Nevada-focused junior Riley Gold (TSXV: RLYG) is teaming up with Kinross Gold (TSX: K) (NYSE: KGC) to advance the exploration of its Pipeline West/Clipper (PWC) project, in which Kinross has been granted the option to earn up to a 75% interest for minimum expenditures of $20 million.
“We are excited to partner with Kinross on our PWC project. Their global proven track record speaks for itself as well as specific regional expertise that includes ownership and operations of two gold mines in Nevada (Round Mountain and Bald Mountain),” Riley Gold CEO Todd Hilditch said in a news release.
Under a venture option agreement signed Thursday, Kinross will assume operatorship of the PWC project and can earn an initial 60% interest in PWC by incurring a minimum of $10 million in qualifying work expenditures.
The Canadian gold major can earn an additional 15% interest (for a total 75% interest) by incurring at least another $10 million in qualifying work expenditures within two years of exercising the initial earn-in option.
Upon exercise of the initial earn-in option, a Nevada-registered joint venture company will be established for Kinross and Riley to hold their respective interests in PWC. Upon exercise or termination of the second earn-in option, the parties will fund ongoing operations of the JV based on their proportionate interests.
There is a dilution provision stating that should Riley’s interest in the JV company be reduced to 10% or less, the company’s interest will then be converted to a 2% net smelter return royalty.
In addition to the earn-in, Kinross will also take a 9.9% equity interest (on a partially diluted basis) in Riley through a private placement. In total, the placement consists of 8 million units priced at C$0.15 each for total proceeds of C$1.2 million.
Shares of Riley Gold surged 30% to C$0.20 on the TSX Venture Exchange by 11:20 a.m. ET, within the upper range of its 52-week range of C$0.09-C$0.24. The gold junior has a market capitalization of C$6.3 million.
PWC project
Located in Lander county, Nevada, PWC consists of approximately 24.7 km² in the heart of the gold-producing Cortez District, also known as the Battle Mountain-Eureka trend. The property adjoins Nevada Gold Mines complex, a joint venture between Barrick Gold and Newmont.
Drilling on the PWC project was first conducted in 1992, but since 1994, other operators such as Agnico-Eagle and Barrick Gold (Placer Dome) generally focused on offsetting early drilling that intersected gold mineralization in the lower plate of the Roberts Mountain thrust.
Results from the historical drilling include 4.6 metres grading 2.594 grams gold per tonne at 324 metres, including a high value of 3.84 g/t gold at 283 metres.
