Chutine finds partner for Mexico

About one month after American Barrick Resources (TSE) dropped its option on the Amelia 7 gold property in Mexico, Toronto-based Chutine Resources (TSE) has found another company willing to finance exploration on the project.

Giant Pacific Petroleums (VSE), a company controlled by former executives of bankrupt finance firm First Toronto Mining, has agreed to spend $1.2 million in return for 100% of adjoining claims known as the Amelia mine property. Giant Pacific’s interest would be subject to a 10% net profits interest to Chutine.

Upon signing the agreement, Giant Pacific will pay out $100,000 to the landholder, an additional $250,000 within two weeks of signing, plus an additional US$250,000 after six months and US$700,000 a year after the deal is signed. Under the deal, Giant Pacific is also issuing 500,000 shares to Chutine.

With one million tons of proven reserves, grading 0.13 oz. gold per ton, the Amelia mine property is a former producer owned by Chutine’s 49% held Mexican affiliate Minera Sanex. Chutine has an option to acquire the remaining interest.

After completing 2,000 ft. of drilling, Barrick dropped its option on the adjacent Amelia 7 because it believes the project doesn’t have adequate reserve potential to meet its 100,000 oz.-per-year development criterion. “But the project is something that a smaller company like Giant Pacific can move into with some confidence,” said Bruce Weaver, president of Giant Pacific, who is working in partnership with Chris Kyria-kou, the former president of First Toronto Mining.

Chutine is retaining an option to back in for a 25-50% working interest in the Amelia mine property, once a feasibility study has been completed. To exercise, Chutine must pay Giant Pacific the equivalent of three times the amount spent to complete the feasibility study.

In addition, Giant Pacific has agreed to spend US$900,000 over three years to earn a 50% stake in the Amelia 7 which adjoins a heap leach gold mine operated by Phelps Dodge (NYSE) and partner Santa Gertrudis. With the emphasis on expanding reserves, Giant Pacific, project operator under the agreement, is moving immediately to commission a bankable feasibility study on the Amelia mine property.