Chalice Shares Fall On Exit From Eritrea Gold Project Zara
28 December 2011
proactiveinvestors.com
Chalice Gold (TSE:CXN) (ASX:CHN) saw its share price fall more than 13 percent on Wednesday, following news of its decision to sell its remaining 60 percent interest in the Zara gold project in Eritrea, to China SFECO Group, a subsidiary of Shanghai Construction Group.
Shares of the Perth, Australia-based company shed 13.24 percent to $0.295, as of 10:13 am ET in Toronto. The company's stock has fallen 58.45 percent so far this year.
Under the terms of the agreement, China SFECO will pay $80 million in cash for Chalice's share of the main Koka deposit, which has an NI 43-101 indicated mineral resource of 5.0 million tonnes grading 5.3 grams per tonne (g/t) gold, for 840,000 contained ounces of gold.
China SFECO will also pay up to $20 million in cash for the rest of the project's deposits, including Zara North, Zara South, and Zara Central.
Chalice chairman, Tim Goyder, said: "On completion of the sales of its interests in the Zara Project, Chalice would be ideally placed to identify, acquire and develop resource projects which could offer investors substantial leveraged growth prospects.
"This is an extremely strong position that would enable the company to take full advantage of growth opportunities."
The transaction, which is expected to close in the second quarter of calendar 2012, remains subject to China SFECO's due diligence, which must be completed by March 12, 2012, as well as shareholder approval.
The deal is also subject to the closing of Chalice's previous July agreement to sell 30 percent of the project to Eritrean National Mining Corp (ENAMCO) for $32 million, plus about $2.0 million for certain costs. ENAMCO already had a 10 percent carried interest in the property.
The divestiture of the Zara project leaves Chalice with the opportunity to develop new projects in Eritrea and elsewhere, it said. Specifically, Chalice said it intends to develop its Mogoraib North project, located about 100 kilometres south of the Zara project.
Chalice recently completed a VTEM magnetic and radiometric survey of the Mogoraib North property, which identified a series of bodies with the potential to host mineralization, it said. It will start an initial 5,000-metre drill program in the first quarter of 2012.
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