Northern Gold grows its prospective real estate

Northern Gold Mining (NGM-V) is adding to its heft in Northeastern Ontario.

The company has cut a deal with privately held Tiger Gold Exploration to acquire its Buffonta property which sits near Northern Gold’s flagship Garrison Gold property.

To get the claims, Northern is paying Tiger $1.5 million in cash, a 3% royalty and will issue 3 million of its common shares a year after the deal closes.

The Buffonta claims are in Garrison, Thackeray and Harker Townships, 4-km southwest of the Garrison project, and cover 15.64 sq km of ground.

Northern says that Archean rocks underlie most of the property and are 3.3-km south of the east-striking Destor-Porcupine Fault zone, which is of course associated with many of the big gold deposits in the Abitibi Greenstone belt. The southern portion of Buffonta is intersected by the Ghostmount Fault which hosts the legendary Holt-McDermott mine.

But Buffonta isn’t only about prospective real estate, the property also hosts known deposits. In total three gold zones have been outlined over the years: the Open Pit Zone, the number 5 zone and the number 6 zone. Northern says that historical production reports indicate that 9,000 oz. gold were recovered from a total of 63,000 tonnes milled at the Kerr-Addison Mill.

The same reports also suggest a non compliant resource of 544,000 tonnes of material averaging 4.8 grams gold per tonne remains in the 3 zones. Northern did caution that it isn’t treating the historic information as current, and therefore it can’t yet be relied upon.

The deal represents the first significant move since the company brought Greg Gibson on board as its chief executive. Gibson joined the board of directors in June and then was appointed chief executive at the end of July.

Gibson was formerly president and chief executive of Trelawney Mining, which discovered the Cote Lake gold deposit in northern Ontario and then was sold to Iamgold (IMG-T, IAG-T) for $585-million.

The company’s Garrison project hosts the Garrcon deposit, which has measured resources of 17.6 million tonnes grading 1.06 grams gold for 604,000 oz. gold; indicated resources of 20.8 million tonnes grading 1 gram gold for 668,000 oz. gold and inferred resources of 15.8 million tonnes grading 0.72 grams gold for 367,000 oz. gold.

A preliminary economic study on Garrcon envisioned an open pit mine that would produce 130,000 oz. gold per year over an 8 year mine life at cash costs of US$495 per oz. The initial capex is expected to be $156 million and the net present value of the project was calculated as $265.9 million. Northern Gold plans to have the deposit in production in mid-2015.

In Toronto on Sept. 6 Northern Gold shares were off a penny to 35.5¢ on 170,000 shares traded.