Prime moves to boost stake in Snip gold mine

Prime Resources (TSE) has thwarted an attempt by International Skyline Gold (TSE) to acquire Cominco’s (TSE) 60% interest in the Snip gold mine in northwestern British Columbia.

Prime, which already owns a 40% stake in the underground mine, is exercising its right of first offer to buy the remaining 60% for $55 million.

In a written statement, Prime President Ronald Parker said he was pleased with the purchase of what he describes as a mature, low-cash-cost operation.

The mine contains a proven and probable reserve of 383,400 tons grading 0.78 oz. gold per ton and a possible reserve of 146,500 tons grading 0.69 oz. In production since 1991, Snip last year produced 128,274 oz. at a cash cost of US$175 per oz.

Cominco sold its interest in Snip after being approached by Skyline, which was eyeing the mine’s infrastructure for use with its neighboring Bronson Slope copper-gold project. Cominco felt that with only three years of reserves remaining, the Snip mine was no longer a core asset.

According to Parker, the purchase will add 239,000 oz. gold in proven, probable and possible reserves at a purchase cost, excluding working capital, of US$157 per oz. Prime’s annual production will increase by an average of 68,000 oz. gold per year for the next three years.

In addition, there are good exploration targets near the existing production areas and in the adjacent Twin West zone, he said.

Prime will appoint Homestake Canada operator of the mine under an arrangement similar to one in place at Prime’s nearby, fully owned Eskay Creek mine. Homestake Canada is a wholly owned subsidiary of Homestake Mining (NYSE), which owns approximately 51% of Prime.

Despite the loss, International Skyline remains committed to its Bronson Slope project and plans to continue with the application for a project permit and a feasibility study.