BacTech balks at Tonkin Springs (April 25, 2005)

Unwilling to come up with an additional US$1.1 million to increase a reclamation bond, BacTech Mining (BM-V) has forfeited its 55% stake in the Tonkin Springs open-pit gold project in Nevada.

The Nevada Bureau of Land Management ordered the bond increased following an audit, which took into account inflation in Nevada.

BacTech’s stake reverts back to the original owner, U.S. Gold (USGL-O); BacTech also relinquishes any obligations on the property.

BacTech acquired its stake in the formerly producing project from U.S. Gold for US$1.7 million in July 2003. Under the deal, BacTech was also responsible for the first US$12 million worth of project funding; the company had spent US$3.9 million by the end of 2004.

Earlier this year, cash-strapped BacTech said it was pursuing restructuring options, including merging or selling its stake in Tonkin Springs.

In January, the former partners tabled a new operating plan for Tonkin Springs that envisaged initial annual production of 17,000 oz. gold from the Rooster deposit’s oxides; thereafter mining would target refractory sulphides at 1,500 tons per day. The production plan spans eight years, with average annual production pegged at 30,000 oz., based on 85% gold recovery (T.N.M., Jan. 21-27/05).

BacTech CEO Ross Orr says that at current prices the project is a wash: “You need a gold price of five-hundred [U.S.] dollars per ounce to make it work properly.”

Micon previously estimated the project’s total reserves at 10.7 million tons averaging 0.06 oz. gold per ton, or 646,000 oz. gold.

The Tonkin Springs project covers 36 sq. miles immediately south of the Cortez joint venture of Placer Dome (PDG-T) and Rio Tinto (RTP-N). Placer is the operator and 60%-owner of that project.

Orr says BacTech continues to pursue options, including a possible merger or share placement. “We’ll pick ourselves up by the bootstraps and move on.”

Denver-based U.S. Gold says it has several parties interested in a possible stake in the project; the company is also considering a merger of its own.

BacTech shares have been on the slide since mid-March, when the Bureau of Land Management ordered the bond increase. The shares were off a penny at a new 52-week low of 5.5 in late afternoon trading in Vancouver following the news on April 12. Shares in U.S. Gold were US11, or 31%, better at US46 in over-the-counter trading.