Royal Oak eyes potential in Athabaska

Armed with funds from a recently announced private placement, Athabaska Gold Resources (TSE) is gearing up to resume exploration of its 60% owned Nicholas Lake gold project, 60 miles north of Yellowknife, N.W.T.

The junior recently entered into a letter-of-intent agreement with Royal Oak Mines (TSE), an intermediate gold producer formed from the recent amalgamation of Royal Oak Resources and the Pamour group of companies. The agreement allows Royal Oak to acquire a significant interest in Athabaska through a series of private placements. If the placements are completed, Royal Oak would own about 33% of Athabaska on a fully diluted basis and be entitled to 50% representation on its board.

Athabaska’s key asset is its interest in the Nicholas Lake project which was last reported to contain preliminary reserves of 473,000 tons grading 0.46 oz. gold per ton. These reserves are contained within the Main zone which is still open to the east and to depth.

“We’re pleased about the agreement with Royal Oak,” said Edward Kennedy of Athabaska. “We now have the

money to get going again, and a backer with clout so we can buy out Chevron’s interest when the time comes.”

Chevron is currently divesting itself of various mineral assets, and Athabaska has the right of first refusal to buy out Chevron’s 40% interest in the large Nicholas Lake property.

But a decision to acquire this interest could depend on the results of an exploration program focused on new targets similar to the Main zone which have potential to increase current reserves.

Athabaska plans to spend about $800,000 on its proposed program, using proceeds from the Royal Oak private placements. The first tranche is for 700,000 units at 15 cents per unit (one common share and one warrant), followed by three million common shares at 25 cents per share on a flow-through basis. Royal Oak also has options to acquire further shares, as well as right of first refusal on future financings.

As for Royal Oak, the agreement with Athabaska provides it with relatively low-risk potential to increase its reserve base in the Yellowknife region where it already has existing operations and infrastructure. The company operates the Giant mine which turns out about 100,000 oz. gold per year, and also has 20 exploration projects in the Yellowknife area. Royal Oak also produces an additional 100,000 oz. gold annually from its mining operations in the historic Timmins camp of Ontario.