Wayside secures US$14 million for QR mine, Bonanza Ledge deposit

Barkerville, B.C. is a ghost town leftover from the 1858-1863 Cariboo gold rush, and soon International Wayside Gold Mines (WYG-V) will ask shareholders to consider taking on the name Barkerville Gold Mines as a part of a complicated deal that could enable the company to put two nearby mines into production.

Wayside has just secured a US$14-million through a three-year drawdown loan facility at an 8% interest rate that will help pave the way to restart operations at the QR gold mine and 900 tonne-per-day mill, bring its Cariboo gold project Bonanza Ledge deposit into production and fund other capital programs.

Andrew Rees, a director for Wayside, says the company went for debt financing so as not to dilute the shares. “We don’t want to issue US$15 million worth of stock at fifty cents a share,” he says.

But the Rees points out that the company is going above and beyond a little debt financing to avoid dilution. Wayside plans to use accumulated tax write-offs of $25 million to buy the QR mine and mill, from now bankrupt Crosslake Minerals. Wayside will be passing on the tax write off to one of Cross Lake’s creditors, contract miner Procon Mining & Tunneling, which took control of the mine and mill when Crosslake went bankrupt.

Originally the plan was to pay Cross Lake to custom mill high-grade Bonanza open pit ore by trucking it 110 km by road to the QR Mill. But Cross Lake fell on tough times during the latest downturn and ended up putting the mine on care and maintenance.

To get the deal done, Wayside plans to spin off all of its properties, including the QR mine and mill, the Cariboo project, and its assets, liabilities and obligations to a new subsidiary, Barkerville Gold Mines in exchange for shares of Barkerville. Wayside shareholders will then trade in their shares for Barkerville shares on a one-for-one basis.

That will leave Wayside as essentially a shell company with a $25-million tax write-off. Procon Mining & Tunneling will then takeover Wayside and Barkerville will list on the TSX.

“It’s a creative way to fund an acquisition,” Rees says.

The QR mine and mill were constructed by Kinross Gold in 1994. Between 2005 and 2008, Cross Lake spent about US$34.5 million in acquisition, exploration, development and refurbishment.

Wayside expects to complete prefeasibility studies for both the QR mine and the Bonanza deposit in the next couple of weeks.

Rees says that if the deal goes through, Wayside hopes to start production at the QR mine this October.

The company also plans to bring Bonanza into production but is still waiting on a mining permit.

By the end of December 2010, Lees says Wayside (by then Barkervill) will have mined about 50,000 oz. gold from the two deposits.

The QR mine has measured and indicated resources totaling 58,000 oz. gold with an average grade of 5.07 grams gold per tonne, plus another 100,000 oz. in the inferred category.

The Bonanza Ledge open pit deposit contains 89,000 oz. under the measured and indicated category and another 8,000 oz. in the inferred category.

The company, which has resources on other Cariboo deposits, plans to do more exploration work once the deal goes through.