The junior has signed a letter-of-intent with a mining arm of the Moroccan government to acquire a 90% direct interest in Zgounder by making staged payments totalling US$3 million over two years. Another US$1 million will be paid to the government once Icelandic Gold produces 10 million oz. silver from Zgounder.
Icelandic has until March to deposit US$2 million, following which the company and the government will sign a mining convention allowing for redevelopment of the mine. Some US$1.1 million of that money will be used for drilling and a detailed evaluation.
The company says the property holds exploration potential beyond the deposit’s 800-metre strike length and that a conventional silver-processing plant, mothballed since 1990, could be expanded.
The government estimates that the mine’s South zone contains total reserves of 366,258 tonnes grading 360 grams silver per tonne, or 3.9 million contained oz. silver. The site also holds about 570,000 tonnes of mineralized tailings, which will soon be auger-drilled.
Icelandic says operations at Zgounder could restart within nine months of the mining convention’s signing. The company envisages building a 200,000-tonne-per-year open-pit and underground operation capable of producing more than 2.5 million oz. silver annually.
While Zgounder ore is not refractory, it will require finer grinding and a relatively long cyanidation-residence time of 36 hours in order to achieve recoveries above 90%. Icelandic believes poor silver recoveries in the past at Zgounder are due to improper handling of the deposit’s coarse native silver and silver-sulphide minerals.
This is Icelandic’s second deal in Morocco. In July, the company acquired an 80% interest in the small Tafrent gold property in exchange for 600,000 Icelandic shares. Resources at Tafrent are pegged at 3.3 million tonnes grading 1.3 grams gold per tonne.
Icelandic last made news in late 1997, when the company discovered that more than $400,000 had been diverted without authorization from a bank account administered on its behalf by Montreal-based St. Genevieve Resources (sgve-c).
The two reached a settlement in July 1998, with St. Genevieve returning $175,000 in cash to Icelandic and transferring 1.2 million Icelandic shares and 1.6 million warrants to a third party, who agreed to pay Icelandic 97.5% of the proceeds from the sale or exercise of the units over the next two years.
Also, St. Genevieve’s rights to buy into Icelandic’s present or future exploration properties in Iceland and Morocco were cancelled.
Following the settlement, Icelandic had 11.6 million issued and outstanding shares.
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