Crystallex International (KRY-T) is selling its mainstay producing mine, San Gregorio in northern Uruguay, to Uruguay Mineral Exploration (UME-V), shedding its mainstay gold producing operation in favor of development-stage projects in Venezuela.
Uruguay Mineral pays US$2 million for San Gregorio and the rest of Crystallex’s Uruguayan assets, which Crystallex purchased in 1998 out of receivership after former operator Rea Gold went bankrupt. The payments are in two US$1-millon tranches, the first within six months and the second within 12 months of the deal’s closing.
Uruguay Mineral also takes over San Gregorio’s project hedge book, of which Standard Bank London is the principal counterparty. The forward contracts with Standard Bank amount to some 37,000 oz. sold at US$300 per oz.
For Uruguay Mineral, the San Gregorio mill is the principal prize in the deal. It has an annual capacity to treat 1.2 million tonnes of ore and Uruguay Mineral, which controls a large land package in the Proterozoic-age Minas de Corrales greenstone belt, has identified a number of prospects in the region, though it has not released a reserve figure.
The two most advanced projects, Sobre Saliente and Castrillon, are both about 7 km north of the San Gregorio mill.
San Gregorio produced 14,452 oz. gold in the second quarter of 2003 and 18,428 oz. in the first quarter, contributing three-quarters of Crystallex’s gold production in the first half of the year. The company’s other production comes from small mines in Bolivar state in Venezuela.
San Gregorio’s total cash cost was US$298 per oz. in the second quarter and averaged US$248 in the first half of the year. The Venezuelan operations turned in a total cash cost of US$365 per oz. in the second quarter and US$402 in the first half of the year.
The two companies had previously pursued a joint venture on Uruguay Mineral’s Corrales projects, a joint venture Crystallex had held through the Minera San Gregorio subsidiary Uruguay Mineral is now acquiring.
To finance the purchase, Uruguay Mineral is issuing 2.4 millon units at $2.85 per unit in a non-brokered placement. The units consist of a share plus a warrant to purchase a second share at $3.75 within 18 months of issue.
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