Homestake doubles stake in Round Mountain

Homestake Mining (HM-N) will buy a 25% interest in the Round Mountain gold mine from Case Pomeroy (CASPA-O) for US$42.9 million. The mine is in central Nevada.

The acquisition doubles Homestake’s interest in the open-pit, heap-leach operation to 50%. Echo Bay Mines (ECO-X), the operator, owns the remaining half.

Under the deal, Homestake will buy all the shares of Case’s wholly owned subsidiary, Bargold, which holds the interest in Round Mountain, by issuing 2.6 million shares plus cash. The share portion of the payment will be valued on a 5-day average closing price two days before the transaction closes. The remaining cash portion will amount to more than US$24 million.

The transaction is expected to close in July, though Case Pomeroy will retain certain receivables and adjustments for US$3.6 million in working capital.

Round Mountain will be the company’s largest contributor of gold in the U.S., surpassing the aging Homestake mine, in South Dakota, where production has fallen to 200,000 oz. per year. In 1999, Round Mountain produced 541,808 oz., of which Homestake’s share was 135,452 oz.

The mine incurred cash operating costs of US$198 per oz. last year. Reserves at the end of 1999 stood at 320 million tons averaging 0.018 oz., equivalent to 5.9 million oz. In addition, the property contains a resource of 126 million tons of 0.016 oz. per ton, or 2 million oz. gold.

Situated 60 miles north of Tonopah, Round Mountain started up in 1977. It has since produced more than 6 million oz. gold and remains one of the largest heap-leach operations.

Elsewhere in Nevada, Homestake operates the Ruby Hill mine, near Eureka, and owns a 33% interest in the Marigold mine, near Winnemucca. The company is also exploring for deep mineralization at the now-closed Pinson mine.