Atlantic Gold drilling increases proven reserves in Idaho

Partners Atlantic Goldfields (COATS) and Jascan Resources (TSE) are considering what to do with their combined 45% interest in the Noxon silver-copper deposit, now that an agreement to sell their interest appears in danger.

After spending $3.5 million each last year for a stake in the huge Montana-based deposit, the partners had arranged to sell their interest to Montana Reserves Corp. of Spokane, Wash., for $40 million (US).

Under an agreement which has already been revised, Jascan and Atlantic are scheduled to receive $28 million cash from MRC. But with the Sept 26 deadline fast approaching, MRC President Frank Duval was unable to confirm that the payment will be made.

“We are in the middle of negotiations that quite frankly could fall apart,” said Duval who is attempting to raise $54 million to buy U.S. Borax and Chemicals’ 55% interest in Noxon. U.S. Borax is a wholly- owned subsidiary of Rio Tinto Zinc.

While the deadline for closing on the Borax, MRC agreement is Sept 6, Duval said his company can buy an option to extend the deadline for up to six months. He declined to say how much MRC will pay to obtain an extension.

Meanwhile, Atlantic Goldfields President William Burton doubts that Duval can make good on the original agreement which was scheduled to close Aug 8. ” It’s definately not a done deal at this point,” he told The Northern Miner. If MRC can’t meet the deadline, Burton said he is prepared to be flexible on how quickly the $28 million is paid out. But the purchase price isn’t negotiable, he said.

With silver prices down to $6.46(US) from $7.80 in July, Burton said MRC probable won’t see a return on its investment in the near future. While reserves at Noxon stand at 142 million tons grading 2.10 oz silver and 0.78% copper, the operator would have to sink an adit or long tunnel to access the deposit at depth. As a result, it could cost up to $30 million to complete a feasibility study, he said.

The amount of data needed to complete an environmental impact report is also a big factor in calculating the cost of bringing the property to production, said Burton who predicts that Atlantic and Jascan will retain their interest in the Noxon deposit.

“There is still enough money in the budget to carry us for another 12 months and after that, we will arrange the financing to maintain our position.”