Otis Gold Corp. (TSX VENTURE:OOO) has announced that it has executed an agreement to purchase a 100% interest in the Kilgore Gold Project and related assets from Bayswater Uranium Corporation for staged payments of US$1.75 million and 2.0 million shares.
The Purchase Agreement replaces an Option agreement ("Option Agreement") dated June 4th, 2008 in which Bayswater granted Otis the right to earn up to a 75% interest in the advanced stage Kilgore Gold Project and related assets, including the early-stage Hai and Goldbug precious metal projects.
The benefits to Otis of increasing its interest in the Kilgore Gold Project and related assets are as follows:
- Under the existing Option Agreement, Otis was required to issue 2.2 million shares and complete a pre-feasibility study (expected to cost up to $1.0 million) to reach a 75% ownership interest. Under the new Purchase Agreement, Otis has acquired a 100% interest in exchange for stage payments of US$1.75 million in cash and the issuance of 2.0 million shares;
- The existing 2% NSR in favour of Bayswater is eliminated, materially enhancing future project economics; and
- Ownership of 100% of the asset substantially increases the flexibility respecting the timing of the exploration and potential development of the Kilgore Gold Project.
Subject to regulatory approval, the cash will be paid according to the following schedule: US$750,000 in 45 days, US$750,000 in 4 months, and US$250,000 in 12 months. Also subject to regulatory approval, issuance of the shares will be according to the following schedule: all shares will be issued at closing and, in addition to the statutory 4-month hold period, will be subject to hold periods which will expire 6 months after closing (as to 500,000 shares), 12 months after closing (as to 500,000 shares), 18 months after closing (as to 500,000 shares) and 24 months after closing (as to 500,000 shares). Under the existing Option Agreement, to date Otis has paid US$200,000, issued 1,300,000 common shares and completed over US$3,000,000 in exploration work. Closing will occur within 45 days of the date of the Purchase Agreement, subject to regulatory approval.
The Kilgore Gold Project comprises a large, 5 square mile, volcanic-hosted epithermal gold system situated on the northern margin of the eastern Snake River Plain. Pliocene-age mineralization is hosted in Miocene lithic and crystal tuff on the margin of a caldera setting. Mineralization style and setting, host rock type and thickness, and overall size of the mineralizing system are analogous to those characterizing the Round Mountain, Nevada and McDonald Meadows, Montana multi-million ounce volcanic-hosted disseminated gold deposits, where high-grade, coarse-gold feeder veins also exist.
Since initiating activities at Kilgore in mid-2008, Otis has completed 56 diamond drill holes totalling approximately 11,500 metres at the Kilgore Gold Project. Additionally, metallurgical testing on four samples from Mine Ridge is being conducted by McClelland Labs of Reno, Nevada, and an Environmental Scoping Study by Golder Associates is in progress. In 2011, Otis is planning an aggressive drill program that will include additional resource development drilling at the Mine Ridge deposit and exploration drilling at the highly prospective Dog Bone Ridge geophysical targets (see News Release dated September 15, 2010). Additionally, in 2011 Otis will be completing an updated NI 43-101 resource calculation on the Mine Ridge deposit to reflect drilling completed from 2008 to 2010.
Otis is extremely pleased with the acquisition and has budgeted for all cash payments from its existing working capital. States Craig Lindsay, President of Otis: "This is a major milestone in the development of Otis that adds immediate shareholder value at a favourable cost to the Company. We felt it was critical to have a 100% interest in our flagship project as we advance Kilgore towards a production decision and we look forward to fully realizing the potential of the Kilgore Gold Project in the future."
John R. Carden, Ph.D., Lic. Geo., a Qualified Person as defined by National Instrument Policy 43-101, is responsible for the technical information contained in this News Release.
Source: Otis Gold Corp.