Expatriate acts alone at Kudz Ze Kayah

With a potential partner now out of the picture, Expatriate Resources (EXR-V) intends to act unilaterally when it acquires mineral assets held by Cominco (CLT-T) in the Finlayson Lake district of southeastern Yukon.

Atna Resources (ATN-T) recently decided against acquiring a 40% stake in the base metal properties, paving the way for Expatriate to earn 100% of Cominco’s interest in 2,800 mineral claims for $1 million in cash and $10 million in convertible debentures. The land package includes the Kudz Ze Kayah and GP4F satellite deposits.

“This is a tremendous opportunity for Expatriate to increase its resource base dramatically,” says the company’s president, Harlan Meade.

The debentures are to be repaid over four years, with $1 million payable in each of the first three years and the remainder due on the fourth anniversary. At any time after two years, Cominco can convert up to 70% of any outstanding debt into Expatriate shares at 115% of the average closing price 10 days before conversion.

At production, the major will also receive a $2-million cash payment and retain a sliding-scale net smelter return royalty, ranging from 1% in the first four years to between 2% and 3.5% in following years, depending on the price of zinc.

Cominco will also be granted a warrant to buy up to 2.5 million Expatriate shares priced at 152% of the stock’s value, averaged over the past 20 days. The warrant expires on March 1, 2007. In exchange, the junior will be given the right to acquire Cominco’s half-interest in the Toe-On joint venture, 6.7 km east of Kudz Ze Kayah. Atna and Toronto-based Boliden (bol-t), which holds a 42% equity interest in Expatriate, have the right of first refusal on the Toe-On property.

A field crew is scheduled to be on the ground by mid-May, and drilling will begin a few days later. Expatriate plans to carry out a significant amount of infill drilling at both the Wolverine and Kudz Ze Zayah deposits this year. The junior will test the downdip extension of the Wolverine deposit along the boundary of its new ground. It will also drill-test new targets and follow up previous drill intercepts at the GP4F and Sable zones.

When the acquisition is complete, Expatriate’s share of the Finalyson resources will total 16.5 million tonnes grading 7.5% zinc, 1.7% lead and 0.92% copper, plus 183 grams silver and 1.5 grams gold per tonne, from three deposits: Wolverine, Kudz Ze Kayah and the GP4F.

The economics of the massive sulphide deposits have been in question since the mid-1990s, owing to metallurgical problems related to high selenium content. The consolidation of the deposits is, in part, an attempt to improve the project’s economics by lowering costs and increasing production.