Apollo Gold (APG-T) is selling off its interest in the much maligned Montana Tunnels project so that it can focus on mining in Ontario and exploring in Mexico.
The company is selling its 50% stake in the past producing mine to its partner, Elkhorn Goldfields, for US$9 million.
The project had been held by the two companies for the last three and a half years, but went on care and maintenance in April of this year due to lower metal prices.
Apollo bought the mine in 2002 after its past operator, Pegasus Gold, filed for bankruptcy.
An expensive pit wall failure led Apollo to cut a deal with Elkhorn in 2006. The agreement brought in US$13 million to repair the mine, and gave Elkhorn its 50% stake.
For the privately-held Elkhorn, full ownership brings synergies with other mining assets it has near the project.
The company said it will re-start mining at the project in the “near future”, but gave no specific date.
Elkhorn will pay Apollo US$5 million payable over the next seven months, with the final payment coming on May 31, 2010.
In 2008 – its last full year of operation – Montana Tunnels produced 49,000 oz. of gold, 486,000 oz. of silver, 15.5 million lbs of lead and 38 million lbs of lead.
Total production costs for the year came in at US$563 per oz. of gold.
Apollo’s share of the proven and probable reserves at the mine amounts to 19.8 million tonnes grading 0.4 grams gold, 7.2 grams silver, 0.16% lead and 0.48% zinc for 251,000 oz. of gold.
By selling off its stake in Montana Tunnels, Apollo can put its energy into its recently initiated Black Fox mine in the Timmins mining camp. The company recently announced the successful continuing ramp up of production at the mine, with 19,740 oz. of gold produced there in the third quarter.
The company also has a key exploration project, Huizopa, in the Sierra Madres of Chihuahua, Mexico.
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