Strait Gold gets nod from Teck with $30m earn-in, premium financing
19:52 10/12/2011
HALIFAX, NS -
Teck (TSX: TCK-B, NYSE: TCK) optioned up to 75-percent of Strait Gold's (TSX-V: SRD) Alicia property in porphyry rich country in Peru and agreed to take a roughly six-percent stake in the junior through a C$600,000 financing at a 100-percent premium.
"This is a great deal for Strait," Strait Gold President and CEO Jim Borland tells Mineweb in a telephone interview. "It shows confidence in the company."
Strait Gold owns a 55-percent interest and holds a 100-percent option in the Alicia property, which is about 500-kilometres southeast of Lima. To get its 75-percent, Teck has agreed to spend up to $30 million on exploration in three stages over the next six years or deliver a prefeasibility study along with other payments.
At the outset, Teck will also subscribe to three million Strait Gold shares at C$0.20 a share - a 100-percent premium to Strait Gold's closing price the day before it announced the agreement.
"This really goes back to the PDAC," Borland says, referring to this year's annual Prospectors & Developers Association of Canada conference in Toronto where explorers and miners proselytize their projects and sell their wares.
Borland says Strait Gold had core out on display that garnered heavy attention. The core was from a drilling program in which Strait Gold hit tantalizing copper-gold intercepts on the Alicia property, including some broader ones in the 100-metre range with low grade copper and gold and some shorter ones in the 1 to 20 metres range at higher grades up to about six percent copper.
After showing off the exploration results Borland says Strait Gold inked several confidentiality agreements - which can be a prelude to possible deals - and that it then received a few offers on Alicia.
"Teck's was the superior," Borland says.
The interest lies, it would seem, in copper-gold elephants in territory where giants such as Xstrata already have a strong presence. Xstrata runs the 120,000 tonne per year Tintaya copper-cathode and concentrate mine and has considerable resources in the area: 1.5 billion tonnes @ 0.51 percent copper at the Antapaccay deposit and 1.5 billion tonnes @ 0.61 percent copper at the Las Bambas deposit. Both lie between 25 and 100 kilometres from Alicia.
"I think it's the potential for the porphyry," Borland says. "That is the real prize." He continues, alluding to the major copper-gold projects in the neighborhood: "Alicia has all the earmarks of those other deposits."
The hope is that with Teck's blessing - cash and geological resources - and Strait Gold's on the ground expertise - eight years experience in Peru - they can catch this mega-prize in the form of a copper-gold porphyry.
A notable term of the option agreement is that if the Alicia property were to yield a copper-gold project worth mining, Teck guarantees to finance Strait Gold's 25 percent joint-venture requirements at prevailing commercial rates. Borland calls it a fail safe were Strait Gold unable to find a better source of financing if the Alicia project ever did get that far.
For now though it will be a matter of plugging away at Alicia before any of these possibilities materialize. And, in the meantime, with a C$600,000 cash infusion and Teck covering costs at Alicia, Borland says Strait Gold can now advance its other projects in Peru, which have gone ignored over the past couple years as it focused resources on Alicia.
