Trimin ready to back Rea with $6.5-million investment

If a recently announced deal is completed, Rea Gold (TSE) could receive up to $6.15 million in financing from Trimin Resources (TSE).

Under the agreement, a wholly owned subsidiary of Trimin will buy a 100% interest in a subsidiary of Rea for $2.15 million in cash, plus a limited recourse promissory note for $11.35 million.

The Rea subsidiary holds a 30% interest in Rea Gold’s principal assets: a 30% direct interest plus a 5% net smelter return interest in the Samatosum silver-zinc-copper-gold-lead mine near Adams Lake, B.C.; substantially all the issued shares of QPX Minerals which owns the QR gold deposit near Quesnel, B.C.; and a 100% interest in the now-closed Bissett gold project in Manitoba.

The remaining 70% interest in the subsidiary will be owned by Rea Gold. The cash payment will be used for the initial development of the QR property. A feasibility study was completed on the project last year recommending the property be put into production at a rate of 825 tons per day. The study was based on a diluted minable reserve of 1.3 million tons grading 0.17 oz. gold per ton.

The project would produce about 44,000 oz. gold per year at a cash cost of about US$304 per oz. over its estimated life of about 4.3 years. Capital cost of the project is estimated at $22 million.

If Rea meets a number of conditions relating to the feasibility and financing of a mine on the QR property, Trimin will provide a subordinate loan facility of $4 million to the company.

In return for the loan facility, Trimin has the right to purchase up to 272,727 shares of Rea at $1.10 per share.

Terry Holland, president of Trimin, said the proposed agreement with Rea will give Trimin access to about $13 million in Canadian development expense. This would allow the company to defer all of its income tax liability (amounting to about $6 million) relating to the sale of its interest in the Hanson Lake copper-zinc-silver project.

Trimin sold its 32.9% interest in the Hanson Lake property last year for $17.5 million, netting a pretax profit of $14.7 million. With over $9.5 million in cash at the beginning of the year, Trimin has been hunting for investments.