Viceroy sells 25% of project to raise funds for startup

VANCOUVER The sale of a 25% interest in the Castle Mountain project in San Bernardino Cty., Calif., for US$17.5 million lifts the final financing hurdle for owner Viceroy Resources (TSE), and clears the way to a production start before year-end.

Viceroy sold the participating interest to MK Gold and has signed a mining contract with the company. MK Gold is a wholly owned unit of Morrison Knudsen Corp. of Boise, Idaho, a company involved in contract mining services and project financing.

Of the total pruchase price, US$15 million will be used to contribute to the capital cost of the project, while the balance of the funds will be split between general accounts and the exploration and development drilling of possible extensions to the known deposits.

Proven and probable reserves at Castle Mountain are estimated at 24.6 million tons grading 0.047 oz. gold per ton, with three additional zones containing a possible reserve of 13.5 million tons grading 0.046 oz.

The planned 8,000-ton-per-day heap leach mine is expected to produce an average of 100,000 oz. over its 9-year life.

The balance of the US$50 million capital cost required for the project was secured earlier this year through a US$35-million loan facility from N.M. Rothschild & Sons.

Viceroy had initially planned to raise the US$15 million through a share issue, but farming out a piece of the project was less dilutive and could be completed much sooner, according the Ross Fitzpatrick, persident of Viceroy.

With a preliminary prospectus for an issue already filed in Ontario, Alberta, and British Columbia, the company plans to proceed with a limited financing to provide funds for the exploration of wholly owned ground adjoining the Castle Mountain area.

Viceroy also plans to pursue new exploration and development opportunities which it has already identified in southwestern U.S.