Northgate’s cash puts Colomac on fast track

Northgate Exploration (TSE) has agreed to provide the remaining financing needed to get the $135- million Colomac gold project into production. The cash-rich company will inject $8 million directly into Neptune Resources (TSE) in exchange for 3.2 million Neptune common shares and 400,000 share purchase warrants. The equity position represents an initial 20% position, Northgate says.

Neptune is building a 200,000- oz-per-year mining operation in the Northwest Territories which is scheduled to enter production in early 1990. Debt financing, provided by Bank of America Canada, totals $90 million and was contingent on Neptune securing the remaining equity financing needed to fund the project.

Earlier this year, Neptune arranged a $48-million deal with Gold Reserve Corp., a U.S. gold investment company. The Northgate deal is part of that financing package. Northgate, which received $160 million last year from the sale of its two copper-gold mines near Chibougamau, Que., has been building a portfolio of gold investments across North America.

The company will also acquire a 35% interest in Gold Reserve for $5 million and holds an option to increase that interest to 60% via the conversion of a $10-million loan to that company.

The largest gold mining project in Canada since Hemlo, the Colomac project is being watched closely by the Canadian mining and investment communities. Burdened by isolated location and low grades, the deposit is believed to be economically viable by Neptune which hopes to enjoy economies of scale from a 10,000-ton-per-day open pit operation. Reserves in one of three zones, total 16 million tons grading 0.064 oz gold per ton.