Claude sells Seabee royalty (February 05, 2007)

In return for $39.2 million in cash, Saskatoon, Sask.-based Claude Resources (CRJ-T, CGR-X) has struck a deal to sell a 10-year royalty on its operating Seabee gold mine in Saskatchewan to privately held Red Mile Resources No. 8 Ltd.

Under the agreement, Claude must pay Red Mile a fixed amount per ounce of gold produced; these amounts can vary from C$40.82 to C$88.95 per oz. over the 10-year term.

Claude has also granted Red Mile a net profits interest of 3.75%, 4.00% or 4.25% in years 2012 through 2016, payable only if each day’s price of gold in any of those calendar years is greater than C$975, C$1,175 or C$1,375 per oz., respectively.

Claude has already received $35 million in cash, and the rest is in the form of a promissory note. Claude expects that the interest earned from the promissory note will be enough to fund the expected basic royalty payments during the first four years of the agreement.

The underground Seabee mine’s gold sales were 11,000 oz. during the third quarter, and the company expects to sell about 48,000 oz. for the full year.

For the first nine months of 2006, the Seabee mine processed 186,700 tonnes of ore grading 6.42 grams gold per tonne, compared with 170,100 tonnes of 5.82 grams gold for the same period in 2005.

In Ontario’s Red Lake camp, Claude recently reacquired control of its 100% owned Madsen gold project after Goldcorp (G-T, GG-N) dropped out of its option agreement.

Claude has been dewatering the shaft at the past-producing mine to facilitate underground drilling, and has already kicked off a surface drilling program.

Claude’s total gross revenue for the third quarter of 2006 was $10 million, a 35% improvement over the $7.4 million reported for the same period in 2005. Of this, Seabee contributed $7.7 million for the third quarter of 2006 compared with $4.8 million for the same period last year.