Royex opts for direct interest in Mahogany’s Jolu property

Royex Gold Mining has apparently given up its intention of accumulating a 50% interest in Canadian Premium Resource Corp. as a means of gaining a stake in northern Saskatchewan’s Jolu gold property and instead has worked out a deal giving it a 30% direct interest in the property.

A restructuring of several deals between those two companies and Mahogany Minerals will result in Mahogany, which originally held a 100% interest in the property, retaining a 42.5% interest, Royex taking a 30% interest and Canadian Premium holding a 27.5% interest.

As part of the new agreement, Royex will turn over to Mahogany the 600,000 shares of Canadian Premium for which it spent $3 million on exploration on the property in 1986. That will make Mahogany Canadian Premium’s largest shareholder with about a 20% interest.

D.W. Busby of Colorado, president of Mahogany, will become president of Canadian Premium.

As a result of the restructuring, Royex has become operator of the project where a 3,000-ft decline ramp, already driven 150 ft., is being developed to a vertical depth of 460 ft. The ramp will provide access for underground drilling and to obtain a bulk sample for metallurgical testing.

The 464-acre property, located about 75 miles northeast of La Ronge, is currently estimated to have 966,000 tons averaging 0.50 oz gold per ton in two zones, the Rod Zone and the Mallard Zone. That reserve estimate is based on 234,000 ft of drilling completed in 1986.

Royex has agreed to spend another $1.5 million on exploration in 1987. Canadian Premium has committed to spend $3.5 million on the property, also in 1987.

Royex has also assumed Canadian Premium’s commitment to raise all the funds necessary to place the mine into production.

Royex retains the option to buy another 1.2 million shares of Canadian Premium in 1987, but the price stipulated under the option agreements is about $7 per share while the stock currently trades at about $2, so it is unlikely those options will be exercised.

Royex, 49% owned by International Corona Resources, is the operating company within the International Corona group of companies. Corona, in turn, is 38% owned by Royex.