Spokane-based Pegasus Gold (NYSE) kicked off the new year by joint-venturing a Nevada gold property held by Athena Gold (VSE), and in a separate development, announced plans to make an additional equity investment in MinVen Gold (TSE).
These initiatives reflect a growing trend whereby major companies appear to be more aggressively seeking acquisition or joint venture opportunities available in the junior mining sector.
Pegasus and Athena recently entered into a letter-of-intent agreement to form a joint venture for exploration and, if warranted, development and mining of Athena’s Talapoosa gold property in Lyon Cty., Nev.
Pegasus can earn an initial 70% joint venture interest by completing a series of cash payments totalling US$4.75 million to Athena and by carrying out phased work programs totalling US$2.8 million.
Athena has the right to increase its interest to 40% if certain gold price or gold production levels are met. Pegasus has the right to withdraw from the project at any point after the first-phase work program, and Athena would retain a 100% project interest.
Athena noted that it is “working quickly toward successful resolution of what are considered to be some nuisance legal claims impacting on project land status.” The dispute was initiated by a former president of Athena. The Talapoosa property is about 45 miles from Reno, and is reported to host preliminary reserves of 19.6 million tons grading 0.045 oz. gold and 0.61 oz. silver per ton, at a cutoff grade of 0.02 oz. gold. The deposit is open to extension, and Athena also views other areas of the property as having good exploration potential.
The junior, based in Denver, Colo., had previously optioned the property to a unit of Placer Dome (TSE), which backed out last summer after completing a first-phase exploration program. The deal was a tough one for Placer; it could earn a 51% interest through payments and exploration expenditures totalling close to US$40 million.
Elsewhere, Pegasus and MinVen announced they were involved in discussions whereby Pegasus would purchase common shares of MinVen by way of private placement (subject to Pegasus’ due diligence review). Denver-based MinVen produced about 87,000 oz. gold during 1991.
MinVen intends to use the proceeds to reduce its debt, augment working capital and assure acquisition of control of the Golden Reward gold mine near Lead, S.D. The mine is expected to produce about 67,000 oz. gold annually from proven reserves of over six years.
Pegasus already owns 2.3 million or 6.2% of MinVen’s outstanding common shares, and also holds a US$4.65-million secured note from MinVen due in October of this year. The proposed private placement would make Pegasus a significant shareholder of MinVen.
MinVen and its joint venture partner at the Golden Reward mine, United Coin Mines (TSE), amended the terms of an agreement which originally contemplated United Coin becoming a wholly owned subsidiary of MinVen.
MinVen intends to use a portion of the proceeds of the Pegasus private placement to complete the MinVen-United Coin transaction, as amended.
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