Treminco acquiring Montana gold mine — Newmont unit to get cash, shares

Junior Treminco Resources (TMO-T) has signed a letter-of-intent with two subsidiaries of Newmont Gold (NGC-N) to acquire the Elkhorn gold project in Montana.

Treminco must issue 550,000 shares and pay US$1.1 million to the two subsidiaries, Hospah and Santa Fe Pacific Gold, over a 2-year period. Should minable reserves increase, the company will be required to pay US$1.5 million in 2003 and US$1 million in 2005.

“We are in the process of positioning Treminco to take advantage of rising gold prices through the acquisition of low-cost, high-quality gold assets with near-term production potential,” says David Hottman, president of Treminco. “The acquisition of the Elkhorn project represents the company’s first step toward this objective.”

The property comprises 6 sq. miles on the southern end of the Elkhorn Mountains in Jefferson Cty. A succession of mining companies, including Gold Fields Mining, Santa Fe and Newmont, have spent a total of US$12 million on exploration and development there.

More than 366,501 ft. of drilling have resulted in an underground minable reserve of 3.1 million tons grading 0.16 oz. gold per ton, based on a cutoff grade of 0.1 oz. gold per ton.

The measured and indicated open-pit reserve weighs in at 10.8 million tonnes grading 0.088 oz. gold per ton, based on a cutoff grade of 0.03 oz. gold.

Gold recovery is pegged at 87%.

Gold mineralization has formed along intrusive contacts of diorite to quartz monzonite bodies, which have invaded and metosomatically replaced calc-silicate hornfels and marbles.

Gold occurs as free grains and as late-stage coatings on sulphide minerals.

Stratabound, sediment-hosted mineralization can be up to 300-ft. thick at intrusive contact intersections.

Exploration to date has identified four main gold-skarn deposits within 1 sq. mile. Known as Carmody, East Bute, Gold Hill and Sourdough, the deposits have a combined strike length of up to 2,000 ft. and are roughly 1,000 ft.

deep. Eighteen drill targets remain untested, and Treminco says there is excellint potential for expanding the known resource.

Initial analysis by Treminco suggests the project can be developed as a near-surface, underground mine similar to the Diamond Hill operation of Pegasus Gold (PGU-T), 30 miles to the east.

Based on a life-of-mine gold price of US$335 per oz. and a diluted minable reserve of 1.1 million tons grading 0.24 oz. gold per ton, the company predicts such a mine could support minimum annual production of 45,000 oz.

at a cash cost of US$230 per oz.

Two past producers on the Elkhorn property, the C&D and Klondyke deposits, are considered to be the most promising prospects for reserve expansion.

Drilling at the C&D mine hit magnesian skarn mineralization along an intrusive carbonate contact. The best intercept ran 75 ft. grading 0.13 oz.

gold. Initial work on the Klondyke mine outlined a skarn alteration along a diorite sediment contact; drilling there intersected 10 ft. grading 0.12 oz.

gold in a pyroxene skarn.

Over the next six months, Treminco will conduct a due diligence review, including confirmation drilling, revisions to reserves and to the mine plan, a metallurgical audit, and a review of environmental permitting and community issues.

Treminco has 16.2 million shares outstanding on a fully diluted basis and working capital of $100,000.