Redstone closes deal on uranium deposit, buys platinum lease

Toronto-based Redstone Resources (TSE) has purchased a 2% gross royalty in the Midwest uranium deposit from Esso Resources Canada for $3 million. A production decision on the Saskatchewan deposit, which hosts preliminary uranium oxide reserves of 56 million lb., is expected by year-end, according to 45% owner Denison Mines (TSE).

If the decision is positive, Redstone estimates it will collect about $4 million per year, based on a long-term contract uranium price of US$20 per lb. Redstone is guaranteed a minimum royalty payment of $700,000 per year beginning in 1993.

If Denison decides not to go ahead, Redstone would be entitled to a 35% interest in the deposit, a possibility with which management is more than comfortable. “We’d be delighted to hold one third of the deposit for only $3 million,” said Redstone President David Harquail.

Bow Valley Industries (TSE) and Uranerz Exploration and Mining, a unit of Uranerzbergbau of Germany, each holds a 20% interest in Midwest, while PNC Exploration (Canada) retains a 15% interest.

In a separate transaction, Redstone acquired mining and surface leases covering about five square miles of the Coldwell Complex, near Marathon, Ont., an environment associated with platinum-palladium mineralization.

Redstone intends to vend the lease which, it says, is good for another 20 years at negligible carrying costs, to a mining company interested in platinum-group metals exploration and development. Redstone would retain a royalty interest in the property.

Redstone, whose strategy is to acquire cash-generating interests in non-gold properties, is 40% owned by Franco-Nevada Mining (TSE).