Aur takes calculated gamble on Brazilian diamond deposit

Just weeks away from becoming a Canadian gold producer, Aur Resources (TSE) is taking a calculated gamble on a Brazilian diamond property which it hasn’t seen yet.

The Toronto company has signed a letter of intent with Glencairn Exploration (ASE) to put up about $250,000 in preproduction financing at the Feijao Cru deposit which is owned by Mineracao Piracicaba of Rio de Janeiro.

Located in a mountainous area near the town of Andaria, the property contains 537,000 cu m of reserves grading one carat per cu m. Glencairn is currently earning a 50% interest in MPL by spending $450,000 on exploration by March, 1989 and financing the property to a maximum $550,000 to production.

While Aur Chairman James Gill has yet to visit the property, he sees it as a possible money spinner for a company which is about to start production at the Kierens zone gold deposit in Val d’Or, Que.

A development program which includes drilling, test pitting and construction of a pilot plant is expected to be completed at Feijao Cru in October.

“This is a bit of a flyer from our point of view but we think the risk/reward ratio is favorable,” said Gill.

Under the terms of the agreement with Glencairn, Aur will immediately buy 300,000 Glencairn shares for 85 cents each. The proceeds will be used to complete the current development program on the Feijao Cru project and to undertake a final feasibility study.

As part of the share purchase, Aur gets 300,000 Glencairn share purchase warrants for $1.05 over a period of 18 months.

If the feasibility study proves positive, Aur will have 60 days to elect to provide up to $5 million in production financing.

“The reason we got into this agreement is that a commercial diamond deposit has yet to be discovered in North America”, Gill told The Northern Miner. Although Aur is involved in diamond exploration north of the United States/ Mexico border, he declined to say where the company’s other diamond properties are located.

“Initially, we are only putting up $250,000 and any additional money we spend is subject to a production decision,” said Gill.

At a current selling price of about $80(US) per carat, the Feijao Cru reserves have an estimated gross value of $48.7 million, according to Glencairn.