LA JOLLA, Calif., Oct. 5, 2017 /PRNewswire/ -- Tonogold
Resources Inc (OTC:TNGL) (the "Company' or
"Tonogold") is pleased to announce that it has entered into
a binding agreement with Comstock Mining Inc. (NYSE American: LODE)
("Comstock"), which amongst other things, provides
Tonogold an exclusive right to earn a 51% controlling interest in
1,162 acres of mining claims in the highly prospective Comstock
Lode region in Virginia City,
Nevada, which includes the Lucerne Deposit, located in the
Storey and Lyon Counties, as listed in Schedule 2 (the
"Lucerne Properties") and depicted in the map provided in
Schedule 1.
PRINCIPLE AGREEMENT TERMS
Tonogold has paid Comstock $200,000 for an initial 6-month option, which can
be extended at Tonogold's election for a further payment of
$2 million prior to the expiry of the
initial option period.
For Tonogold to earn a 51% controlling interest it will be
required to invest $20 million over
the next 42-months on work programs developed and managed by
Tonogold, on the Lucerne Properties; the objective being to produce
a commercially and technically robust mine plan and feasibility
study to enable profitable mining on the properties to commence. It
should be noted, that the $20 million
expenditure threshold is not a commitment, but a requirement to
earn the 51% interest in the Lucerne Properties.
The Agreement provides that a Joint Venture Steering Committee
be established immediately with majority members being nominated by
Tonogold. Work programs, budgets and other day-to-day operational
decisions require a simple majority decision of the JV Steering
Committee, thus ensuring Tonogold assumed operational control from
the outset.
Other aspects of the agreement provide Tonogold with:
- An option over Comstock's heap leach facilities (including the
crushing, stacking, Merrill Crowe
plant, gold recovery facilities, the American Flats mineral claims
(totaling 1,013 acres – see map in Schedule 1), and other related
infrastructure, plant and equipment ("American Flat
PP&E"). Tonogold has the right to acquire 51% of the
American Flat PP&E for $25
million once it has acquired a 51% interest in the Lucerne
Properties. If exercised, the purchase price shall be payable to
Comstock over an 18-month period commencing from exercising the
American Flat PP&E option.
- A Right of First Refusal over mining claims (192 acres)
covering Comstock's Dayton gold and silver deposit.
FUTURE WORK PROGRAMS
Tonogold believes that notwithstanding the operating losses
incurred over the 3-year period (2012-2015) during which
Lucerne ore was mined (open pit)
and treated (heap leach), the project dynamics contemplated by
Tonogold would be vastly different with significant economic
improvements resulting from the adoption of industry best practice
strategies, including:
- Consideration of a higher rate of production (equipment and
roster selection). Previous operations operated on an 8-hours/day,
5-days per week and as a result failed to secure the significant
economic of scale benefits that were available.
- Ensuring ore mined and treated is economic. The previous
operations operated without a Reserve with surface mining relying
on a Resource that (for a number of reasons summarized below)
resulted in sub-economic ore (i.e. waste) being mined and treated.
This is outlined further under the "Lucerne Resource" Section
below.
Tonogold's work programs over the next 3-years will be targeting
sustained annual production in excess of 100,000 ounces of gold per
year with cash costs of ~$750/ounce.
The work program for the initial 6-month period is expected to
include:
- Detailed Independent review of the Lucerne Resource
- Possible infill drilling within the Lucerne Resource
- As part of the initial review, there will be a focus on
identifying high-grade zones within the overall Lucerne Resource to
establish a better understanding on the structural controls and to
help determine down-dip potential for subsequent
drilling.
- Assessment of the various known high-grade underground
opportunities such as Succor, PQ, Woodville, etc. and to consider drilling
programs to gain a better understanding of their potential.
LUCERNE RESOURCE
The Official Resource for the Lucerne deposit as reported by Comstock will,
as part of the initial work program, be re-estimated by Tonogold's
technical consultants (Mine Development Associates ("MDA"),
Reno) with an initial focus on
that part of the Resource that is likely to be converted into a
Reserve.
Tonogold is wary to pre-empt the results and outcome of the
future work in this area (which is likely to take 6 to 12-months to
complete), but believes that it is important for investors to gain
a general understanding of some of the Resource issues that have
come to light during Tonogold's due diligence program, and to be
aware that this is expected to result in a significant
reduction in the Resource as currently reported by Comstock of 79.8
million tons at 0.027 ounces of gold per ton ("o/t Au")
(0.92 grams of gold per tonne ("g/t Au")), for 2.14 million
ounces of contained gold which uses a 0.007 o/t Au (0.24 g/t Au)
cutoff. The expected reduction is the a result of:
- The cutoff grade assumed of 0.007 o/t Au (0.24 g/t Au) is, in
Tonogold's opinion, far too low given the prior operating
conditions. Tonogold believes that even with the economies of scale
expected to be achieved in future operations, a cutoff grade of
0.02 o/t Au (0.69 g/t Au) would be more appropriate. Based on
Comstock's Resource statement, this would reduce the pre-mined
Resource from 2.14 million ounces of gold to 1.55 million ounces of
contained gold.
- There is a requirement within Canadian Institute of Mining's
("CIM") definitions of resources, upon which Canadian
National Instrument 43-101 relies, that a resource must have
"reasonable prospects for economic extraction". The
Official Resource for Lucerne
includes mineralization down to 1,520 feet (463 meters). Tonogold
believes that mineralization below 820 feet (250 meters) would not,
at this time, meet the "reasonable prospects for economic
extraction" at a cutoff of either 0.007 o/t Au or 0.02 o/t Au.
