotation will work on the material.
Nevoro also brings in two exploration properties it acquired separately from the Apollo deal. The two are about 20 km north of Florida Canyon. At one, Pirate, which Nevoro holds under lease from a group of claim-holders, a test pit yielded about 7,000 oz. gold. The other property, Nugget Fields, is pure grassroots exploration.
Montana Tunnels, southwest of Helena, Mont., is a polymetallic operation that produced 71,000 oz. gold in 2001, along with byproduct silver, lead and zinc. The byproducts actually contribute a lot to the operation; Montana Tunnels produced about 500,000 oz. silver, 6,800 tonnes lead and 20,000 tonnes zinc last year. Pursuit puts the mine’s operating cost at US$195 per oz. gold, after the credits for byproduct metals.
At mid-2001, reserves at Montana Tunnels stood at 5.4 million tonnes grading 0.6 gram gold and 6.2 grams silver per tonne, plus 0.2% lead and 0.52% zinc. An 18-million-tonne resource, additional to the reserve, averages 0.5 gram gold, 6.2 grams silver, 0.2% lead and 0.52% zinc. Pursuit and Nevoro have contracted an outside consultant to confirm both the Florida Canyon and the Montana Tunnels reserve and resource estimates.
The mine’s future may be in an underground operation, as Apollo did some prefeasibility work on converting to an underground mine. The pit needs about US$10 million in stripping over the course of the year, an activity that started in April.
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