Gold producer Glamis Gold (TSE) plans to buy a 35% interest in the Imperial County project in California.
In exchange for paying $1 million in cash to Arizona Star Resource (VSE), Glamis would acquire the property outright, subject to due dilegence and a 1.5% net smelter return in favor of Arizona Star.
The claims are eight miles northwest of Glamis’s Picacho mine and southeast of Santa Fe Pacific’s Mesquite mine.
The geological resource in two deposits at the Imperial County project total 44.2 million tons grading 0.024 oz. gold per ton, based on a 0.012-oz. cutoff. The strip ratio of the resource is relatively high, at about 3-to-1, and Glamis notes that the project will be economic only if gold trades above US$420 per oz.
In a further wrinkle, much of the ground is on federal land and will therefore be subject to proposed government royalty taxes. The proposal passed by the House of Representatives is for an 8% net smelter return, while that passed by the Senate opts for a 2% net proceeds royalty. Glamis Vice-president James Billingsley noted that the difference between the two is significant, given that the 8% royalty is on sales whereas the 2% proposal is only on operating profit.
Most mining representatives expect the royalty will fall somewhere in between. Naturally, they hope it will be on the low side and resolved before the end of the year.
As for Arizona Star, the junior plans to concentrate on further exploration and metallurgical work on the Aldebaran gold project in Chile. The company is earning a 51% interest by spending US$4 million and paying US$2 million by September, 1994.
A pre-feasibility study estimates the deposit contains 81.1 million minable tons grading 0.02 oz. at a strip ratio of 1-to-1.
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