Red Back gains Canadian listing with Champion merger

A merger agreement between Australian-listed Red Back Mining and Vancouver-based Champion Resources (CHA-V) will give Red Back a long-sought foothold in Canadian capital markets.

The deal will see Champion, part of the Lundin group of exploration companies, raise $3 million and consolidate its shares at a 3:1 ratio, provided shareholders approve. Red Back shareholders get one share of the consolidated company for every three Red Back shares; the new company will also take the Red Back Mining name.

Red Back shareholders would own about 87% of the new company, which would pursue a Toronto Stock Exchange listing.

Red Back’s principal asset is a 95% interest in the Chirano gold project in Ghana, about 15 km south of the Bibiani gold mine operated by Ashanti Goldfields (ASL-N). Chirano boasts a reserve of 16.1 million tonnes grading 2.1 grams gold per tonne, part of a resource in all categories of 30.4 million tonnes at 2.1 grams per tonne.

A feasibility study by Perth-based consultants Lycopodium Pty. indicated the deposit could be mined by open pit at an annual rate of 130,000 oz., with recovery by conventional milling. Optimization studies on the pits suggest a further 8 million tonnes of the resource could be brought into reserves at present gold prices.

Red Back has a right of first refusal on the plant at the Obotan mine in Ghana, owned by Australian gold producer Resolute Mining. Metallurgical tests during the feasibility work showed recoveries of 95% of the gold in oxide material, and 91% of the gold in primary sulphide and transitional material, using a process design similar to the Obotan plant. Between 40% and 50% of the gold can be recovered by gravity concentration, and the rest by conventional cyanidation.

Red Back also holds a property in the Ashanti gold belt, which the new company will retain.

Several permits Red Back has applied for in northern Ghana, and a portfolio of Australian nickel and gold projects will be spun off into a listed Australian company whose shares will be distributed to Red Back shareholders.

Champion’s principal asset is the Farim phosphate deposit in Guinea Bissau.