Glen Eagle to buy 45% stake in Kinbauri’s Spanish assets

Vancouver – Kinbauri Gold (KNB-V, KINBF-O) looks to have taken the first step towards funding its El Valle and Carles project in Spain.

Kinbauri has agreed to sell a 45% stake in its Spanish subsidiary Kinbauri Espana to Glen Eagle Resources (GER-V) for $32 million. The letter of intent allows Glen Eagle to purchase an additional 5% interest for $5 million.

Kinbauri will remain the project’s operator.

The Spanish subsidiary owns a 100% interest in Kinbauri’s primary asset, the El Valle and Carles past-producing mines in northern Spain which Kinbauri acquired from Rio Narcea in 2007 for US$5 million.

Since producing a revised scoping study that outlined plans to restart the project in March, Kinbauri has been on the hunt for sources of funding.

The scoping study estimated capital expenditures on the project would reach €90 million. A base case scenario using metal prices of US$750-per-oz. gold and US$2.50-per-lb. copper returned a net present value of $94 million and a 33% internal rate of return (after-tax and discounted at 10%).

The mine plan is to produce about 100,000 oz. gold and 10 million lbs. copper per year over a nine and a half year mine-life. Kinbauri estimated cash costs of US$372-per-oz. gold net of a copper credit.

Kinbauri hopes to begin production in 2011.

Glen Eagle appears to have sourced the necessary funding through a credit facility. In late March Glen Eagle and a partner, Paradise Peak Holdings, announced that a European consortium of banks would make a US$32 million credit facility available to them on May 1.

Glen Eagle subsequently announced that date had been extended to June 12.

Kinbauri president Vern Rampton states: “Glen Eagle Resources and its CEO, Mr. Jean Labrecque share our intention to aggressively move the project forward to production.”

Calls to the offices of Kinbauri and Eagle Resources late Friday afternoon on April 17 went unanswered.

On news of the transaction Glen Eagle’s share-price dropped 3.5¢ to 14.5¢ and Kinbauri’s share-price rose 2¢ to close at 47¢. Respectively Glen Eagle and Kinbauri have about 30 million and 53 million shares outstanding.

Kinbauri says the transaction is set to close May 15.