Meridian eyes half-stake in Gold Hawk

Mid-tier producer Meridian Gold (MNG-T) has reached an agreement that could give it a controlling interest in Montreal-based junior Gold Hawk Resources (CGK-V).

Under the proposed deal, Meridian would subscribe to a private placement of 6.5 million Gold Hawk shares at 20 apiece. Meridian would also get 6.5 million share purchase warrants. One warrant would allow Meridian to buy another Gold Hawk share for 20 for 18 months.

Also under the deal, Meridian would subscribe to a one-year, $1.3-million convertible note from Gold Hawk. The note can, at any time before maturity, be converted into 6.5 million Gold Hawk shares at a conversion price of 20 per share; the shares would be accompanied by a 2-year purchase warrant good for one share at 20. Gold Hawk will invest proceeds from the note in certificates of deposit as security for repayment of the note until the conversion, if it occurs.

Of the $1.3 million in proceeds from the initial private placement, $1.05 million is earmarked for work on Gold Hawk’s wholly owned Machacala gold-silver property in northern Peru. If Meridian converts the $1.3-million note into Gold Hawk shares, about $1.2 million of the proceeds will go toward work at Machacala. The balance will be added to Gold Hawk’s working capital. Meridian will act as operator for exploration at Machacala.

As part of the private placement deal, Meridian will also receive one seat on Gold Hawk’s board of directors.

If Meridian converts the note and all attached warrants, the company would hold 26 million Gold Hawk shares or about 50.7% of the junior’s then-outstanding 51.2 million shares.

The agreement is subject to regulatory and Gold Hawk shareholder approval. Meridian’s board of directors must also sign off on the deal.

Machacala is 40 km east of the Peruvian coastal city of Trujillo. More than 12 sub-parallel gold-silver-mineralized quartz veins ranging from 500 metres to more than 2 km in length have been mapped on the property. The sub-vertical veins vary in width from 1 to 30 metres. From 1979 to 1991, Minera Santa Isabel, a Peruvian company, mined 230,000 tonnes averaging 6 grams gold and 340 grams silver per tonne from the property. Some 200,000 tonnes of tailings from concentrates remain on-site and run 1.23 grams gold and 68.6 grams silver.

A 2000 initial drilling campaign by Gold Hawk returned an average of 11.6 grams gold-equivalent from three veins. All five of the widely spaced short drill holes cut economic values over intervals measuring 1.5-3.5 metres.

In late 2000, Gold Hawk drilled eight holes on the property, returning highlights such as: 3.7 metres (from 189 metres) grading 11.32 grams gold and 23.6 grams silver per tonne in the Casa Fuerza vein in hole 2; and 3.2 metres (from 156 metres) of 13.55 grams gold and 164 grams silver in the Fragua vein in hole 4.