Under the terms of the deal, Placer has the right to earn a 50% interest by spending $7 million on exploration over a 33-month period. The company can earn the remaining 50% by placing the property into production. After capital payback, Metalore would be entitled to a 50% net profits interest. During payback, Metalore will receive a 2% net smelter royalty.
Placer Dome must also purchase Metalore treasury shares, the amount of which has not been determined. The company will also hold options to purchase additional Metalore stock.
The Brookbank property generated considerable excitement when Metalore first announced strong results from a deep drilling program in 1986. The find, made at depths of 1,300 ft to 1,800 ft, included assays of 0.47 oz gold per ton across 53.4 ft and 24 ft grading 0.46 oz.
Controversy hit the project when Ontex Resources (ASE) launched a $500-million lawsuit against Metalore just two months after the discovery was announced. Ontex, which holds a 10% net profits royalty, sold the property to Metalore. Metalore has said that Ontex’s claims are unfounded and has filed a countersuit.
The Ontex suit prevented Hudson Bay Gold, an affiliate of Inspiration Resources, to conclude a deal with Metalore. HudBay wanted clear title to the property before committing to sinking a 1,800-ft shaft.
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