Armada and Leader in merger talks

Leader Mining International (LMN-A) has entered into talks with Armada Gold (AAU-T) for a possible merger of the two companies. However, an agreement is by no means imminent.

Following an announcement by Leader that the two companies had signed a memorandum of understanding “regarding a potential merger,” Armada was quick to release a public statement that “no material agreements have been entered into” and that the memo was only a confidentiality agreement that allowed the two companies a chance to perform due diligence investigations. Armada said it has also entered into similar agreements with a number of other companies.

Armada’s two major assets are the Baley gold project in southern Siberia and a 49% interest in the Erdmin joint venture, which operates the Erdenet copper project in Mongolia.

Kvaerner Metals-Davy is scheduled to deliver the results of a bankable feasibility study on production from Baley’s Taseevskoye deposit, which has a minable reserve of 3.1 million tonnes grading 7.1 grams gold per tonne. Taseevskoye would be mined by open-pit methods and produce about 100,000 oz. gold a year.

The capital cost of bringing the deposit into production is estimated at US$30 million; the unit cash cost, at US$145 per oz.

Erdenet, a solvent extraction-electrowinning operation, is producing 10 tonnes of copper cathode a day, and a study (funded by Marubeni Industries of Japan) is under way to determine the feasibility of an expansion to 60 tonnes per day, or 20,000 tonnes annually.

Leader is also in merger talks with Vancouver-based Ariel Resources (AU-T), operator of three gold mines in Costa Rica. Leader says it has finished its investigations on Ariel and that conditions for the merger are being discussed further.

At Leader’s Knife Lake project in northern Saskatchewan, a preliminary open-pit design is nearly ready. The Knife Lake deposit has a drill-indicated resource of 79 million tonnes grading 1% copper. Leader is also exploring several other prospects in the area.