SolidusGold to buy Newmont’s Northumberland for US$20M

VANCOUVER — Rick Van Nieuwenhuyse’s SolidusGold (TSXV: SDC; US-OTC: SLDGF) is making a significant wager on a potentially underappreciated piece of Newmont Mining’s (NYSE: NEM) expansive gold portfolio in Nevada. On Sept. 15, Solidus announced its intention to acquire a 100% interest in Newmont’s  97 sq. km Northumberland gold project for US$20 million in cash.

The Carlin-style gold deposit is  150 km northeast of the historic mining town of Tonopah along State Highway 376.

Newmont picked up the property in 2011 as part of its US$2.3-billion deal for Fronteer Gold and the junior’s Long Canyon oxide gold discovery.

SolidusGold says that US$17.5 million has been spent on Northumberland over the past eight years.

Northumberland has a historic resource of 36.5 million indicated tonnes grading 1.92 grams gold per tonne and 7.72 grams silver per tonne for 2.2 million contained oz. gold and 9.1 million contained oz. silver.

The historic pit at Newmont Mining’s Northumberland gold project in Nevada. Credit: SolidusGold.

SolidusGold’s initial interest will be in open-pit oxide material that includes 13.6 million indicated tonnes of 1.23 grams gold and 7.31 grams silver for 602,000 contained oz. gold equivalent.

Van Nieuwenhuyse serves as SolidusGold chairman and interim CEO. He is best known for his role in discovering the massive Donlin Gold deposit in the historic Kuskokwim belt of southwest Alaska, now a project jointly owned by Barrick Gold (TSX: ABX; NYSE: ABX) and NovaGold Resources (TSX: NG; NYSE-MKT: NG) following Barrick’s failed hostile takeover of NovaGold almost a decade ago.

“There’s a lot of information that can go into updating the historic resource, and we’ll do our own work as well,” Van Nieuwenhuyse said during a conference call. “Newmont’s current focus on near-mine exploration and development meant this was a non-core asset, which allowed us to make the proposal. The scarcity factor in terms of assets of this size and calibre really makes this a unique opportunity. There’s just not a lot of large-scale, multimillion-ounce gold deposits in Nevada that are not already in the hands of major companies.”

Northumberland sits in the middle of Nevada in northern Nye County, 50 km north of Kinross Gold’s (TSX: K; NYSE: KGC) Round Mountain mine. The project area includes 16 sq. km of patented private mining claims, mill-site patents and fee lands. Open-pit, heap-leach mining from 1981 through 1990 generated 231,000 oz. gold and 486,000 oz. silver.

Northumberland has a 35 km gravel road, while Newmont’s exploration permits, on private and United States Forest Service lands, are designed and bonded for future surface disturbance. Previous site development includes 400 metres of underground decline and drill platforms. All historic resources are on private land with no underlying royalties.

“Our team believes there is significant discovery upside on the property, and obviously it’s a safe jurisdiction. We’ll focus on the open-pit oxides initially and there’s good potential for expansion, but there is also tremendous upside, in terms of underground sulphide mineralization,” Van Nieuwenhuyse said.

“We also see some really great exploration upside on a number of targets that have been identified, but not yet drilled. These are located on forestry-service lands, so it will require another permit step, but I’m encouraged by the high-grade soil anomalies south of the historic resource along trend,” he added.

To finance the acquisition and near-term exploration work, SolidusGold has signed a deal with Haywood Securities for a $40-million private placement, wherein it would sell 114.3 million subscription receipts at 35¢ each. SolidusGold also negotiated an over-allotment option that could raise another $6 million.

Each subscription receipt converts to a SolidusGold share when the Northumberland deal is finalized. The financing could close in October, while the property deal is scheduled to be complete by late November.

The company reports that “certain strategic investors,” led by U.S.-based private equity outfit GF Capital, have expressed interest in subscribing for up to $20 million of the financing.

SolidusGold has outlined a $9-million work program that could include $8 million in drilling and $750,000 in metallurgical work to gain more understanding of the sulphide and transitional material.

The company hopes to release a National Instrument 43-101 compliant resource estimate at Northumberland by May 2017.

“There’s a great database there, so I don’t think it’s going to take a lot of drilling to get comfortable with the historic resource. That will be the first phase of our drilling,” Van Nieuwenhuyse said. “We need to validate the oxides, and see if we can get that resource up towards 1 million oz. gold. The second phase will probably look at expanding the sulphide resource and gain greater confidence in the oxides.”

SolidusGold has traded in a 52-week range of 3¢ to 72¢, and gained 14¢ after news of the Northumberland deal to a 49¢-per-share close at press time. The company has 49 million shares outstanding for a $25.2-million market capitalization, and expects to have pro-forma cash of $14.5 million after the acquisition.