Gammon Gold (GAM-T, GRS-N) is dishing out $8 million for a 5.3% stake in Golden Queen Mining (GQM-T), a junior with assets in southern California.
Under the non-brokered private placement the gold producer is acquiring 5 million units at $1.60 apiece. Each unit consists of one share of Golden Queen, one quarter of a warrant exercisable at $1.75, and one quarter of a warrant at $2 for a period of 18 months after closing.
Once the transaction closes on June 1, Gammon Gold will hold about 5.3% of Golden Queen or 7.5% on a fully diluted basis.
Golden Queen is a gold exploration and development company. The company’s principal asset is its 100%-owned pre-development stage gold-silver Soledad Mountain property in Kern County, southern California.
The junior wants to develop a gold-silver, open pit, heap leach operation on its Soledad Mountain property just outside the town of Mojave.
Soledad is estimated to contain 2.16 million oz. gold and 37.63 million oz. silver in the measured and indicated categories and an additional 511,000 oz, gold and 11.15 million oz. silver in the inferred category at a gold-equivalent cutoff garde of 0.274 gram gold per tonne.
In Jan. 2007, Norwest Corp. of Vancouver prepared a National Instrument 43-101 compliant technical report to assess mineral reserves as part of an independent feasibility study. According to their findings, Soledad’s proven and probable reserves total 45.57 million tonnes grading 0.703 gram gold per tonne and 12.96 grams silver per tonne for contained gold of 1.05 million oz. gold and 19.36 million oz. silver.
Once in full production the planned average ore mining rate would be 4.1 million tonnes a year with an average stripping ratio of 2.12:1 including waste rock mined during the pre-production period.
Gammon operates two mines in Mexico. Its flagship Ocampo project in Chihuahua state started commercial production in 2007. The company also operates the El Cubo operation in Guanajuato state and has a development property called Guadalupe y Calvo in Chihuahua state. The company recently completed a purchase option agreement to acquire the Mezquite project in Zacatecas State.
Gammon Gold closed down 12¢ or 1.5% at $7.75 per share, while Golden Queen lost 1¢ or 0.7% to finish at $1.49 per share.