Canamax to sell Hundere prospect for $10 million

After outlining 5.2 million tonnes of grade 18.5% combined lead zinc with 1.752 oz silver per ton, Canamax has agreed to sell its 100% stake in the property to Toronto-based Hillsborough Resources (TSE).

Under the agreement, Canamax will receive $10 million in cash initially while retaining a 10% net profits royalty after Hillsborough has recovered its capital costs.

Hillsborough also has the option to acquire the 10% net profits royalty for $3.5 million at any time within five years after the deal is closed.

Considered a non-core asset by Canamax, the 427-claim Mt. Hundere property has been subjected to 65,426 ft of surface drilling. All reserves outlined so far at the Watson Lake property occur in sub-horizontal, stacked replacement lenses within a limestone formation.

“We feel it is one of the best lead zinc exploration properties in the country,” said Canamax spokesman John Pearson.

Canamax is in something of a transition period following the resignation of President John Hansuld. It expects to report a $8.2 million write down after selling its 50% stake in the Ketza River gold mine to Belmoral Mines (TSE).

As a result, a $21.9 million gold loan previously negotiated with the Westminster Bank of Canada was recently converted to a currency loan. But Pearson said the company was under no pressure to sell.

“We are a gold company and we want to concentrate our efforts on our Kremzar and Bell Creek gold mines in Ontario,” he said.

As Hillsborough President George Vooro was en route to Mt. Hundere to begin the due diligence process, he wasn’t available for comment. But vice-president Kenneth Hawrelak said it’s much too early to predict what Hillsborough will do with the asset this year. “It has a lot of potential and the possibility exists that more reserves can be turned up by future drilling,” he said.

Hillsborough, which provides mine engineering services through its Canadian Mine Development division, has a couple of metal exploration properties in British Columbia.

If the deal is closed, Canamax will maintain a position in the Watson Lake area via its 24.5% stake in the Midway lead-silver-zinc project where reserves stand at 1.3 million tons of grade 7.9% lead, 9.6% zinc and 11.8 oz silver.

It also has interests in a number of Northwest Territories gold properties.

News of the agreement had little effect on the share price of either company. Canamax traded at $3.60 on the Toronto Exchange, close to its 52-week low of $3.50. Hillsborough, meanwhile, was trading at around $2.45 in a yearly range of $2.65 and $2.05.

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