Solana Petroleum Corp. of Flagstaff, Ariz. has agreed in principle to acquire more than 710 square km of contiguous gold and other mineral claims, leases, and other mining rights near Mine Centre from Fort Frances-based Hexagon Gold Ltd.
The announcement was made Feb. 13 and while it still has to be ratified by Solana’s stockholders later this month, that will be a mere formality, according to Hexagon president and Fort Frances resident Jack Bolen.
“All the shareholders are on board,” he remarked. “We’ll be starting an exploration program as soon as we’ve completed the steps required by the stock exchange.”
Those steps should be completed by April 15, noted Bolen, who also is a current director of Solana.
The deal involves a purchase price of $1 million, which will be paid through the issuance of five million units of Solana stock, which currently trades on the Vancouver Stock Exchange.
The purpose of the transaction, said Bolen, is to enable Hexagon—up until now an exclusively private corporation—to gain access to outside funding in order to conduct further exploration of the properties, which already show good promise.
Bolen said Hexagon has invested more than $1.7 million over the last seven years in exploration on the site and with the infusion of new capital, that work now can move forward.
The deal also means Hexagon now will be part of a listed junior mining company and subject to the regulations of the market.
Bolen said the deal was made possible partly because of the increase in the price of gold, which has gained more than 30 percent over the last 12 months.
He said he sees that trend continuing at least in the short-term, although there are no guarantees. Much depends on the U.S. economy and events in the Middle East.
“What’s really affecting the price of gold is the weakness of the U.S. dollar against the Euro,” Bolen explained. “My personal view is it [gold] will go higher.”
The Mine Centre properties are some of the most promising in Canada, which is what made the deal so attractive to Solana.
“What is significant is the property at Mine Centre has 100 gold-producing veins that we know of,” said Bolen, adding the quality of the recovered ore is extremely high.
“We’ve been seeing recovered grade of .56 ounces per ton,” he remarked.
Like all such ventures, however, this is a long-term investment. Bolen said there will be no immediate impact on the local economy since the personnel and equipment required to explore the properties will be brought in from outside.
Furthermore, it will be three or four years before they even know what the true potential of the site is.
“We have a good idea of what’s at the surface, but not what’s underneath,” Bolen noted.
Sub-surface exploration is expensive and time-consuming, requiring patience and expertise.
Bolen said the exploration program will be done in two phases. In the first phase, Solana will contribute $260,000 to finance fine cutting, backhoe stripping, and the extraction of field samples.
The second phase will add diamond drilling and de-watering of the shafts. This will involve a further commitment of $400,000.
“By the fall of 2004, these phases should be complete,” Bolen predicted.
Bolen was less certain of the long-term results, however. As someone experienced in the mining industry, he knows better than to count unhatched chickens.
Mining, he admitted, is always risky and not for the faint-hearted. Over the decades, millions and millions of dollars have been poured into the ground all over the world only to disappear forever.
“Mining is the biggest gamble in the world,” Bolen said. “For every 100,000 claims, there might be one producing mine.”