Ken Snyder sale closes

Shareholders of Normandy Mining (NDY-T) have approved the agreement with Franco-Nevada Mining (FN-T) under which Normandy will take over the Ken Snyder mine at the northern end of Nevada’s Carlin gold trend. Franco will become Normandy’s largest single shareholder, with a 20% interest.

The deal, originally announced in early April, will see Franco-Nevada’s Australian royalty interests, and the 41-sq.-mile exploration property surrounding Snyder, transferred to Normandy. Franco keeps a royalty on Snyder of 5% of net smelter return, which increases, starting at gold prices of US$300 per oz. to a maximum of 10% at US$400. Normandy also receives a cash injection of US$48 million from Franco-Nevada.

The Snyder mine produced 216,000 oz. gold and 2.1 million oz. silver in the 12 months ended March 31, 2001. It is among the most economic mines in the industry, with cash production costs of US$114 per oz. in fiscal 2001; this is partly attributable to its average head grade of 0.95 oz. per ton.

At the end of 2000, the mine had reserves of 3.4 million tonnes grading 0.63 oz. gold and 7.8 oz. silver per tonne. The figure is higher in tonnage and lower in grade than the figure for December 1999, when reserves were estimated at 3 million tons grading 0.86 oz. gold and 9.8 oz. silver per tonne.

The new reserve calculation reflected a higher dilution factor, which has been the principal operating glitch at Snyder since it began production in 1999.

Snyder’s mill capacity is now 1,000 tons per day following a US$2-million expansion, which included increased capacity in the crushers, a new 350-ton grinder, and modifications to the thickener and Merrill-Crowe recovery circuits.

One question hanging over the deal is the future of contract mining at Snyder. The contract currently belongs to Dynatec (DY-T). Franco had already been studying the viability of taking over operation of the mine (before the Normandy deal), and Normandy has said it too is interested in operating it.