Stock rather than cash proves faith in new McGarry Mine

By Gregory Reynolds

A group of private investors has shown faith in the future of Armistice Resources Corp. as the company moves towards declaring commercial production later this year of its McGarry Gold Mine near Kirkland Lake.

The group was entitled to two payments of $500,000 but instead accepted 10 million shares of the company. The deal involved the third and fourth payments of five that will pay the investors for a historic property, the former producing Kerr-Addison Gold Mine.

The amendment to the option agreement was announced Feb. 27 but the fifth and final $500,000 payment due on Jan.1, 2015 calls for cash.

“We are very pleased to have made this amendment that enables us to satisfy the third and fourth purchase payments with common shares,” said Todd J. Morgan, CEO and president. “This enables Armistice to use our cash to continue funding the development and operations of our McGarry Mine.”

“As we reported in July 2012, the results of the surface diamond-drilling program carried out on the Mill Zone of the Kerr-Addison property were very encouraging. The findings from the 68 holes drilled confirmed our expectations that there is great potential for mineral resource delineation on the property. Our current focus is on bringing the McGarry Mine into commercial production in 2013.

As we progress with that and start to generate meaningful cash flow, we intend to resume exploration drilling on the company’s extensive land package, including the Kerr-Addison property,” Morgan said.

On Sept. 4, 2012 Armistice announced that it has begun the shipment and sale of gold concentrate from the McGarry.

“The commencement of shipping and selling gold concentrate from our first operating mine obviously is a significant and exciting milestone in the development and growth of Armistice Resources,” said Morgan, at the time. “The initial shipment of 35 tons of concentrate from the mill in Cobalt, Ontario to the smelter also marks Armistice’s first generation of revenue and operating cash flow.

“Following formal acceptance of the initial shipment by the smelter, we will be proceeding with regular shipments of concentrate for refining and sale. We have an additional 135 tons of floatation concentrate and 24 tons of gravity concentrate ready to ship. We are approaching production of 200 tons per day from the McGarry for shipment to the mill in Cobalt and are working to increase this to an average of 350-to-400 tons per day by 2013. A surface and underground stockpile of 3,500 tons of broken ore is currently available for shipment to the mill,” Morgan said in September.

Including the McGarry Mine property, Armistice has established a sizeable footprint of contiguous gold properties in Virginiatown on the prolific Larder Lake-Cadillac Break that extends 200 km east-west straddling the Ontario and Quebec border and that has produced 95 million ounces of gold.

In December 2012, Armistice completed the purchase from Bear Lake Gold Ltd. of the mineral rights on 18 mining claims totaling 627 acres (the Barber-Larder Property) located on the western boundary of the McGarry Mine.

The McGarry Mine consists of 33 contiguous patented mining claims, including three licenses of occupation, totaling 484 hectares. The McGarry Mine is fully permitted and all equipment and systems at the site have been brought up to standards.

The McGarry Project is located less than a kilometre west of the community of Virginiatown and approximately 40 kilometres east of the Town of Kirkland Lake in Northern Ontario. The Armistice mining plant and shaft, located at the eastern end of Barber Lake is easily accessible by means of a short gravel road from paved Highway 66.

Access to the rest of the project area is via bush roads and trails. Electric power is available on site at the Armistice shaft through a substation installed at this location. The area offers abundant infrastructure and ancillary services, including an experienced labour force and custom milling facilities, suitable to support underground mining operations.

In December 2010, Armistice signed a definitive five-year option agreement for the purchase of up to 100 per cent of the mineral rights on the Kerr-Addison property, which is adjacent to the McGarry Mine. Kerr-Addison was one of Canada’s largest gold producers, producing more than 11 million ounces of gold during a 58-year operating life from 1938 to 1996.

Armistice agreed to make five annual payments of $500,000 in cash to a group of private investors who controlled ownership of the Kerr-Addison property and to issue 2,000,000 common shares to the Group. Armistice subsequently made the first two annual cash payments. The third payment of $500,000 was payable in January 2013.

Armistice continues to be required to pay a 2% royalty on gold production from the Kerr-Addison, except for an area identified in an internal report prepared by AJ Perron Gold Corp. dated October 21, 1996 as containing proven and probable reserves which are subject instead to a 3% net smelter royalty.