With uncertainty in metal prices, it has been a tough road in the past couple years for junior miners to find financing, meanwhile mergers and partnerships haven’t been easy to come by either. The struggles are widespread as noted this summer by Sacha Backes, a mining investment division senior investment officer at World Bank Group member International Finance Corp. Backes noted at the Africa Iron Ore conference that IPOs were down and delistings at record levels for small companies on the London Stock Exchange Aim market.
Anyone that follows the Toronto Venture Exchange knows the fight for survival many developmental companies have been facing. Toronto-based Carlisle Goldfields Ltd. (TSX:CGJ) (OTCQX:CGJCF) has 35,304 hectares in the Lynn Lake greenstone belt in Manitoba, which includes the past producing MacLellan Mine.
MacLellan was in production for three years (1986-1989), reporting production of nearly one million tonnes grading 5.36 g/t gold as an underground mine. Carlisle has NI 43-101 compliant mineral resource estimates on five deposits within its Lynn Lake Gold Camp, four of which form the basis for the December 2013 Preliminary Economic Assessment (PEA): Farley Lake Mine Deposit, MacLellan Mine Deposit, Burnt Timber Mine Deposit, and Linkwood Deposit.
An optimized PEA, announced in February, shifted to an open pit mine model for the historical Farley Lake Mine and MacLellan Mine deposits as an integrated project alone. The NI 43-101 technical report includes a post-tax Net Present Value of $257 million, an Internal Rate of Return of 34% using a 5% discount rate and $1,100 U.S. gold price. The two deposits as one project are forecast to produce 145,000 ounces annually at a weighted average grade of 2.2 grams, which the company says would be one of the highest-grade open pit gold deposits in North America.
As many juniors are well aware, without an influx of cash or a partner, getting the metal out of the ground can be a painfully slow grind. Carlisle said Tuesday it has a new strategic investor and partner in AuRico Gold Inc. (TSX:AUQ) (NYSE:AUQ) to help move its Lynn Lake Gold Camp project forward.
In the deal, which is still subject to customary regulatory approvals, Carlisle will do a private placement issuing AuRico 70.6 million common shares at 8 cents per share for total consideration of approximately C$5.6 million, giving AuRico almost 20% of the issued and outstanding shares of Carlisle Goldfields. AuRico will acquire a 25% stake in the project for $5.0 million, form a JV with Carlisle and become the operator on the project. Further, AuRico can up its holdings to 51% of the Lynn Lake Gold Camp by spending $20 million towards the advancement of a feasibility study within three years. If AuRico delivers a NI 43-101 compliant feasibility study within three years, its ownership in the project will climb to 60%.
With the pact, AuRico also has the right to nominate two candidates to Carlisle’s board, amongst other things.
"AuRico's commitment to form a Joint Venture and advance a Feasibility Study as Operator on the MacLellan Mine and the Farley Lake Mine properties very credibly moves the Lynn Lake Project to a development footing and is a 'game changer' for Carlisle," said Carlisle President and CEO, Abraham Drost in a statement today. Drost added that Carlisle will continue to operate a well-funded exploration program on the balance of the highly prospective Lynn Lake property potentially supporting future long-life, low-cost mine production and processing.
"This transaction with Carlisle represents a compelling, but low risk opportunity to participate in the early stage advancement of a highly prospective mining district in Canada and is consistent with our strategic focus on high-quality assets in North America," stated Scott Perry, President and CEO of AuRico Gold, in a separate announcement.
Toronto-listed shares of Carlisle Goldfields have climbed from a close of four cents on Monday to 4.5 cents (+12.5%) in early afternoon trading. TSX-listed shares of AuRico Gold have risen 9.9% on the day, last printing $4.00 with three hours to go in the trading session.
