Relief Canyon mine acquisition falls through for Canarc

Following a due diligence review of Firstgold‘s bankrupt Relief Canyon gold mine in Nevada, Canarc Resource (CCM-T) has decided not to proceed with the US$11-million acquisition.

Canarc had successfully bid to buy the Relief Canyon gold assets through a bankruptcy court auction, subject to a due diligence period that expired Feb. 4, 2011. To facilitate the mine purchase, the company had arranged a $12-million bridge loan with Effisolar, an investment company focused on the energy and mining sector.

Neither Canarc, nor Effisolar, are satisfied with the results of the due diligence to date, and Effisolar has notified Canarc that they no longer intend to provide the $12-million loan for the acquisition.

According to Canarc, the main issues relate to the fact that the known gold resource is inferred and it is not yet fully permitted for mining. The inferred resource also partly occupies a neighbouring property and Canarc was unable to acquire that property on commercially acceptable terms.

Canarc says it is still interested in buying the Relief Canyon mine once the secured lender to Firstgold is able to acquire the mine assets through the bankruptcy proceedings, subject to resolving the remaining due diligence issues. Canarc further states that it has received expressions of interests from other possible lenders regarding future debt financings related to the Relief Canyon mine acquisition.

As a condition of its original winning bid on the Relief Canyon mine, Canarc paid a US$300,000 non-refundable deposit to Firstgold that was secured by the right to purchase the mine’s assay laboratory for an additional US$300,000. Effisolar has agreed to provide Canarc with a $300,000 convertible loan to complete the purchase of the fully built and operating commercial assay lab located near the Relief Canyon mine site.

While conducting its due diligence on Relief Canyon, Canarc identified several other gold exploration and mining properties that are available for acquisition, which it intends to further evaluate.