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TABLE OF CONTENTS Dec 16 - 22, 2013 Volume 99 Number 44 - 0 comments

Mega Precious gets the cash to push on Monument Bay

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By: Anthony Vaccaro

Mega Precious Metals (TSXV: MGP) has secured financing to drive its Monument Bay gold project in Manitoba to the next level.

The money will come from Pacific Road Resources Funds, a private equity firm with a focus on the minerals sector. It will see an initial investment US$3 million in Mega, but if all goes well, that total could rise to US$40 million, which would take the project right through feasibility.

The deal came together after the resource fund and the junior developer were introduced at the Precious Metals Summit in Colorado in September. From there, Mega’s president and CEO Glen Kuntz says things flowed rather quickly, and after two and a half months of due diligence, Pacific Road was satisfied that Monument Bay represented the type of long-term value it was looking for.

“They liked multiple aspects of the project,” Kuntz says. “We own a whole mining camp — 338 sq. km — and on that is a 120- to 140-km gold structure, so they are not just buying one deposit.”

Indeed, Pacific Road’s investment, which will give it a 19.9% stake in Mega, gets it exposure to three deposits: Twin Lakes, Mid East and the AZ zone.

Combined, the deposits have open-pit measured and indicated resources of 67 million tonnes grading 1.3 grams gold for 2.88 million oz., and underground measured and indicated resources of 133,000 tonnes grading 5.5 grams gold for 24,000 oz.

There are also open-pit inferred resources of 25.9 million tonnes grading 0.7 gram gold for 602,000 oz. gold.

Twin Lakes is responsible for 3 million of the global 3.6 million gold oz. outlined so far, and as such will see most of the investment dollars coming in from Pacific Road.

As for Mid East, it sits 3 km east and along strike from Twin Lakes, while the AZ zone is situated in the footwall of Twin Lakes.

Kuntz — who worked on the project while with Noranda in 1989, and was part of the team that acquired it for Mega in 2010 — says the company has benefitted from a simple oversight by its former operators.

Noranda left a good deal of core unassayed due to lower gold prices at the time. That has meant that Mega has been able to add 650,000 oz. gold to its resources simply by assaying old core on the site. The cost of adding that gold has been $1 per oz., Kuntz says.

With the new capital flowing into company coffers, Kuntz says much of the focus will be on outlining more high-grade zones in what could one day become a starter pit.

And gold might not  be the only thing to come out of a future pit. Another oversight by Noranda was that the company didn’t assay for tungsten. The mineralized zones at Monument are not only gold-bearing, but also tungsten-bearing, with assays in the 1–2% tungsten range over as much as 1 metre. The mineralization, which occurs near the gold mineralization, could provide a by-product credit to a future mine.

As for the specifics of the deal with Pacific Roads, the fund also has the right to invest in three more tranches, provided that Mega reaches certain milestones.

The second tranche would see another US$7 million go to Mega once an internal resource analysis is completed. That money would be used to get a preliminary economic assessment (PEA) done by the end of next year.

The third tranche would bring in another US$10 million, and come after the PEA is completed. That money would go towards funding a preliminary feasibility study.

The fourth and final tranche is for US$20 million, and would come if Pacific Road was satisfied with the prefeasibily study. That money would fund a bankable feasibility study.

Each of the tranches would be generated using a price based on the 20-day, volume-weighted average price of Mega’s stock at the time the tranches are to be executed. So, in theory, they should support the company’s stock price, as it continues down the development road.

But the deal with Pacific Road isn’t the end of the financing story. The company is also putting together a private placement, with the hopes of raising another $1.5 million. That money would be used to develop Monument Bay.

Kuntz says the private placement was meant to help long-time shareholders take larger positions on the back of the Pacific investment.

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Mega Precious Metals' Monument Bay gold project in Manitoba, 570 km northeast of Winnipeg. Credit: Mega Precious Metals
Mega Precious Metals' Monument Bay gold project in Mani...

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Mega Precious Metals Inc

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