The CMI-reported Resource below 820 feet amounts to around 0.5
million ounces of contained gold (using a 0.02 o/t Au cutoff).
- Finally, following a review and analysis of the Resource by
Tonogold's technical consultants, and when comparing the Resource
with actual past production (resource/production reconciliation),
there is evidence that the official resource estimate may have been
overstated by over 30%.
Tonogold emphasizes that it is the quality of the resource that
is far more important than the quantity.
Notwithstanding the negative implication of these issues,
Tonogold is significantly comforted that the losses previous
suffered can reasonably and realistically be converted into
significant returns, by (in particular):
- The Development of a technically robust resource
model,
- The Completion of a Reserve estimate that would also be
compliant with NI 43-101 and CIM Guidelines,
- The establishment of a detailed and robust mine plan
- The consideration of appropriate scale of operations (equipment
sizing, rosters, etc.)
- Undertaking and completing a technical and economic feasibility
study prior to committing to recommence production.
FUNDING
Since June 30th 2017,
Tonogold has secured commitments for an additional $1 million of subscriptions from a small group of
investors, in respect of the Company's five (5) cent convertible loan note, which together
with the cash on hand at June ($352,000) provide the Company with the financial
resources required for the initial 6-month program.
LISTING CONSIDERATION
The execution of this Agreement provides Tonogold with a
potentially significant company-transforming asset, which now
justifies our seeking an upgrade of our current listing status
to at least a fully reporting entity. In addition, Tonogold is now
considering seeking a listing on the Toronto Venture Exchange as
soon as practical (expected within 12-months) and has embarked on
the assessment of various avenues to achieve this. The upgrade
listing objectives are designed to widen the investor base to
enable other investor groups that are currently prohibited from
investing in Tonogold, to be able to do so in the future.
QUOTES
Mark Ashley (Tonogold's President
and CEO), commented: "We commenced our negotiations with Comstock
over 15-months ago. The positive, constructive and open dialogue
that has been nurtured by both companies over this period has
ensured that the resultant Agreement provides a structure that's
not only workable but importantly provides a strong foundation for
a successful strategic partnership for the benefit of both
companies. Tonogold has also gained a significant and detailed
understanding of the opportunities and potential that the Lucerne
Properties provide over this period."
Corrado de Gasperis (Comstock's
CEO) stated "We have been impressed by the commitment, diligence
and frankly, passion, exhibited by Mark and the Tonogold
team. We believe the success of Lucerne depends on this type of technical
diligence, development and competencies that Mark and his team have
demonstrated over the past year-plus. We have the right
partner with the right capital support to maximize the value of the
Lucerne operation."
SHARE ISSUE
Tonogold also advises that 85,139,994 new shares were issued
during September 2017, as
contemplated in the previous Financial Statement lodgments (under
the heading "Condensed Statement of Shareholders' (Deficit)"),
bringing the Company's issued share capital to 104,321,659
shares.
Forward-Looking Statements
This press release and
any related calls or discussions may include forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 about Tonogold. Forward-looking statements are
statements that are not historical facts. All statements,
other than statements of historical facts, are forward-looking
statements. Forward-looking statements include statements about
matters such as: future prices and sales of, and demand for, our
products; future industry market conditions; future changes in our
exploration activities, production capacity and operations; future
exploration, production, operating and overhead costs; operational
and management restructuring activities (including implementation
of methodologies and changes in the board of directors); future
employment and contributions of personnel; tax and interest rates;
capital expenditures and their impact on us; nature and timing and
accounting for restructuring charges, gains or losses on debt
extinguishment, derivative liabilities and the impact
thereof; productivity, production slowdowns, suspension or
termination, business process, rationalization and other
operational initiatives; investments, acquisitions, joint ventures,
strategic alliances, business combinations, asset sales;
consulting, operational, tax, financial and capital projects and
initiatives; contingencies; environmental compliance and changes in
the regulatory environment; offerings, sales and other actions
regarding debt or equity securities; including a redemption of the
debenture, and future working capital, costs, revenues, business
opportunities, debt levels, cash flows, margins, earnings and
growth.
The words "believe," "expect," "anticipate," "target,"
"estimate," "project," "plan," "should," "intend," "may," "will,"
"would," "potential" and similar expressions identify
forward-looking statements, but are not the exclusive means of
doing so. These statements are based on assumptions and assessments
made by our management in light of their experience and their
perception of historical and current trends, current conditions,
possible future developments and other factors they believe to be
appropriate. Forward-looking statements are not guarantees,
representations or warranties and are subject to risks and
uncertainties that could cause actual results, developments and
business decisions to differ materially from those contemplated by
such forward-looking statements. Some of those risks and
uncertainties include the risk factors discussed in Item 1A, "Risk
Factors" of our annual report on Form 10-K. Occurrence of such
events or circumstances could have a material adverse effect on our
business, financial condition, results of operations or cash flows
or the market price of our securities. All subsequent written and
oral forward-looking statements by or attributable to us or persons
acting on our behalf are expressly qualified in their entirety by
these factors. We undertake no obligation to publicly update or
revise any forward-looking statement. Neither this press release
nor any related calls or discussions constitutes an offer to sell
or the solicitation of an offer to buy any other securities of the
Company.
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SOURCE Tonogold