Constantine Metal Resources Ltd (CVE:CEM) (OTCMKTS:CNSNF) has finalized a lease agreement on a new property in Alaska as it begins the process of spinning out gold assets into a wholly owned subsidiary.
A formal lease agreement was finalized with Cook Inlet Region Inc (CIRI) for the rights to the Johnson Tract property, a 21,000 acre tract of land around 200 kilometres southwest of Anchorage, Alaska. The property hosts the high-grade Johnson Tract deposit, which hosts gold, silver, copper, zinc and lead along a 12 kilometre strike length.
The agreement is for an initial 10-year lease term, followed by a five-year development term to achieve a mine construction decision. Under the terms of the agreement, Constantine will make annual lease payments of US$75,000 during the first five years, which will increase to US$150,000 from year six onwards until production on the property is achieved.
Constantine has also committed to spending US$10 million in expenditures during the initial term and US$2 million per year during the development term until the company reaches a mine construction decision. CIRI will receive a royalty on the project ranging from 2% to 4% and have the option to acquire a maximum 25% interest.
"We are pleased, and look forward to, working with CIRI in the exploration and development of the Johnson Tract Property," said Garfield MacVeigh, president and CEO of Constantine Metals in a statement.
"Finalizing the Johnson Tract lease agreement is a significant milestone in the evolution of Constantine that will allow us to take the next step and spin out our high-quality gold assets in Alaska and Timmins into HighGold. The board and management believe that this structure will allow Constantine shareholders to realize the value in the gold properties while retaining the growing value that the Palmer base metals project provides."
The Vancouver-based company also provided details of a proposed spinout of certain gold assets into HighGold Mining Inc, which would include the Johnson Tract property.
HighGold’s focus will be on exploring for high-grade gold in North America. In addition to Johnson Tract, the subsidiary’s portfolio will include three properties in the Timmins region of Ontario, including the past-producing Munro-Croesus gold project.
Constantine shareholders will be entitled to receive common shares of HighGold distributed on a pro rata basis, the company announced Tuesday. HighGold is expected to list on the TSX Venture Exchange and conduct a private placement at a later date, according to Constantine.
Post-spinout, Constantine will continue its work on its flagship Palmer project, a polymetallic property in the Alaska panhandle.
Shares of Constantine Metal Resources were last trading at C$0.54 on the TSX Venture and at US$0.40 on OTC markets.
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