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Gowest buys 50% of mill in Timmins to handle its ore

By Gregory Reynolds, Mining Life

Nov 1, 2017


Discovering gold sometimes is easier than find a milling facility to process the ore from the resulting mine but junior miner Gowest Gold Ltd. Has solved that problem by buying 50 per cent of an existing mill near its Timmins gold development project.

On Jan. 23, Gowest announced that it has entered into a non-binding letter of intent with Northern Sun Mining Corp., a corporation existing under the laws of the Province of Ontario, with respect to the creation of a jointventure corporation (JVco) to own and operate the Redstone Mill. Upon completion of the proposed Transaction, each of the parties held a 50% interest in JVco.

Gowest is a Canadian gold company focused on fast-tracking the development of its 100% owned, Bradshaw Gold Deposit (formerly named Frankfield East), part of its North Timmins Gold Project (NTGP).

Gowest is also exploring additional gold targets on the 110-square-kilometre NTGP land package it controls and continuing to evaluate acquisition targets in the vicinity of the Pipestone Fault area, part of the prolific Timmins Gold Camp. Currently, Bradshaw contains a National Instrument 43-101 compliant Indicated Resource estimated at 2.1 million tonnes grading 6.19 g/t Au for 422 thousand oz. Au and an Inferred Resource of 3.6 million t grading 6.47 g/t Au for 755 thousand oz. Au. Further, based on the Pre-Feasibility Study (conducted by Stantec Mining) Bradshaw contains Mineral Reserves, using a 3 g/t Au cut-off and a gold price of US$1,200 / oz., totalling 1.8 million t grading 4.82 g/t Au for 277 thousand oz. Au. Gowest boasts a highly experienced and capable management team and board with a proven track record of success in all key areas, including finance, exploration, mine development, business development and gold production.

The Redstone Mill was 100% owned by Northern Sun and had the capacity to process approximately 1,500 tonnes of ore-per-day. Located just south of Gowest’s Bradshaw Gold Deposit, which forms part of its North Timmins Gold Project, the Redstone Mill is well-situated to satisfy Gowest’s anticipated future ore processing requirements.

In order to effect the proposed transaction, Northern Sun initially transferred to JVco all of the assets comprising the Redstone Mill, and JVco assumed all of the obligations and liabilities relating to the mill, in exchange for shares of JVco having an aggregate deemed value of $23 million. The assets were transferred to JVco free and clear of all liens or encumbrances (other than any permitted encumbrances.)

Following the organization of JVco by Northern Sun, Gowest purchased a 50% interest in JVco for consideration equal to $11.5 million.

In connection with the transaction, JVco and Gowest entered into agreements, on market terms, pursuant to which JVco (among other things) agreed to process ore produced by Gowest from its proposed 30,000 tonne bulk sample. Also, JVco reserved an average of 500 tonnes-perday of capacity in order to satisfy Gowest’s anticipated future ore processing requirements.

Greg Romain, Gowest president and CEO, commented “we look forward to becoming equal partners with Northern Sun in the Redstone Mill, where we can process the material we extract from Bradshaw, and, with our partner, we can benefit financially by helping to secure additional feed for the remaining mill capacity from other regionally located mining companies.”

On Feb. 2, Gowest announced that PGB Timmins Holdings LP (PGB) funded the initial tranche of US$5,600,000 pursuant to the previously announced Pre-Paid Forward Gold Purchase Agreement entered into between PGB and Gowest on Dec. 16, 2016.

PGB is an investment vehicle controlled by Pandion Mine Finance, LP. The proceeds from the initial tranche were used by Gowest principally to fund the development of the Bradshaw, as well as for general and administrative costs and the payment of transaction fees and expenses relating to the financing.

Pandion is a mining-focused investment firm backed by MKS PAMP Group and Ospraie Management, LLC that provides flexible financing solutions to developing mining companies.