Niogold is acquiring an option on a gold property contiguous to its Marban Block in Quebec from Breakwater Resources Ltd, in partnership with Atlanta Gold Inc. The arrangement is an amendment to an earlier deal signed by Atlanta Gold in 2003. That company fell short of the original C$3.5m spending requirement on four properties: Normar, Mouskor, Malartic H and the Malartic H Annex claims.
Under the terms of the new option agreement, Breakwater has extended the time requirement to Sept. 1, 2009, and Niogold has agreed to complete the remaining C$1.2m in spending needed to earn a 60-percent interest. Upon earn-in, Niogold will hold a 60-percent interest in the Malartic H and Malartic H Annex blocks, with Atlanta holding a similar interest in the two other blocks.
Objective's view:
We view the agreement as attractive, as it would give Niogold a majority interest in two properties contiguous to its Marban Block project. Further, historical drill holes on the Marban H block produced noteworthy gold assays over significant intervals, such as hole 89-18, which returned 8.47 grams of gold per tonne over 3.0 metres, 89-09, which yielded 8.99 grams of gold per tonne over 5.1 metres, and 89-19, which produced 27.46 grams of gold per tonne over 0.8 metre.
The option arrangement commits Niogold to spending a significant portion of its remaining treasury over the next year, which will force the company to scale back its pace on the main Marban project, or to seek additional funds through additional raises at unfavourable share prices. Nevertheless, we believe the project does offer sufficient merit in combination with the existing Marban Block project to warrant the move. We believe recent developments continue to support our base-case valuation of Niogold, although admittedly in pessimistic times.
