St Andrew buys Holloway assets from Newmont

St Andrew Goldfields (SAS-T, SASXF-O) has agreed to buy subsidiary Holloway Mining from Newmont Mining (NMC-T, NEM-N), moving the Holloway and Holt-McDermott mines and a large land package into the St Andrew stable.

Newmont is selling the assets for US$40 million in a deal the parties expect to close at the end of October. Newmont will hold onto a 1% net smelter return; it also receives a 1% net smelter return on production from St Andrew’s “East Timmins” land package, in seven townships to the south and west of Holloway and Holt, and from its Stock Twp. mill.

The two former producers have been on care and maintenance since the end of April, after Newmont packed it in at the money-losing Holloway operation. Barrick Gold (ABX-T, ABX-N), which had owned the Holt-McDermott mine, sold it to Newmont for US$5.2 million in October 2004.

Newmont subsequently commissioned a resource estimate from Roscoe Postle Associates that put the measured and indicated resource on the two properties at 4 million tonnes grading 7.4 grams gold per tonne, plus 1.2 million tonnes of inferred resources averaging 7.3 grams per tonne.

Holt has a 1,195-metre shaft and Holloway one of 867 metres and another of 441 metres. Holt’s mill is rated for 3,000 tonnes per day, although in recent years it had operated at about half its capacity.

Along with the mine properties St Andrew is getting a land package of 144 sq. km covering the length of the Porcupine-Destor fault in eight townships between the Garrison mine and the Quebec border.

To finance the deal, the company plans to increase a previously arranged rights offering to $88.9 million from a previous $28.9 million. The offering will consist of $74.5 million in common share units and $14.5 million in flow-through units. Both types of unit carry half a warrant, with a full warrant exercisable to buy a common share at $1.75 for 18 months. A related private company, Technifund, will backstop the whole flow-through issue and $14.5 million of the common unit issue.