Shares of American Reserve Mining (VSE) hit a new low of 8 cents recently after Placer Dome (TSE) agreed to pay $2.28 million cash for the junior’s 35% stake in the Paymaster gold mine project near Timmins, Ont.
The purchase price represents a substantial discount to the $18 million Placer paid for a 60% interest in the project in 1989, when the gold producer was looking for additional sources of ore to feed its Dome mill. As a result of the sale, American Reserve will take an asset writedown of $8.4 million. “(The purchase) is not based on any new developments,” said Hugh Leggatt, a spokesman for Placer. “It’s rather that we had an opportunity to buy because American Reserve wanted to unload its interest.”
In February, Placer wrote off the US$31-million carrying value of its interest in the project after spending more than $20 million dewatering, rehabilitating and exploring the former producer from the 6,025-ft. level. Referring to an independent feasibility study, American Reserve said the deposit would produce about 43,000 oz. per year at a cash cost of US$240 per oz. Placer is working on its own feasibility study.
“We will put it in our property inventory for possible development in the future,” said Leggatt.
The purchase agreement is subject to regulatory approval.
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