High River settles dispute

High River Gold Mines (HRG-T) has withdrawn its objection to the sale of Incanore Gold Mines, a private Canadian company, to Queenstake Resources (QRL-T).

Incanore is active in Burkina Faso, West Africa, where its assets include several gold, base metal and diamond exploration properties. One of these is the Taparko gold property, in which it has an 18.5% interest. The majority interest, 61.5%, is held by High River, the operator, while the remainder is held by the government of Burkina Faso.

In August, Queenstake announced it would acquire Incanore by issuing 7.6 million shares. Under the deal, the Canadian Imperial Bank of Commerce (CIBC), a major Incanore shareholder, will be issued 3.2 million Queenstake shares. CIBC would also subscribe to 5.4 million Queenstake special warrants for $1 million. Each special warrant would entitle CIBC to buy one Queenstake share for 18.5 for 18 months. The shares would be subject to a 12-month hold.

On Aug. 25, High River launched legal action, claiming it had the right of first refusal on Incanore’s interest in Taparko.

Under the settlement, Incanore has granted High River an option to buy its 18.5% interest in Taparko for $1.4 million. The option expires three years after closing or when High River begins construction of a production facility at Taparko, which ever comes first. During the option period, High River must cover all funding at Taparko. These funds will be added to the initial joint-venture earn-in expenditures, which High River can deduct from production cash flow at Taparko. Incanore’s outstanding cash call is expected to be about $30,000, payable Dec. 29.

If High River elects not to exercise its option, cash calls will resume, according to the terms of the joint-venture agreement. Failure to meet current cash calls within 30 days will result in dilution of Incanore’s interest.

Queenstake retains a 30-day exclusive negotiating right with respect to any future development of the joint venture.

Taparko is a 1,200-sq.-km mining concession. It lies 200 km northeast of Ouagadougou, the capital of Burkina Faso. In July 1999, an independent feasibility study placed the geologic resource there at 17.4 million tonnes grading 2.07 grams gold per tonne.

High River reports that zones 3 and 5 are continuous over a strike length of 1.1 km and contain about 63% of the total resource estimate. Both zones remain open at depth. The company says there are several other gold zones along the Taparko structure, as well as anomalous areas outside the main structure.