Denver-based
Skyline believes the claims represent the strike extension of the adjacent, soon-to-be depleted Snip gold mine, which is owned and operated by Homestake Canada, itself a wholly owned subsidiary of San Francisco-based
In return for up to $500,000 in funding, Royal Gold will receive either 22% of the net operating profit or a 2% net smelter return on ore mined from the claims (whichever is greater). Thereafter, the company will receive either 8.25% of the net operating profit or a 1% net smelter return royalty.
Skyline and Homestake have meanwhile agreed to conduct underground drilling and drifting on the claims, and to share, on a 55-45 basis, the operating profit on any ore mined. The ore would be processed at Homestake’s Snip mill.
Exploration will focus on following up a previous drill intercept, which cut 15.77 grams gold per tonne across a 2-metre interval. The mineralization is adjacent to a quartz-calcite-sulphide stringer zone containing 4.9 grams gold across 1.6 metres. The intercept occurred 195 metres from the eastern end of the Snip mine at the number 412 drift and 75 metres inside the Skyline claim boundary.
Drifting and drilling will begin this month and last about eight weeks.
Also, Skyline has traced a near-surface structure of disseminated and stockwork gold mineralization known as the Highwall zone. The zone has been followed along strike for 800 metres on Skyline’s property. Skyline geologists interpret the undrill-tested structure as the easterly continuation of the deeper, high-grade target it hopes to mine near the Snip deposit.
The Snip mine has produced more than 1 million oz. gold since it was commissioned in 1991. Its third-quarter total cash costs for 1998 were US$173 gold per oz. at an average head grade of 26 grams gold per tonne. Snip’s reserves are expected to be depleted during the second quarter of 1999.
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