Glass Earth shares up 22% on option to buy Coromandel goldmine
Gold miner Glass Earth has gained rights to take over the Neavesville gold and silver prospect controlled by Canadian resource developer Eurasian Minerals.
A complex set of arrangements will see Glass Earth make limited up-front payments, with most revenue flowing to Eurasian once commitment to a mining operation has been made.
The announcement saw shares in Glass Earth leap 22% to 33 cents, although they remain 52% below their high point for the last 12 months.
Located immediately north of Newmont Gold's major producing mine, Martha Hill, Neavesville has been identified in the past as containing a JORC code-compliant resource, although the resource measurement exercise will be repeated and updated because of changes to the way JORC certification rules now work.
"The Neavesville project offers the opportunity to have management control over the development of a significantly advanced gold/silver project, with an already established (historic) resource, with the immediate objective to update and improve the potential of the existing Bluff resource," chief executive Simon Henderson says in a statement to the NZX.
The project also offered "tantalising new targets" to increase its size.
Long-time New Zealand gold mine developer Geoff Loudon, chairman of Nautilus Minerals, will take a 50% stake in Glass Earth's rights to the Neavesville project.
Eurasian will receive an immediate payment of $C85,567 in reimbursement for recent exploration costs and will be eligible before December 31 next year for an option payment – made either as 850 ounces of gold, its cash equivalent, or in Glass Earth shares – at Glass Earth's election.
Glass Earth will then have 24 months or until December 31, 2015, to produce an updated JORC resources report, at which point it will elect either to take over ownership of the project or walk away.
If it exercises the option to proceed, it will then be up for payments equivalent to 2% of net smelter royalties from the production of the mine, and additional payments of 75oz gold or its equivalent annually before the option exercise, and 100oz gold annually after exercise until production commences.
On completion of a JORC-compliant feasibility study supporting a mine construction decision, Glass Earth will make a payment in gold, or cash or shares to its equivalent value, on a 1:100 ratio up to 500,000oz on those and subsequently reported reserves. Above 500,000oz, the ratio drops to 1:200.
"What we like about this and worked hard to negotiate is that most of the payment occurs after we've got a positive decision to mine," Glass Earth's chief financial officer told BusinessDesk.
The historic, unconfirmed estimates of the resource at Trig Bluffs showed near-surface "upper zone" mineralisation in 3.2 million tonnes, averaging 2.7 grams of gold per tonne, and 8.9 grams of silver, containing 289,000 oz of gold and 944,000 oz of silver.
Deeper, potentially underground minable resources were identified as 470,000 tonnes of mineralised rock averaging 7.1oz of gold per tonne and 20.7 grams per tonne of silver, containing 107,000oz of gold and 312,000 ozof silver.