excerts from a newsletter I receive, for what its worth;;;;;;;;;;;;;;ct:
Stockwatch: Southwestern Gold
NATURAL RESOURCE INVESTOR
& WORLD GOLD STOCK REPORT
/ / / FAX ALERT #24, Vol. 1998 / / /
(Investor relations report produced on behalf of company)
SOUTHWESTERN GOLD CORPORATION (TSE: SWG)
SOUTHWESTERN GOLD ADDS PHELPS DODGE, NEWMONT AND PAN AMERICAN SILVER TO ITS
STABLE OF JOINT-VENTURE PARTNERS; INCREASES EXPLORATION BUDGETS TO
US$38-MILLION OVER NEXT THREE YEARS
The Company recently added Phelps Dodge, Newmont and Pan American Silver to
its roster of majors joint-venturing on Southwestern projects in Chile and
Peru.
Active joint venture projects number 25 -- throughout Peru, Chile, Brazil,
Canada and China. Other JV partners include RTZ Mining, Teck Corp.,
Cominco, Minorco, Cambior, Savage Resources, Southern Peru Limited, plus
several more.
What's more, Southwestern now estimates that its JV partners and the
Company itself will spend about US$38-million on its exploration projects
over the next three years, including the 1998-9 exploration year. These
projects cover the gamut of major gold, silver, copper, diamond and zinc
exploration targets.
The financial planning underlying this intense activity is something many
admire. At mid-1998, Southwestern had a strong, debt-free balance sheet
showing about C$32-million in cash plus considerable marketable securities.
But what's remarkable is that through its structuring of JV's, Southwestern
has also ensured that it can maintain a strong cash position and may
actually increase it over time as various JV's progress.
First, most of SWG's JV partners pay 100% of the costs of projects,
including significant property maintenance costs, plus other cash payments,
as they pursue their earn-in conditions. Second, most of the JV agreements
have provisions for the JV partner to fully fund final feasibility studies
and the construction/development costs to bring any mines found into
production. Southwestern arranges all this up front by committing by stages
to reduce its eventual interest in projects to about 30% in exchange for
its partners funding all such costs, as well as paying SWG further cash
payments of significant amounts (US$5--US$20-million) on each project
advancing to the final stage.
The joint-ventures SWG just formed with Phelps Dodge illustrate how their
agreements work. On SWG's El Condor Project in Chile, Phelps Dodge must
first spend US$3-million over three years to earn a 51% interest. After
that, for funding the completion of a bankable feasibility study, Phelps
can earn a further 9% interest. Next, Phelps has the option to finance the
mine development in order to earn a further 10% interest. And, if it does
so, it can top up its interest by another 5% (up to 75% in all) by paying
SWG the sum of $5-million in cash.
For every rule there are exceptions, however. Southwestern's new JV with
Pan American Silver on the Felix project in Peru does vary from this
formula. The Felix property consists of about 31,000 hectares, with about
10,000 hectares 100% owned by SWG and about 20,000 hectares controlled
50%/50% by SWG and Teck Corp. SWG and Teck had previously identified a
large, high-grade mineral district 28 kilometers long running through the
Felix projects which was characterized by bonanza-type vein mineralization.
Intensive sampling of more than 200 vein structures returned high-grade
values for gold, silver, copper, zinc and lead.
Under the JV deal with Pan American, the partner must spend US$3-million
over three years on the combined Felix property. Thereafter, on defined
areas of specifically silver mineralization, Pan American can buy out 100%
of Teck's and/or SWG's property interests for a NSR royalty of 4% on areas
jointly owned by SWG and Teck and a NSR royalty of 2.75% on property areas
wholly owned by SWG after, making advanced royalty payments in each case.
On all areas not designated as silver targets, Pan American can establish a
50/50 JV with SWG/Teck or SWG.
a 51% interest in the project by spending US$5-million, with the right to
earn up to 70% as per the SWG typical formula described above.
the company intensifies project work in 1999. Stay tuned.
SWG has about 15.3-million shares outstanding. It has recently been rated
by gold analyst Ron Struthers as "the single best buy in junior mining
today."
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AT LEAST JUNIOR MINING COMPANYS ARE GETTING SOME RECONITION....Walt |
