Beanstalk Capital Inc. has announced it has entered into an asset purchase agreement dated February 16, 2011 pursuant to which Almaden Minerals Ltd. (TSX: AMM, NYSE: AAU) will vend 100% of its Elk Gold Project located near Merritt, British Columbia to Beanstalk in exchange for a controlling interest in Beanstalk and a 2% net smelter returns royalty.
Property Description:
The Elk Property is located in southern British Columbia, Canada roughly 325 km northeast of Vancouver and 55 km west of Okanagan Lake, approximately midway between the towns of Merritt and Peachland. The property is within the Similkameen Mining District and consists of 27 contiguous mineral claims and one mining lease covering 16,566 hectares. Except for the Agur Option block, Almaden has a 100% interest in all claims. A 1% NSR production royalty is payable on production from the Agur Option block, located approximately 4 km south of the area of estimated resources. Prospecting activities date back to the early 1900s but detailed work in the area began in 1960s and 1970s by several companies who focused on copper and molybdenum. Fairfield Minerals investigated the area for gold in 1986. Approximately 51,500 ounces of gold were produced between 1992 and 1995 from a test pit and underground mining exploration (a decline was excavated for underground drilling activity, but no stoping or underground mining occurred).
On January 24th, 2011 Almaden reported the results of a positive Preliminary Economic Assessment ("PEA") of the open pit potential of its 100% owned Elk gold project located in British Columbia, Canada. The positive PEA demonstrates the potential that a viable project could be launched on the Elk property. The results for the base case (at US$1,000 per troy ounce) indicate a mining project with a 7 year mine life producing 139,000 ounces of gold at estimated cash operating costs of $C528 per troy ounce, initial capital expenditures of C$9.91 MM, pre-tax Internal Rate of Return of 51%, payback of 1.85 years and NPV of $C28.7 MM using a discount rate of 8%. The results for US$1,200 per troy ounce case indicate a mining project with a 9 year mine life producing 297,000 ounces of gold at estimated cash operating costs of $C652 per troy ounce, initial capital expenditures of C$17.5 MM, pre-tax Internal Rate of Return (IRR) of 39%, payback of 3.3 years and NPV of $C67.9 MM using a discount rate of 8%.
The NI 43-101 compliant PEA was completed by Roger Pooley, (MAusIMM) of SRK Consulting Australasia Pty Ltd. ("SRK"). SRK relied on other authors in the areas of Geology, Resources, and Mineral Processing. Susan Lomas, P.Geo of Lions Gate Geological Consulting ("LGGC") prepared an updated National Instrument 43-101 compliant resource. Gary Hawthorn, P.Eng. of Westcoast Mineral Testing Inc. (WCMT) supervised the metallurgical testing and estimated the preliminary capital and operating costs for a treatment plant. Brian Alexander, P.Geo. supervised the 2010 drilling program at Elk. A Technical Report entitled "NI 43-101 Technical Report for a Preliminary Economic Assessment on the Elk Gold Project, Merrit, British Columbia, Canada" dated January 14th, 2010 will be filed at www.sedar.com. The experts listed above have written sections of this Technical Report and are acting as the Qualified Person (QP) for those sections.
The PEA did not consider the underground potential of the resource but only the portion of the current resource amenable to open pit mining. The 2010 Mineral Resource Estimate and the PEA study does not include the results of the 2010 drilling program. The Company plans to incorporate the 2010 drilling results into an updated mineral resource estimate once all the assay results are received, for the purposes of more advanced studies, including an analysis of the underground potential. The PEA recommends that the Company proceed with a Pre Feasibility Study of the project.
Highlights of the PEA are:
- Average life of mine cash operating cost of $C528 per ounce at $US 1,000 per ounce (Base Case) and $C 652 at $US1,200 per ounce.
- Estimated start-up capital expenditures of $C9.91 million and life of mine sustaining capital of $C12.18 million (Base Case).
- At $US1,000 per ounce, pre-tax Internal Rate of Return (IRR) of 51%, payback of 1.85 years and NPV of $C28.7 MM using a discount rate of 8% (Base Case).
- At $US1,200 per ounce gold, pre-tax Internal Rate of Return (IRR) of 39%, payback of 3.3 years and NPV of $C67.9 MM using a discount rate of 8%.
The preliminary assessment includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary assessment will be realized. This mining study and PEA are at a conceptual level where different options can be considered and a broad understanding of the potential project performance can be gained. SRK and Almaden consider this project to be preliminary or "green field" in nature as previous mining activity on the property was largely for exploration purposes and the property has not been the subject of a detailed pre-feasibility study as is defined in NI 43-101. For the base case pit scenario 9% of the resource considered viable in the study are Measured Resources, 73% Indicated and 18% Inferred Resources. For the US$1200 pit scenario 7% of the resource considered viable in the study is based on Measured Resources, 71% on Indicated and 22% on Inferred Resources.
