After spending $16 million over the last two years developing a processing facility at its Relief Canyon mine in Nevada and finding a state-owned Chinese company with which to partner, Firstgold Corp. (FGD-T, FGOC-O) says The Committee on Foreign Investment in the United States objects to the partnership on national security grounds because the mine is near a military installation.
First Gold’s Relief Canyon mine is about 80.5 km from the Fallon Naval Air Station and related infrastructure, which the Navy uses for tactical aviation training.
The news sent Firstgold’s stock plunging 37.5% to 2.5¢ per share in Toronto with 1.3 million shares changing hands.
The Committee on Foreign Investment says it will recommend to U.S. President Barack Obama on Dec. 21 that he reject the proposed investment by China’s Northwest Non Ferrous International Investment in First Gold. The CFIUS believes that the Chinese company’s proposed involvement in Relief Canyon poses significant national security risks.
“We have tried to walk through it with them to see if there’s a way to mitigate it and they don’t seem to be open to discussions at their level, maybe the president will be, I don’t know,” Firstgold’s chief executive, Terry Lynch, said in a telephone interview.
Earlier this year China’s Northwest Non Ferrous International Investment agreed to purchase 51% of Firstgold for US$9.5 million and loan it US$5.5 million for working capital for the mine. They were also buying the secured lender’s position for US$11.5 million.
“The Chinese can come in and buy real estate near Lovelock so I don’t see what’s so special about the mine…it’s just baffling,” he said, adding that Relief Canyon is a very small mine that in a good year would produce only about 80,000 oz. gold.
Lynch also pointed out that the Relief Canyon property is surrounded by other mining properties.
Lynch pointed out that as far as he knows there are no laws that restrict foreign companies wishing to invest in properties near military establishments and if there were, he would not have proceeded with the transaction.
“It’s about having a clear set of rules,” he argued. “There probably have been a tonne of transactions involving foreign companies buying assets in Nevada so is this just a Chinese rule? Is there some sort of xenophobia about this? … I wouldn’t have gone through all this grief if I had known this would have been such a traumatic ordeal.”
Now Firstgold is reviewing other options to bring Relief Canyon into production and to obtain value for its assets.
“The good news is that at the time we struck the deal with Northwest, gold was at US$900 per oz., today it’s US$1,100 per oz. so that’s positive and we’ve had some inquiries,” Lynch noted.
Relief Canyon is one of four properties Firstgold owns in Nevada.
The mine is about 177 km northeast of Reno and consists of 965 acres.
Historically, 141,000, ounces of gold were extracted from the Relief Canyon property between 1986 and 1989. The operations were then suspended due to the declining price of gold.
The junior explorer poured its first gold dore bar in March 2009 after receiving its final reclamation permits from the Nevada Department of Environmental Protection in April 2008. The permit was the final step of a permitting process that took nearly three years to complete.
According to Firstgold’s website, the company had anticipated mining to begin in the existing pits in early 2010.
Throughout 2007 and 2008, the company developed a new crusher system and completely overhauled its process plant. The plant is capable of handling 2 billion gallons of fluid per year and processing 7 million tons of ore.
Over the last 52 weeks Firstgold has traded in a range of 2¢-31¢ a share and has 182.5 million shares outstanding.
Be the first to comment on "Firstgold gets caught between two superpowers"