Nova Scotia-based Etruscan had sought to expand its South African holdings through a merger with Mountain Lake, whose main asset is an alluvial diamond project in the Ventersdorp district, 150 km west of Johannesburg.
The new agreement gives Etruscan a 75% interest in the property once it has spent US$2 million on exploration work and completed a positive feasibility study. Etruscan has further agreed to arrange project financing once a production decision is reached.
Mountain Lake will have to put up 25% of the funding to bring the project into production, but Etruscan has agreed to advance that money if necessary, taking its repayment from 75% of Mountain Lake’s share of the project’s revenue.
Historically, the seven concessions making up the holding have yielded about 50,000 carats of diamonds. Individual diamonds weighed up to 19 carats. Previous work by Mountain Lake and Ashton Mining of Australia indicated a resource of 14.5 million tonnes of gravel with a historical average grade of 1.5 carats per 100 tonnes. Under the merger agreement, Etruscan had planned to bring the project into production at 2 million tonnes annually.
Mountain Lake’s other assets include the CK gold property in Wyoming, the Canagau base metal property in Ontario, the Goodwin base metal property in New Brunswick and the Valentine Lake gold project in Newfoundland.
The companies planned to merge based on an exchange ratio of one share of Etruscan for every two shares of Mountain Lake. On completion, Mountain Lake shareholders would have held about 16% of Etruscan.
Etruscan says it still plans to develop an alluvial diamond portfolio in South Africa. The company has entered into an agreement with Whiterock Holdings of Pretoria to purchase diamond mining rights to farm Goedgedacht 27IQ, which covers 43 sq. km in the Ventersdorp area. The company is in talks to acquire other South African diamond properties.
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