Southern Metals acquires Chilean ground

Having only recently acquired the Laja gold project in northern Chile, Fremont Gold (FGLD-O) is now joint-venturing the property to a second party.

Arizona-based Southern Metals (SUH-V) will earn up to a 70% interest in the 250-ha property, which is adjacent to the Andacollo mine of Dayton Mining (DAY-T), south of the coastal city of La Serena.

In April, Fremont agreed to acquire the property in return for paying the current landholders US$2.5 million and completing a bankable feasibility study over 4.5 years. The company then made an initial payment of US$30,000 payment. Further payments will be made on an escalating scale every six months. The owners retain a sliding royalty interest based on the price of gold, and they will receive a bonus of US$1 million if the feasibility study identifies either a minable reserve of more than 2 million oz. or 800,000 oz. gold with the price of gold greater than US$360.

Under a separate agreement, Southern Metals (formerly known as Aranlee Resources) can earn a 60% interest in Laja by spending US$3 million and completing the bankable feasibility study by June 2003, including spending US$1 million during the first two years.

Southern can acquire an additional 10% stake by arranging financing for development and construction.

The agreement between Southern and Fremont, though subject to regulatory approval, is expected to close in June 1999.

Plans call for a surface program to evaluate the extensions of known gold-bearing manto structures from the Andacollo property. Drilling will follow, provided sufficient financing can be raised.

Mineralization is associated with the mantos in a pile of andesitic volcanics associated with nearby porphyry intrusions.

Southern Metals recently completing a one-for-seven share rollback. It currently has 6.2 million shares outstanding and 6.4 million fully diluted.