Terramar buys California company that owns a former gold producer

Terramar Resource Corp. has agreed to purchase Mount Gaines Resources, a California company whose principal asset is the old Mount Gains gold mine in California. Between 1853 and 1949, the mine produced 125,000 oz gold from ore grading 0.5 oz per ton.

The acquisition will be financed through the issuance and allotment to Mount Gains shareholders of seven million Terramar shares after the completion of a proposed 7-for-4 consolidation. Terramar has also agreed to discharge $450,000(US) of Mount Gains liabilities by payment in cash at the closing. It is expected that these funds will be provided from the proceeds of a private placement currently under negotiation, says Terramar.

Coincident with the acquisition, a controlling interest of 53.4% in Terramar will be transferred from Pacific Concord Resource Corp. to Concord Investment Co. An outstanding loan of $2.4 million will also be transferred and, subject to regulatory approval, converted into equity. The net effect of these transactions is that current Mount Gains shareholders will be the registered beneficial holders of approximately 36% of Terramar.

According to Terramar’s chairman, Peter Maxwell, “the Mount Gains gold mine represents a major step forward for Terramar.” He notes that Mount Gains has produced over 3,000 oz of gold in the past 12 months using modern heap leach methods. At present, there are over 175,000 tons of mill tailings and underground low grade material under 24-hour leach which should produce gold for another two years at least, he states. There is also open pit potential adjacent to the old workings.

Like so many other old California gold properties, the Mount Gains mine has an interesting history. It was discovered and patented in 1853 by Captain James Gains, one of the authors and signatories of the Texas Declaration of Independence.

The first mining in the area involved placer operations at Burns and Eldorado Creeks between 1853 and 1873. Lode mining began about 1868 on pockets and narrow stringers, vein matter being crushed in arrastras, or rock-lined pits. In the early 1870s, a 400-ft vertical shaft was sunk on the Frenchman claims about 2,000 ft northeast of the present main shaft. Shallow surface workings supplied most of the ore crushed on site, but $150,000, at $20(US) per oz was recovered from ore mined on the Barfield claim. About 1881, the Mount Gains mine was purchased along with a large group of mines in the vicinity of the No 9 mine by Yosemite Mining in which M. Huling, a Pennsylvania oil man, was the chief owner.

The main shaft, started by the Yosemite Company in 1881, was down 300 ft by 1897. At that depth the vein was reported to be five feet wide and the ore to average $25 per ton at $20 per oz. The Consolidated Mining and Processing Company failed to get the mine into production and after a period of three years Mount Gains Mining moved in to operate the mine. It was organized in 1906 and operated the property until 1911, deepening the shaft to 1,322 ft and completing several thousand feet of drifts. Mine production from 1900 to 1911 totalled 1 million.

Operations by this company ended in indebtedness and litigation in 1911. In April, 1914, a group of Denver and Los Angeles men headed by A. M. Gillespie attempted to reopen the mine but were unsuccessful. About 1917, another company, the Mount Gains Gold Mining Co., was organized with G. W. Croots and Serona Crotts as principal owners and W.J. McCray as superintendent. Considerable expenditures were made for equipment but indebtedness and litigation hampered the various managements and no material mining was accomplished during the 1920s. In May, 1934, the mine was leased to Internati onal Mining and Milling of Los Angeles. From 1939-49, due to litigation, the mine was operated under law 77(B) which prevented prudent mine exploration and development. As a result, experts conclude that with proper drilling and further exploration an entire new mine potentially exists.

Production records are incomplete but that average grade at Mount Gains is estimated to be 0.5 oz gold per ton in addition to substantial quantities of silver and copper. The mine remained dormant from 1949-55 when San Franciso mining attorney J.W. Radil purchased the property. Another Texan, Joseph Hudson, then 32, bought the gold mine with its several hundred acres of land and the minerals rights in 1980.

Hudson has been conducting a combined surface mining and reclamation project since that time. This has resulted in the successful heaping and leaching of approximately 175,000 tons of gold and silver ore. Terramar will receive 100% of the revenues coming from these two heaps over the next two years.