Inco-Fort Knox deal moves closer

Vancouver — Fort Knox Gold Resources (FNX-T) has moved a step closer in its attempt to acquire five of Inco’s (N-T) properties in the Sudbury Basin.

Inco has signed a non-binding letter of intent that lays the basis for negotiation.

Under the proposal, Fort Knox can earn a 100% interest in the properties, as well as the right to lease all the surface land and onsite facilities. In return, the junior agrees to spend $30 million by the end of 2005, and to boost Inco’s stake in the company to 19.9%. Inco can re-acquire a 51% interest in any new discovery that contains mineral resources with a value of at least 600 million lb. of nickel by spending 200% of Fort Knox’s costs on the new deposit. The major would also be granted the rights to process the minerals, and in the event of third-party processing, would retain a 2% net smelter royalty for nickel, copper and cobalt and a 2.5-to-5% for precious metals. Inco also retains a right of first refusal on the sale of any of the properties.

Fort Knox plans to share the exploration and development costs by assigning a 25% interest in the properties to contract miner Dynatec (DY-T).

The proposal still requires the signing of an option-to-purchase agreement, as well as the approval of Fort Knox shareholders.