Santa Elina, Echo Bay firm up Chapada deposit

Santa Elina Gold (TSE) and Echo Bay Mines (TSE) are stepping up their joint effort to explore for gold deposits in Brazil.

Echo Bay will acquire another 4 million shares of Santa Elina, entitling the major to both an increased share in the smaller company and a half interest in the Chapada copper-gold deposit in Goias state.

The US$10-million private placement features a unit price per share of US$2.50. Santa Elina will use half of those proceeds to finance a third-party, bankable feasibility study.

Echo Bay has 60 days to accept the deal once the feasibility study is received.

To acquire the half interest in Chapada, Echo Bay will pay US$25 per oz. of gold and 2 cents per lb. of copper on proven and probable reserves as determined by the feasibility study. If, at a later date, more reserves are found, the major will pay Santa Elina a net smelter return royalty of 3.5% on its share of the additional reserves.

Echo Bay will end up increasing its interest in Santa Elina to 6.7% from less than 4%.

The Chapada porphyry was discovered by Inco in the early 1970s. Noranda later determined a copper reserve and sank a shaft for bulk sampling. However, owing to poor metal prices, Noranda turned the property over to its Brazilian partner. Later, Santa Elina acquired it.

A report by Watts, Griffis & McOuat determined that the deposit contains minable reserves of 103 million tonnes grading 0.43% copper, plus 0.4 gram gold per tonne. Additional work by Santa Elina, including 660 recent drill holes on the soil cap overlying the deposit, has indicated greater gold reserves.

As a result of this work, Santa Elina is confident it can add another 87.5 million tonnes of mineralized material at similar grades.