Cornucopia Res. to acquire gold producer in Arizona

The planned purchase of Addwest Minerals for US$22.3 million will give Cornucopia Resources (TSE) a 50,000-oz.-per-year gold producer.

Addwest, a wholly owned subsidiary of Addington Resources (NASDAQ), owns the Gold Road mine near Oatman, Ariz. The mine started production in early 1995, and Cornucopia expects output to reach an annual rate of 50,000 oz. by year-end.

An independent study puts proven and probable reserves for the Gold Road at 518,000 tons grading 0.3 oz. gold per ton. Based on a review of historic information, Cornucopia estimates the mine may contain a further 2.2 million tons grading 0.36 oz. gold.

The underground mine and associated mill are rated at 500 tons per day, and the company is confident both minable reserves and the production rate can be expanded within the next year.

According to a letter of intent, Cornucopia will pay US$7 million in cash, issue 6 million common shares at a deemed price of US$1 per share and assume US$9.3 million in existing gold loans.

The cash component of the purchase price will be financed through a private placement of 11.43 million special warrants at US87.5 cents each. The special warrants will convert to one common share and a share purchase warrant exercisable at US87.5 cents in the first year and US$1.00 in the second.

In addition to the Gold Road mine, Addwest owns the Golden Zone property in Alaska, midway between Anchorage and Fairbanks.

Exploration to date at Golden Zone outlined an open-pit, minable resource totalling 2.9 million tons grading 0.078 oz. gold at a stripping ratio of 1.68-to-1.

As part of the purchase price, a 5% net smelter royalty capped at US$6 million is payable to Addington on the Golden Zone project.

Addwest’s third asset is its Shumagin Island project on Unga island in Alaska.

The project includes two prospects about 5 miles apart. The Shumagin prospect is estimated to contain a drill-indicated resource of 250,000 tons grading 0.68 oz. gold, while the Apollo prospect has an estimated resource of 2.25 million tons grading 0.15 oz. gold and 8 oz. silver, plus base metal credits.

James Carter, executive vice-president of Cornucopia, says the company now plans to conduct a more in-depth due diligence review over the next month, before proceeding with the acquisition.