Ontex options Brookbank to Placer Dome

Exploration could resume as early as November on a group of Beardmore, Ont., gold claims awarded to Ontex Resources (ASE) following its recent court battle with Metalore Resources (TSE).

Ontex has signed a letter of intent with Placer Dome (TSE) granting the Vancouver-based major the option to earn as much as 60% of the Brookbank gold property in return for spending $13 million on exploration and development. If a formal agreement is signed, it will include the 18 claims awarded to Ontex by an Ontario court judge last December after he ruled that Metalore had intentionally misled Ontex on the nature of exploration results. Metalore President George Chilian has appealed that decision although it isn’t yet known when a final ruling will be handed down.

Based on results of drilling completed by Placer before exploration was interrupted last August, preliminary reserves on the key 18 claims stand at 1.4 million tons grading 0.26 oz. gold per ton (0.23 oz. cut). The following are terms of the proposal, which also gives Placer an option on 471 additional Brookbank claims awarded to Ontex by the court: To exercise an option on a total of 489 claims, Placer must purchase $2-million worth of Ontex shares for a period of 18 months at 30% above the prevailing market price. The Vancouver company must also spend $7 million on exploration and development work including $1 million within six months of signing a formal agreement.

Placer plans to exercise the option by spending $4 million on the Ontex claims over three years as long as Metalore loses its appeal. The major can also increase its interest another 10% by spending a further $6 million within three years after earning 50%.

A decision by the Ontario Court of Appeal would also influence Placer’s proposed plan to spend $2 million on another 39 claims held equally by the Vancouver company and Metalore. Subject to the court ruling, Ontex would contribute 50% of the amount spent by Placer on those 39 claims. Although the proposal is conditional on both companies executing a formal agreement within 60 days, Ontex officials are clearly excited about the future implications for their company.

“We feel this is the advent of a new era for Ontex and for exploration activity in the Beardmore area,” said Ontex Vice-President Ross McGroarty. Speculation that an announcement was imminent sent Ontex shares up 85 cents to $2.95, Sept. 23, the day before the proposal was revealed to the public. Trading was also halted briefly, at the company’s request, to allow the news to be disseminated.

Having spent $1.4 million at Beardmore under a similar agreement with Metalore, before the court case interrupted drilling, Placer is intimately familiar with the project and its potential.