EXPLORATION 1999 – Sudbury Contact buys Tonkin Springs

Toronto-based Sudbury Contact Mines (SUD-T) has acquired a 60% interest in the Tonkin Springs gold project in the Battle Mountain trend of central Nevada.

In exchange for the interest, the company (SC) paid $800,000 and issued 200,000 shares to Gold Capital, a wholly owned subsidiary of Globex Mining Enterprises (GMX-T).

As part of the transaction, SC also entered into an operating agreement with the minority holder of the property, Denver-based U.S. Gold (USGL-O), which owns 40%. SC will pay US$235,000 to U.S. Gold at closing and make monthly payments of US$45,000 over the next 33 months.

SC agreed to spend US$2 million exploring the property over the next three years. It will also fund the first US$4 million in exploration, after which U.S. Gold must contribute its share of the funding.

Under certain conditions, SC would finance — in the form of a loan — U.S. Gold’s share of project financing. Failure to repay the loan could result in dilution of U.S. Gold’s interest, though not below a 2% net smelter return royalty.

Tonkin Springs consists of 1,164 claims covering 36 sq. miles in Eureka Cty., south of Elko.

U.S. Gold began initial gold production at an open-pit heap-leach mine within the property in 1985. However, operations were suspended in November 1988 in the midst of constructing a 2,000-ton-per-day bio-oxidation mill for sulphide ores.

Past exploration at Tonkin Springs, on the southern portion of the property, outlined a series of oxide and sulphide deposits with a total resource of 1.37 million oz. gold within 30.7 million tons grading 0.045 oz. per ton.

SC plans to concentrate its efforts on the northern part of the property, which remains largely unexplored. Initially, the company will compile existing geologic and geochemical data, with mapping and drilling to follow.

Globex sparked renewed interest in Tonkin Spring in August 1997, when it acquired Gold Capital. The company conducted metallurgical tests and drilled 30 holes, but soon ran out of money when the price of gold fell. Globex sold its interest in Tonkin Springs because of high maintenance costs, including large advance payments to U.S. Gold.

SC is 59%-held by Agnico-Eagle Mines (AGE-T) and is that company’s principal exploration subsidiary. Tonkin Springs is the first property SC has acquired since it merged with another Agnico-Eagle subsidiary, Silver Century.

The company holds 34 additional exploration properties for gold, base metals and diamonds across northeastern Ontario and northwestern Quebec.