Galway Gold (GLW-V) Jan 10, '14 has exercised its right to acquire the Vetas gold-silver project in the Vetas-California-Surata gold region of Colombia. The total option exercise price is approximately $4.3-million (U.S.) (cash balance as of Sept. 30, 2013, was $13.5-million (U.S.)). Galway Gold has been advised that the counterparty to the Reina de Oro option contract has rejected the exercise of the option. Galway Gold is seeking arbitration of this matter pursuant to the terms of the option contract. Management feels confident of a positive outcome from the arbitration hearing based on the following facts.
According to contractual provisions, exercise of the option required a sole autonomous decision by Galway only and did not require a justification. Cash payments in excess of $800,000 (U.S.) plus 500,000 shares of Galway Resources were paid to the owners on a timely basis. A total of $13.5-million (U.S.) was spent on exploration of the Vetas project, which was performed according to internationally recognized standards. Galway conducted extensive surface geochemical sampling, underground channel sampling, a geophysical survey and surface and underground drilling programs (46,838 metres in 91 diamond drill holes) over a four-year period. Galway used internationally recognized drilling companies and assay labs as well as internationally experienced, well-respected geologists and staff to carry out the exploration program at Vetas. The company regularly provided presentations to the owners who had the ability to review the exploration program on a regular basis and were entitled to conduct a third party audit. No complaints were ever received by Galway over the course of the exploration program that was conducted on the property. The Reina de Oro option contract cites immediate and automatic transfer upon exercise, as well as technical and administrative autonomy in the management of the exploration project.
Contract calls for payment on measured and indicated ounces
Pursuant to the Reina de Oro option contract, Galway Gold can acquire the mining rights for the Reina de Oro licence concession by exercising the option and thereby own a 100-per-cent interest in the Vetas gold-silver project. The option exercise price is that amount equal to 1.5 per cent of the 30-day average spot prices of gold and silver in the measured and indicated categories. Galway Gold has calculated the option exercise price based on 229,978 gold equivalent ounces in the measured and indicated categories. The respective average spot prices per ounce of gold and silver used in this calculation were $1,246.17 (U.S.) and $19.96 (U.S.) on the London Metals Exchange for the last 30 days prior to the effective date of exercise. The total option exercise price is therefore approximately $4.3-million (U.S.). Galway Gold had a cash balance of $13.5-million (U.S.) on Sept. 30, 2013.
On Nov. 27, 2013, Galway Gold announced an initial mineral resource estimate at its Vetas gold-silver project. The mineral resource estimate was prepared in accordance with NI 43-101 standards by Roscoe Postle Associates Inc. (RPA) of Toronto, Ont. |
