Sale to Western Goldfields doubles Orofino’s money

A tidy little deal for an interest in a new Nevada gold mine has all owed Orofino Resources to double its money in about a month.

In early August Orofino bought a 10% interest in the Hog Ranch mine for $1.5 million (US) and a contribution of about $700,000 (US) as its share of the capital cost of placing the property into production.

Now, in a transaction valued at $5.25 million(Cdn), TSE-listed Western Goldfields is acquiring Oronoveda Inc., the wholly-owned subsidiary of Orofino which held the 10% interest.

The purchase will increase Western’s interest in the heap-leach mine in northwestern Nevada to 42% from 32%. Western expects to increase its interest to 60% when the mine reaches commercial production in the next few weeks.

For Orofino, it was a neat way to make a good return.

“We like the property very much,” says Orofino President John Kearney, “but when we received an attractive offer for our relatively small interest we reviewed the time it would take before Orofino made an equivalent return on its investment and decided to accept the offer.”

The mine is expected to produce 50,000-55,000 oz of gold annually. On Sept 14 it poured its first gold bar weighing 764 oz. Western Goldfields is the operator.

To finance the purchase, Western completed a private placement of 865,000 convertible preferred shares at $6.75 per share. It also obtained a further $697,500 as a result of a greenshoe option on 150,000 shares held by the underwriter of Western’s initial public offering earlier this year. As a result, after the purchase of the 10% interest is complete Western will have working capital of more than $1.5 million.

When Orofino made its purchase of the 10% interest in August, a loan to finance the purchase was guaranteed by its parent company, Northgate Exploration.