Buckhorn partners sign new royalty agreement

A new royalty agreement has been signed by partners in the Buckhorn heap leach gold mine in Nevada. The agreement clarifies the recovery by Cominco Resources International (76% interest) and Equinox Resources (24%) of costs and expenses from revenues prior to paying Bar Resources a 20% net profits royalty.

Vancouver-based Bar was the original owner of the property. The company’s agreement with Cominco Ltd. (which inherited the property when it took over Bethlehem Copper and later put it into Cominco Resources) was ambiguous. Conditions to be met before Bar’s royalty clicked in could be interpreted in different ways, Cominco says.

Under the new agreement, before Bar’s royalty becomes payable, Cominco and Equinox can recover up to $10 million(US) as at Sept 30, 1987, plus operating costs, exploration costs up to $1.5 million per year, expansion costs, interest costs on expansions, a 3.5% management fee and interest costs on the foregoing amounts at the lesser of 8% or the prime rate of the Chase Manhattan Bank. At Dec 31, the outstanding balance was $8.3 million.

After Cominco and Equinox recover these amounts Bar’s 20% net profits royalty becomes payable, unless expenditures of $1 million or more are made on development or processing sulphide ore on the property. In this case Bar will receive 4% of net proceeds of production until Cominco and Equinox have been reimbursed for these expenditures.

The agreement coincides with the companies announcing increased reserves of oxide-type ore at Buckhorn of 1,160,000 tons grading 0.047 oz gold per ton (up from 1,094,000 tons grading 0.046 oz). A 2-drill exploration program is under way to add oxide-type ore and a third will be added later. In addition there are near-surface inferred reserves of one million tons of sulphide-type ore grading 0.075 oz. A 1988 drilling and metallurgical program is aiming to add to these reserves and to find out if the metallurgical recovery of gold would be sufficient to warrant mining.

An active ground acquisition program has increased the property’s size to over 70 square miles. The new ground will also be explored in 1988.