Homestake buys Aussie project from Rio Tinto

Denver — In return for US$27.6 million, Homestake Mining (HM-N) will acquire the Cowal project in New South Wales, Australia, from North Gold (WA), a wholly owned subsidiary of Rio Tinto (RTP-N).

According to a feasibility study conducted by North, the project contains reserves of 73 million tons grading 0.035 oz. per ton, equivalent to 2.5 million oz. gold. It is in the Lachlon fold belt, 250 miles west of Sydney.

Many of the holes drilled to date bottomed in economic mineralization, and Homestake believes there is considerable potential to increase reserves.

The feasibility recommended open-pit mining of 6.6 million tons per year. Ore would be treated in a conventional carbon-in-leach plant with a separate sulphide flotation circuit. Annual production is pegged at 200,000 oz. gold over 10 years.

Rio Tinto gained the property through its acquisition of North Ltd. late last year, and subsequently decided to sell it.

Homestake paid an initial deposit of US$375,000, followed by US$9.6 million upon completion of the agreement, which is still subject to government approvals. On the fourth anniversary of the agreement, Homestake will pay US$2.6 million, and a further US$15 million if it decides to develop the mine.

“The acquisition of the Cowal project represents an excellent opportunity to expand gold reserves and future production without compromising our financial strength and geopolitical risk profile,” says Homestake Chairman Jack Thompson.

The acquisition also solidifies the company’s position as the second-largest gold producer Down Under. Homestake produced nearly 900,000 oz. last year from its Kalgoorlie and Yilgarn operations in Western Australia. Normandy Mining (NDY-T) ranks as the continent’s largest producer.

Once the deal is approved, Homestake will begin a geologic evaluation of the 153,000-acre property, in addition to engineering studies and other predevelopment work.

In 1999, North received development consent from the government of New South Wales.

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