Black Hawk purchasing Redstone nickel mine

Ownership of the Redstone nickel mine near Timmins, Ont., which closed in June, will change hands under a recent deal between Black Hawk Mining (TSE) and Timmins Nickel (TSE).

For $150,000, Black Hawk will secure ownership of the nickel mine, related infrastructure and 63 claims. As part of the deal, Black Hawk will pay Sherrit Gordon (TSE) $100,000 plus a 2% net smelter return (NSR) royalty (to a maximum of $312,500) from production. In exchange, Sherritt Gordon will forgive Timmins Nickel’s debt to Sherritt.

Considering the depressed state of the nickel market, Black Hawk has no plans to reopen the mine in the near future, said President Gordon Bub. Instead, the company will launch an exploration program to test the downdip extension of the orebody.

Black Hawk is committed to spending $400,000 on exploration over the next 18 months. At that time, Sherritt may elect to convert its NSR to a 40% working interest, or a 50% interest if the exploration expenditures fall short of $400,000. Sherritt will also have the right to purchase concentrate from the mine at competitive prices.

Redstone was put on care and maintenance after a dispute between Timmins Nickel and Marshall Minerals (TSE) closed the Carshaw mill where the ore was being treated. Until then, the mine operated at a rate of 300 tons per day and an average cost of about US$3.22 per lb. Developed reserves to the 800-ft. level are estimated to be 40,000 tons grading 2.6% nickel. Bub believes the mine could operate profitably at US$3.50 nickel. The metal recently traded in the US$2.60-2.70 range.