BacTech gives Tonkin Springs a try (June 09, 2003)

Canadian-Australian junior BacTech Enviromet (YBA-V) has agreed to take a 55% interest in the past producing Tonkin Springs gold mine in Nevada’s Eureka Cty.

To do so, BacTech must pay U.S. Gold (USGL-O) US$1.75 million in cash, including a US$250,000 non-refundable payment on signing. The balance is due in two equal payments, one at closing and another when gold production begins or in one year, whichever comes first. BacTech must also solely fund the project up to US$12 million.

The deal is subject to due diligence and regulatory approval, and has a drop dead date of July 31.

Tonkin Springs first began production in late 1989 with bioleaching as a pre-oxidation process for the sulphide ores followed by conventional carbon-in-leach extraction. The uneconomic operation closed in the mid-1990s and has since seen a handful of failed revival attempts.

The last company to have a go at the project was Toronto-based Sudbury Contact Mines (SUD-T), a 57%-held subsidiary of Agnico-Eagle Mines (AGE-T), which picked up a 60% stake in 1999 by acquiring Gold Capital.

In late 2001, Sudbury Contact withdrew from the project after spending $2.0 million on drilling 19,400 metres in 107 reverse-circulation holes with the goal of boosting resources. The drilling failed to change the original resource estimate.

The 93-sq.-km Tonkin Springs mine is situated on the prolific Cortez Gold trend in Nevada. The mine is home to a known resources totalling around 28 million tonnes grading 1.54 grams gold per tonne (or 1.4 million oz. gold).

The project includes 3,000-ton-per-day mill with a bio-oxidation circuit and complete infrastructure. In 2002, U.S. Gold licensed Newmont Mining‘s (NEM-N) commercially proven N2TEC flotation technology to concentrate Tonkin Spring’s gold-sulphide mineralization. BacTech anticipates little retrofitting as it converts the operation to its proprietary bioleaching process.

U.S. Gold’s President William Reid said in a prepared statement, “bioleaching of the sulphide gold concentrates on site will result in the lowest operating cost compared to other processing alternatives, which in turn will significantly enhance project economics.”

The pair intend to use cash flow from Tonkin Springs to further explore the property.