AuRico joins Carlisle Goldfields’ efforts to develop Manitoba’s next mine

POSTED ON November 11, 2014 BY Travis McPherson
CATEGORY AuRico Gold, Carlisle Goldfields, Stories,

AuRico's President Scott Perry says Carlisle represents "a compelling, but low risk opportunity " (Image: Carlisle Goldfields)

Another cashed up mid-tier producer has decided the time is right to deploy some capital into the junior sector. This time the cashed up mid-tier is AuRico Gold (AUQ:TSX) and the junior is Carlisle Goldfields (CGJ:TSX).

AuRico, who operates two gold mines in Canada and Mexico, has agreed to purchase 70.6 million shares in Carlisle at a price of $0.08 per share, representing a 100% premium to yesterday's closing price. Once complete, AuRico will own 19.9% of Carlisle and will be eligible to nominate two members to the board. They have also agreed to form a joint venture partnership on Carlisle's Lynn Lake gold camp in Manitoba.

AuRico has spent most of the past 3 years completely transforming itself.

First, in 2011, they bought their current two assets, El Chanate and Young-Davidson and then divested over $1 billion worth of assets in 2012 including their Ocampo mine which they sold to Carlos Slim for $750 million cash.

Scott Perry, President and CEO of AuRico says the transaction is a "compelling, but low risk opportunity to participate in the early stage advancement of a highly prospective mining district in Canada."

As part of the transaction, AuRico will help fund exploration efforts on Carlisle's Lynn Lake gold camp.

AuRico will earn an initial 25% interest in the Lynn Lake camp by paying Carlisle $5 million cash.
AuRico will then become the operator of the project.
AuRico can earn an additional 35% by spending $20 million on the project and delivering a feasibility study within a 3 year earn-in period. The Lynn Lake project already has a preliminary economic assessment (PEA) on it.
Exploration and development expenditures from there on out would be financed on a prorated basis.

Abraham Drost, President and CEO of Carlisle stated: "AuRico's commitment to form a joint venture and advance a feasibility study as operator on the MacLellan mine and the Farley Lake mine properties very credibly moves the Lynn Lake project to a development footing and is a game changer for Carlisle."

The Carlisle PEA envisages a 12 year mine-life producing 145,000 ounces of gold annually at $477/oz c1 costs (Image: Carlisle Goldfields)

Carlisle discovered the Lynn Lake camp in 2009 and has since spent $17.5 million in exploration, delineated a 1.8 million ounce gold equivalent resource across two main deposits and delivered a robust PEA which envisages a 12 year mine producing an average of 145,000 ounces of gold annually at $477 per ounce cash costs. The project is estimated to cost $185 million (including a $35 million contingency) and generate a $257 million post-tax NPV (5%) and IRR of 26%.

AuRico has also agreed to fund Carlisle's exploration team to allow them to do what they do best. AuRico will provide up to $2 million annually in exploration, with the funding being split 50/50. Carlisle will be operator of the exploration outside of the scope of the feasibility study.

"Carlisle will continue to operate a well-financed exploration program on the balance of the highly prospective Lynn Lake property potentially supporting future long-life, low-cost mine production and processing in the Lynn Lake gold camp of Manitoba," says Mr. Drost.

Shares have yet to respond to the transaction and closed today even on the day at $0.04 per share on 3 million shares traded.

With the AuRico investment, Carlisle gets over $10.5 million from AuRico including the initial 25% earn-in. They also get up to $2 million annually in exploration and likely a feasibility study delivered within the next 3 years.

Post transaction, the company will have a market cap of approximately $15 million (at $0.04 per share), and will have over $30 million in cash payments and exploration work due to it within the next 3 years.

I don't know why it still surprises me when share prices don't respond to positive news out of the sector these days, but it does.

Carlisle is led by Mr. Drost, a professional geoscientist, who incubated Premier Royalty through to its sale to Sandstorm Gold and was the former President of Sabina Gold and Sandspring Resources.

Read: Carlisle Welcomes AuRico as Strategic Investor and Joint Venture Partner

Disclosure: Author owns no shares in any of the companies mentioned. All facts are to be verified by the reader. Always do your own due diligence as this is not investment advice.

Travis McPherson

trav@ceo.ca

Travis McPherson

trav@ceo.ca

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