Jipangu invests in Apollo, eyes Nevada assets (June 02, 2005)

Denver-based Apollo Gold (APG-T) has agreed to sell Japanese-based gold miner Jipangu a 9.5% stake in the company for $4 million.

Under the deal, Jipangu will acquire 10 million Apollo shares at 40 apiece; the subscription price represents a 9% premium to Apollo’s 10-day weighted-average trading price.

Apollo has also signed a non-binding letter of intent outlining the sale of its Nevada mining assets, including the Florida Canyon and Standard mines, and the company’s exploration properties, to Jipangu.

In 2004, the Florida Canyon mine produced 73,083 oz. of gold at a total cash cost of US$360 per oz. During the first three months of 2005, the mine produced 9,846 oz. at $394 per oz.

Mining at Florida Canyon was suspended in early March as the company shifted its focus to the construction and loading of a new heap leach pad at the Standard mine. Meanwhile, leaching operations Florida Canyon continue, with an estimated 55,000 oz. of gold remaining on the leach pad at the beginning of 2005.

At the end of 2004, Florida Canyon’s proven and probable reserves stood at 15.2 million tonnes grading 0.5 gram gold per tonne, for around 263,600 oz. of contained gold. The estimate is based on a gold price of US$375 per oz.

Situated some 5 miles to the south, the Standard open-pit heap-leach mine poured its first gold in late 2004, and is expected to reach commercial production in the second quarter of 2005; production for all of 2005 is projected at 30,000-40,000 oz.

During the first quarter of 2005, the mine produced 3,603 oz. of gold from development ore. Proven and probable reserves at the end of 2004 totalled 23.4 million tonnes running 0.6 gram, for around 442,400 contained oz.

Apollo’s Nevada exploration package includes the Pirate Gold and Nugget Field projects, near the Florida Canyon mine. The 3-sq.-mile Pirate project covers an area of minor, historic high-grade underground and surface gold production. Nugget Field is home to historic dry-land placer production.

Proceeds from the proposed sale will be used to fund development of Apollo’s Black Fox project, 75 km east of Timmins, Ont., where a full feasibility study is due by the end of the year. The study will include an updated reserve estimate.

A prefeasibility study early in 2004 pegged open-pit reserves at 2.9 million tonnes grading 4.8 grams gold. Additional (unclassified) mineralized material is estimated at 1.4 million tonnes running 4.8 grams gold.

Apollo envisages Black Fox as an open-pit/underground operation, with the pit mined at the daily rate of 1,500 tonnes over more than five years. Annual production is projected at 81,000 oz. gold. The underground portion of the operation would include a mill and tailing impoundment facility. The plan carries a $60-million price tag.

Permitting is expected to be complete by early 2006; full production could conceivably follow in early as 2007.