Gunsteel, Nu-Dawn work out innovative milling deal

Along with associated private company, Nugget Mines, Gunsteel has signed a letter of intent to acquire a 60% interest in the HB mine, mill and related assets from Nu-Dawn Resources VSE).

The mill is located about three miles from the Nugget property (owned equally by Gunsteel and Nugget) which has total reserves of about 223,000 tons grading 0.33 oz gold per ton. Gunsteel’s objective is to process ore in the 100-150-ton- per-day cyanide circuit which is attached to the 1,200-ton-per-day flotation mill.

Kept on a care and maintenance basis for some time, the mill was owned and operated until 1972 by Cominco Ltd. to process lead-zinc ore from the adjacent HB mine, once a significant producer in the Salmo district. David Minerals took it over in 1981 and added the cyanide circuit which is about 90% complete. The mill was then sold to Nor-Quest Resources in 1987, and subsequently sold to Nu-Dawn.

To acquire its interest, Gunsteel and Nugget will have to pay $200,000 to Nu-Dawn and issue stock valued at $200,000. A further $400,000 is payable out of proceeds from milling. Gunsteel will be operator, with profits from the milling operation to be shared 60% by Gunsteel and Nugget and 40% by Nu-Dawn.

The companies plan to use the lead-zinc flotation section of the mill to process some existing ore that still remains in the HB and nearby Canex mines, along with custom ore from other properties in the area. Gunsteel and Nugget recently signed a letter of intent to acquire the past-producing Canex mine from Placer Dome Inc., with Nu-Dawn having the right to participate on the same 60-40 basis as the HB venture.

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