Vancouver – Cross Lake Minerals (CRN-T, CLKMF-O) plans a significant financing, in conjunction with a share consolidation, to bring its QR mine back into production.
The planned $9.75-million brokered private placement financing, through Pacific International Securities, will have the company issuing up to 7.5 million units plus up to 6.5 million flow-through units at 65 and 75 apiece respectively. Overallotment options will allow issuance of an additional 650,000 of each series of units, with the company also holding the option to issue a further $2 million of units on a non-brokered basis.
The financing is priced on the basis of a planned five-to-one share consolidation to be voted upon at Cross Lake’s upcoming annual and special general meetings.
The bulk of funds from the planned financing will be allocated towards the recommencement of operations at the QR gold mine, located about 70 southeast of Quesnel in central British Columbia’s Cariboo-Chilcotin region. A recently completed feasibility study reviews planned development by both underground and open pit methods.
Cross Lake plans to target easily accessible resources in the Midwest zone by underground mining while the Northwest zone is expected to be developed though an open pit. A combined open pit-underground operation is strategized for the West zone. The independent study, conducted by Wardrop Engineering, estimated initial capital requirements of $4.5 million to recommence operations at QR.
Using a US$467.50 per oz. gold price, the feasibility study projects positive economics for the first two years of operation. Cash flow summaries indicate net revenues of about $40 million, from the recovery of over 72,000 oz of gold, with an operating profit of about $11 million.
A further $4 million will be allocated towards underground development and drilling of the North zone. Road construction, portal development and several hundred metres of workings along with underground drill stations will test the zone with at least 5,000 metres of drilling. The North zone, a faulted extension of the Main zone, sits about 300-500 metres beneath the existing mill site and has been previously delineated over a one km strike length and remains open.
The QR deposit is hosted in an Upper Triassic volcanic sequence containing porphyry-skarn related mineralization. Gold occurs both free and in sulphides (pyrite) primarily in altered, carbonate-rich units but also in the stratigraphically lower units along fractures and in stockworks.
Kinross Gold (K-T, KGC-N) mined the project in the mid-1990s, but placed it on care and maintenance in 1998 due to weak metal prices. The mine produced about 42,000 oz. of gold annually for Kinross over its 2.5-year operating life. A pit wall failure and underground mining shortfalls contributed to increasing operating costs, prompting the major’s ultimate closure decision.
The processing and mill circuit at QR has a capacity of about 1,000-tonnes-per-day using a standard crushing circuit followed by a carbon-in-pulp recovery process. Onsite diesel generators are expected to be replaced by a 29-km power line extension by B.C. Hydro. Cross Lake anticipates it would take about three months to place the mine back into production.
On its pre-consolidation basis, Cross Lake has 108.9 million shares outstanding to post a $16 million market capitalization given its recent 15 per share trading price. The company’s trading range over the last year is 4.5-to-18 per share.
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