Cambior gold loan provides Nova-Cogesco with Silidor funding

An $8-million gold loan is being arranged by Nova-Cogesco Resources (TSE) with Cambior Inc. (TSE).

Proceeds of the loan, at the agreement-in-principle stage, will be used to finance Nova-Cogesco’s share of expenditures for the completion of the underground exploration program at the Silidor gold property at Rouyn-Noranda, Que., and the company’s share of production costs should such a decision be made.

Under the terms of the loan, Nova-Cogesco will borrow an equivalent amount of gold ounces worth up to $8 million(C). The interest rate will be equal to Cambior’s cost of borrowing gold, plus 1%. The loan will be repayable in kind in 10 equal consecutive semi-annual instalments on March 1 and Sept 1 of each year, with the first payment due March 1, 1990.

Nova-Cogesco may also repay the entire or any part of the loan in advance with 30 days’ written notice and by paying a penalty in kind equal to 1% of the quantity of gold being repaid.

Three companies are involved in the Silidor project: Nova-Cogesco with a 20% interest, Cambior with 25% and Noranda Inc. (TSE) with 55%. Project reserves were last reported to total about 4.8 million tons grading 0.19 oz gold per ton, to a vertical depth of 2,300 ft.

Nova-Cogesco President Stuart Lee said the gold loan will provide exploration funds to the company without diluting Nova-Cogesco’s share capital. The agreement, to be formally signed July 4, is subject to regulatory approval.

Nova-Cogesco and Cambior have also reached agreement-in- principle on a deal which would see Cambior process the former’s portion of ore from the Silidor project at Cambior’s Yvan Vezina mill.