VANCOUVER — Keen to see some near-term benefit from its recently acquired Nevada mineral assets, Fronteer Development Group (FRG-T, FRG-X) has signed an agreement with Newmont Mining (NMC-T, NEM-N) to expedite a production decision on the Sandman gold project, located about 20 km west of Winnemucca.
Under a letter of intent, Newmont can earn a 51% interest in the project within 36 months if it spends US$14 million on the ground, completes a positive bankable feasibility study, commits to fund and build a mine, secures the necessary permits and contributes some adjacent ground to the joint venture.
The major can grab a further 9% of the project by spending another US$9 million on development. Fronteer, which acquired its Nevada projects through a takeover of NewWest Gold last year, retains a 2% net smelter return royalty on the first 310,000 oz. of gold production from Sandman and can also opt to have Newmont arrange its 40% of development costs.
Mark O’Dea, Fronteer president and CEO, says the deal is an opportunity for the two companies to “realign our relationship and focus on what we’re each good at.”
Sandman consists offivedeposits, four of which (Abel Knoll, North Hill, Silica Ridge and Southeast Pediment) host a cumulative measured and indicated resource of 7.3 million tonnes at 1.17 grams gold per tonne for about 272,000 contained ounces gold. The project hosts another 1.3 million inferred tonnes grading 0.93 gram gold — kicking in another 38,000 contained ounces.
The near-surfacedeposits can potentially be mined by open pit and contain significant oxide gold mineralization — making them amenable to heap-leach extraction. The deposits are also open to expansion due to the significant overburden cover.
Sandman offers Newmont potential “satellite” ore feed for its nearby mining operations.
“They (Newmont) see this as something that has relatively low capital requirements to get up and running with some significant upside,” O’Dea says. “There could be a million ounces plus at Sandman — they’ve got three years to test it and get to a production decision, so it’s a win-win for both of us.”
The letter of intent also sees Fronteer regaining 100% of the Northumberland project in central Nevada — just north of Barrick Gold (ABX-T, ABX-N) and Kinross Gold’s (K-T, KGC-N) Round Mountain
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