Hi Don, you asked for it, I throw this out for discussion purposes:
Barrick must make a decision soon, likely after this 7,000 meter program has completed and they perform an internal resource estimate, so I'll say in a May/June timeframe, perhaps July.
One of my main reasons for choosing this timeframe relates to Tom Shrakes key comments at
Message 3374680
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"our view on the deal with Barrick is as follows: Barrick must make an expenditure of US$10.5 million on or before July, 2000 and make a production decision to maintain their interest in Diablillos. A production decision is defined as a thorough feasibility study and capital budget. Barrick has the right to assign their interest with our consent. Our right to grant consent is absolute and there is no "reasonable right to withhold" clause. These issues are defined in the Articles of Association of the holding company. Should Barrick fail to make a production decision by the year 2000, they must sell their interest in the project back to us for $10,000 or invest US$4 million per year until a production decision is made. "
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We talk about the fact that Barrick must prepare a feasibility study before July, 2000 but Tom Shrake has on a few occasions indicated a feasibility study will take over a year and I would imagine a thorough one will take even a bit longer ... one can presume that a feasibility study costs big bucks also ... so why would Barrick even attempt to do one if the resource proves to be smaller than their minimum ... Samantha in one of her latest updates to the thread has indicated Barrick has not even started a feasibility study ... would Barrick hold on just to cheese PFG management off ... I think not?
Now, their decision must be one of four choices (are there any more?):
1) Make an offer to PFG for their 30% plus any of the bordering properties. (most likely)
Note 1: The Fantasma property in my mind, was a sweetener added to the pot to entice Barrick to make the proper decision!
Note 2: Barricks minimum for a gold resource is typically 3 to 4 million ounces but in this special situation, where the amount of silver and its extraction rate is so high they have actually lowered their level to a minimum of 1 million ounces of gold (or perhaps a little bit less) because of the high amount of silver credits. I ask myself are they near this ... if not why are they still drilling?
2) Attempt to sell their interest in Diablillos to a third party (PFG can match)
Note: I am struggling with how this one might play out, any further thoughts would be welcome.
- The key here might be this, are Barrick and PFG both searching out purchasers for the same property (Diablillos) and who has the most to offer (remember that PFG has some important surrounding properties):
It is already a known fact that both Barrick and PFG talk in terms of high quality gold properties, therefore one can assume both parties will attempt to sell their interest at some stage. Now, if you were a buyer of resource properties, would you prefer to negotiate with a company like Barrick who is renowned for their tight-wadded-ness or PFG if they were 100% property owners with these key properties bordering the Diablillos. Who knows what kind of negotiations are taking place behind the scenes.
3) Make a decision to move on with the feasibility study which would indicate their minimum has been met. (I doubt this as typically Barrick dislikes joint ownership)
4) Drop the project altogether expensing as a "cost of doing business" exploration. (possible but unlikely)
Like I say, I throw this out and would appreciate any comments!
Rick |
