Fort Knox raises cash for Inco properties

Fort Knox Gold Resources (FNX-T) has completed an offering of 4 million flow-through shares at $1 apiece and 4 million units at the same price for proceeds of a price of $8 million.

One unit comprises one share plus half a purchase warrant. One whole warrant allows the holder to buy one Fort Knox share for $1.25 for a year after the release of funds from escrow of the offering. Dundee Securities and Griffiths McBurney acted as agents in the offering.

Fort Knox plans to use the proceeds of the offering for exploration on five Sudbury Basin properties it plans to acquire from Inco (N-T). The money will be held in escrow pending the effective date of an option agreement with Inco.

Earlier this month, Fort Knox and Inco entered into an agreement that grants Fort Knox the option to acquire a 100% interest in former producing mines: McCreedy West, Levack, Victoria and Kirkwood plus the Norman North platinum-group-element-copper-nickel zones, all found around the margin of the Sudbury basin in Ontario.

Under the deal, Fort Knox is required to pony up $14 million in exploration within 16 months. A first tranche of $7 million will be covered by the money raised through the offering.

Fort Knox can earn a 100% interest in the properties, as well as the right to lease all the surface, land and on-site facilities. In return, the junior must spend $30 million by the end of 2005 and has agreed to boost Inco’s stake in the company to 20%. Inco can re-acquire a 51% interest in any new discovery that contains mineral resources with a value of at least 600 million lbs. of nickel by spending 200% of Fort Knox’s costs on the new deposit. The major would also be granted the rights to process the minerals and, in the event of third-party processing, would retain a 2% net smelter royalty for nickel, copper and cobalt and a 2.5-5% NSR for precious metals. Inco also retains a right of first refusal on the sale of any of the properties.

Fort Knox plans to share the exploration and development costs by assigning a 25% interest in the properties to contract miner Dynatec (DY-T).