Partners launch $14 million program

Vancouver — Fort Knox Gold Resources (FNX-T) and Dynatec (DY-T) have inked a joint venture agreement to explore, develop and potentially mine five nickel-copper-platinum-palladium properties in the Sudbury district of northeastern Ontario.

“Fort Knox is very pleased to have Dynatec, one of Canada’s premier mining contracting and service companies, as its joint venture partner,” says Fort Knox’s President, Terry MacGibbon. “With Dynatec on board, we will be able, if warranted, to put the properties into production with minimum capital and mine the properties with low operating costs.”

The Sudbury Basin joint venture, held 75% by Fort Knox and 25% by Dynatec, paves the way for a $14 million exploration program over the McCreedy West, Levack, Victoria, Kirkwood and Norman properties. Fort Knox picked up the projects from Inco (N-T) earlier this year.

Under the Inco deal, Fort Knox is required to pony up $14 million in exploration expenses within 16 months. The company can earn a 100% interest in the properties, as well as the right to lease all the surface land and on-site facilities. In return, the junior must spend $30 million by the end of 2005 and has agreed to boost Inco’s stake in the company to 20%.

Inco can re-acquire a 51% interest in any new discovery that contains mineral resources with a value of at least 600 million lbs. of nickel by spending 200% of Fort Knox’s costs on the new deposit. The major would also be granted the right to process the minerals and, in the event of third-party processing, retain a 2% net smelter royalty for nickel, copper and cobalt and a 2.5-5% NSR for precious metals. Inco also retains a right of first refusal on the sale of any of the properties.

Fort Knox has assigned all of its rights, obligations and interest in the properties to the Sudbury Basin joint venture. Fort Knox will conduct all surface and underground exploration activities on the properties, while Dynatec will conduct all surface and underground mining operations. The partners will share costs equally on the first $14 million spent, while the remaining $16 million required to be spent will be funded pro rata basis; with Dynatec contributing 25% or $4 million and Fort Knox contributing 75% or $12 million.

“The participation and interest to be earned in these Sudbury Basin Joint Venture properties is significant to Dynatec’s corporate growth strategy and we are excited about working with Fort Knox and Inco bringing new production to these properties,” adds Bob Dengler, Dynatec’s Chief Executive Officer.

The properties are all former copper, nickel, platinum, palladium and gold producers and contain numerous remnants and extensions of previously mined deposits. The initial $14 million work program is underway and comprises at least 80,000 metres of surface drilling. Underground drilling on the McCreedy West and Levack properties is planned for later in the year.