Equity drops option on Bitech’s Nugget Pond gold property

Equity Silver pulled out of the Newfoundland joint venture recently and has decided not to participate further in the project. The company spent more than $3 million on the prospect.

Vancouver-based Equity, 59% controlled by Placer Dome (TSE), said the size of the Nugget Pond gold deposit did not meet its early expectations. Equity retains no interest in the property.

“The right to run is a very important part of any exploration agreement,” a spokesman for Equity told The Northern Miner in an interview earlier this year.

Based on a recently completed prefeasibility study, Bitech says the Nugget Pond property hosts a geological reserve of 513,744 tonnes grading 14.13 g gold per tonne (566,000 tons of 0.41 oz.

Bitech President James Wade says his company received more than $1 million in option payments from Equity and that $2.2 million was expended on drilling by the Vancouver company.

Earlier this year, Equity signed a rare multimillion-dollar option deal with Bitech.

The option was arranged following the release of some spectacular preliminary drill results from Nugget Pond including one hole that intersected 0.41 oz gold over 72.5 ft. The hole was described by one observer as “probably the best gold intersection ever obtained in Newfoundland.”

The agreement gave Equity the right to earn a 50% interest in the unproven prospect by making option payments to Bitech totalling $12.3 million over four years and providing exploration expenditures of $12.2 million. The Vancouver company also agreed to arrange $50 million in production financing.

“In the beginning, everybody was bullish on Nugget Pond,” Wade told The Northern Miner in an interview. “I’m still bullish on it.”

Wade said, “Bitech is looking at a number of alternatives” to finance a proposed $12.4 million underground exploration program next year.

Current plans call for construction to begin in May on a 5-km access road into the property. Barker Construction of Baie Verte, Nfld., has been selected as the successful bidder.

Bitech says the underground exploration program, to be completed in late 1991, will consist of bulk metallurgical testwork and a feasibility study. A final production decision could be made at that time, says Wade. The company estimates preproduction capital costs at $18 million.

Shares of Bitech have traded at a low of 28 cents recently on the Alberta Stock Exchange. The two largest shareholders are Wade with about 3.5 million common shares while another 4.4 million shares are held by NIM partnerships.

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