The trial open pit operation that occurred in the 1990s mined a small portion of vein material. Known as the Base Case, it is based on using augmented process equipment that Almaden already owns. This limits the throughput to 500 tpd. The Base Case is a conservative and low risk scenario in the light of the current gold price, and in practice the project could be expanded to mine a much larger part of the known resources if current gold prices are sustained. To show the effect of this, an alternative case known as the $US1200 case was also studied. The $US1200 case assumes that a gold price of $US1200/tr.oz will be maintained for eight years. The mine processing plant production is doubled, to 1,000 tpd. It is believed that if the project proposed goes ahead, then these resources will have a much improved chance of being mined, because access can be gained from within the open pit, and the treatment plant will have been built, and will be ready to accept underground production without further capital expense. This matter can therefore safely be left for consideration at a later time.
A mineral resource for the Elk Property was estimated by LGGC. Multiple quartz veins were interpreted on north-south trending cross sections. Three-dimensional solids models were built from the sectional interpretations using diamond drill hole data captured through to 2007. Assay gold grades were capped and composited to vein width composites averaging about 1.5 m. Gold grades were estimated into a block model using the inverse-distance method.
The Transaction
Pursuant to the Asset Purchase Agreement, Almaden has agreed to vend a 100% interest the Elk Gold Project to Beanstalk in exchange for 37,000,000 common shares in the capital of Beanstalk (the "Shares") and a 2% net smelter returns royalty. All or a portion of the Shares may be subject to resale restrictions and escrow requirements under applicable securities laws and the policies of the Exchange. In addition, two million of the Shares will be held in escrow, subject to the following terms and conditions: (a) one million Shares will be held in escrow and released at such time as Beanstalk establishes one million ounces of measured or indicated reserves of gold on the Elk Gold Project, as verified by an independent 43-101 report; and (b) one million shares will be held in escrow and released at such time as Beanstalk establishes an additional one million ounces of measured or indicated reserves of gold on the Elk Gold Project, as verified by an independent 43-101 report. Any Shares not released from escrow within five years of the Closing will be returned to Beanstalk for cancellation.
The Transaction and the Concurrent Financing (collectively, the "Qualifying Transaction") are intended to constitute Beanstalk's qualifying transactions pursuant to Policy 2.4 "Capital Pool Companies" of the Exchange Corporate Finance Manual. Following completion of the Qualifying Transaction, Beanstalk will be a Mining Issuer on the Exchange. The Transaction is an arm's length qualifying transaction and, as such, the Transaction is not subject to shareholder approval, unless otherwise required by the Exchange or applicable laws.
The parties' obligations to complete the Transaction are subject to the satisfaction of certain conditions precedent, including, without limitation: (a) the completion by Beanstalk of a due diligence review to its satisfaction with regard to Elk Gold Project; (b) the receipt of all necessary approvals of the Exchange and other regulatory and government authorities; and (c) the completion by Beanstalk of a private placement (the "Concurrent Financing") to close concurrently with the Transaction (the "Closing") of up to 10,000,000 units (each a "Unit") at a purchase price of $0.50 per Unit (each Unit consisting of one common share and one whole warrant ("Warrant") exercisable at $0.75 for three years from the Closing) and up to 3,850,000 common shares in the capital of Beanstalk issued on a flow-through basis (each a "Flow-Through Share") pursuant to the Income Tax Act (Canada) at a purchase price of $0.65 per Flow-Through Share for aggregate gross proceeds of up to $7,502,500, or in such other amounts and on such other terms as may be determined by Beanstalk. A finder's fee or agent's commission may be paid in connection with the Concurrent Financing, in accordance with the policies of the Exchange. The proceeds of the Concurrent Financing will be used to provide working capital, to undertake the proposed work program on the Elk Gold Project and for general working capital purposes.
Trading Halt
In accordance with Exchange policies, the common shares in the capital of Beanstalk are currently halted from trading and will remain so until the documentation required by the Exchange for the Qualifying Transaction can be provided to the Exchange, which may be until completion of the Qualifying Transaction.
The information in this release in respect of the Elk Gold Project has been reviewed by Jim O'Rourke, P. Eng., a qualified person as defined in National Instrument 43-101 "Standards of Disclosure for Mineral Projects".
Source: Almaden Minerals Ltd.