Cazador optioning Farley Lake project

Under an option agreement, the Keystone joint venture is expected to acquire a 55.2% interest in the Farley Lake gold project near Lynn Lake, Man.

(Keystone is a partnership of Cazador Exploration (VSE) and Black Hawk Mining (TSE). Farley Lake is owned 55.2% by Manitoba Mineral Resources and 44.8% by Mingold Resources.)

Under the agreement, Cazador will pay Manitoba Mineral Resources an initial $25,000 plus $500,000 when a formal agreement is signed.

A further $1-million advance royalty is also payable by June 30, 1994, or when production begins, whichever comes first. The advance royalty is deductible from a net smelter return which varies between 3% and 5%, depending on the price of gold.

Golden Band Resources (VSE) can earn the remaining 44.8% interest from Mingold, and both companies hold a right of first refusal on Manitoba Minerals’ interest in Farley Lake.

The property contains an estimated open-pit reserve of 1.6 million tonnes grading 3.62 grams gold per tonne. It will provide mill feed for the Keystone project.

Cazador can earn a 49% interest in the Keystone joint venture by spending $10 million and is in the process of arranging financing.

The capital cost to bring Keystone’s BT deposit into production, using the now-closed MacLellan mill, is estimated at $7.9 million.

David Martin-Smith, a spokesman for Cazador, said the purchase price of the Farley Lake interest will be added to his company’s expenditure on the joint venture toward the $10-million earn-in.

(Cazador plans to merge with Granduc Mines (TSE), and the two companies are working out exchange ratios.)