Chalice / NevsunChalice Gold, Eritrea sign $32 mn agreement on Zara gold project
Forjunior Chalice Gold Mines a significant pay-day is now within itssights, as it and the Eritrean government sign a shareholder agreementover the Zara gold project.
Author: Kip Keen
Posted: Saturday , 30 Jul 2011
VANCOUVER, BC -
TheEritrean government, through its state mining company ENAMCO, has sixmonths to pay Chalice Gold Mines (TSX: CXN, ASX: CHN) $32 million forits stake in the Zara gold project in northern Eritrea now that the twohave signed a shareholder agreement governing their partnership.
Theshareholder agreement builds on terms Chalice Gold and ENAMCO agreed toa month and a half ago when they set the purchase price for ENAMCO's 30percent participating interest in the Zara project. The Eritreangovernment signaled in mid-November 2010 it intended to exercise itsright to full, 40-percent participation in the mining project.
UnderEritrea's mining laws ENAMCO automatically gets a 10 percent freecarried interest - that is a stake for which it pays nothing - and canthen choose to pay for up to 30 percent more in any mining project, withthe stipulation it be responsible for its share of project costs.
ENAMCOwill owe a third of project costs at Zara, where, for the Koka deposit,Chalice Gold has outlined 840,000 ounces gold @ 5.3 g/t inJORC-compliant indicated and inferred resources and completed afeasibility study.
In its feasibility study Chalice Gold outlinedan open pit mine that would produce 104,000 ounces gold a year over aseven-year mine life. With gold set at $900 per ounce, Chalice Goldestimated Zara's net present value at $99 million, after-tax anddiscounted by five percent.
Chalice's partnership with ENAMCOfollows in the footsteps of Eritrea's pioneering miner Nevsun and itsproducing Bisha copper-gold-silver-zinc mine. At Bisha ENAMCO also took a40-percent stake (10-percent free carried), though the value of its 30percent participating interest there has yet to be decided.
Unlikein Chalice Gold's case and the Zara agreement, back in 2007 Nevsun andENAMCO decided that the price of the government's stake in Bisha wouldbe decided after first gold shipment. With commercial production atBisha having begun earlier this year, Nevsun had set June 30 as thedeadline for a decision.
Nevsun subsequently delayed thatdecision without setting a new deadline, however. It stated recentlythat it and ENAMCO are reviewing independent reports on the finalpricetag, which the Eritrean government will pay with cashflow from theBisha mine.