Black Hawk to buy out Limon royalty

Black Hawk Mining (BHK-T) has made arrangements to buy out a 2% royalty on the El Limon gold mine in Nicaragua for $1.25 million. The deal, with royalty-holder Repadre Capital (RPD-T), will see Black Hawk pay the buyout fee over two years.

A November 1998 agreement between the two companies gave Repadre the royalty on El Limon in exchange for giving up a 1.5% royalty on the Manantial Espejo property in Argentina. A rider on the agreement provided that Repadre would get $1.25 million in cash if there had been no decision to place Manantial Espejo into production by the end of 2001. Repadre has agreed to a 2-year payment schedule instead.

El Limon produced 70,351 oz. gold in 2001 at an average cash cost of US$187 per oz.

A poor fourth quarter, with production of only 16,216 oz. at US$203 per oz., meant El Limon fell short of a budgeted 75,000 oz. at US$170 per oz. The operation’s underground fleet was not fully available during the quarter, forcing the mine to stope some lower-grade areas.

Manantial Espejo is currently operated by Silver Standard Resources (SSO-T), which is earning a total interest of 50% from Black Hawk. Silver Standard acquired an initial 10% interest last August from Barrick Gold (ABX-T) for 400,000 Silver Standard shares. Barrick retains a 3% net smelter return royalty on part of the property, effective only on any new resources discovered after the transaction.

Manantial Espejo has an indicated resource of 1.2 million tonnes grading 341.5 grams silver and 3.5 grams gold per tonne, with a further inferred resource of 625,000 tonnes grading 348.7 grams silver and 3.4 grams gold.