Volcanic Gold Mines (VG.V) came out of a trading halt yesterday after announcing a binding letter agreement to acquire an 80% ownership of WAMA from a BVI-domiciled company which owns a gold project in Guinea.
Volcanic will issue 12 million shares and spend at least C$11.5M on the gold property within the next 34 months. There’s a very firm commitment to spend at least C$500,000 on exploration and drilling in the first four months after the transaction date. Volcanic will also assume US$9.1M of debt which will become payable once a NII43—101 compliant resource estimate of 1.5 million ounces at a minimal grade of 2 g/t has been defined. The $9.1M will be repaid in cash and shares. The owners of the BVI company will also receive up to 6 million purchase warrants at an average exercise price of C$1, valid for five years.
So, what is Volcanic Gold Mines actually buying?
First of all, Volcanic’s land package in the Mandiana gold district has now increased to approximately 500 square kilometers. The WAMA owned land package has been the subject of a pretty extensive drill program, with 89 holes having been completed in 2014 and 2015. Several holes had visible gold in them, even those relatively close to surface. And with 2 meters of 220 g/t gold, 6 meters at 17 g/t gold and 12 meters containing 4 g/t gold, it’s very clear the property has a lot of potential. The deposit seems to be quite ‘nuggety’ as there are several short intercepts with an exceptionally high average grade, but this is completely consistent with the gold projects across the border, in Mali. That’s actually an advantage, as it paves the way to recover a large part of the gold through a simple gravity circuit.