First Class Metals plc (FCM.L) this morning announced the acquisition of the Sunbeam project in Ontario, Canada which encompasses three past producing gold mines (1898 to 1905) within a total licence area of 48 sq. km (104 single cell claims).
Previous estimates suggest there could be 50,000 to 70,000 tonnes of ore at a grade of 13.0 g/t gold remaining in the old workings, with the structure hosting the Sunbeam Mine open in all directions, allowing for a concerted focus for future exploration. The property also appears to offer considerable gold exploration upside within the wider licence area, given the exploration results from Nuinsco, who reported astonishing grades of 93.3 g/t gold over 0.44 metres from drilling work near the permit area being acquired by FCM. Limited modern exploration has been conducted over the licences.
The project acquisition consideration is an initial C$700K, along with C$750K in exploration-related expenses over three years, certain milestone payments up to C$500K if a resource is defined and a net smelter royalty of 1%.
Sunbeam’s purchase is being financed through the raising of a 12-month – £1m convertible loan note (converting at 12p, 15p, 19p and 22p), with 1 for 1 warrants issued on each drawdown exercisable between 20p and 30p, and small equity placing at 12p to raise £80K, with attached warrants exercisable at 20p
Comment:
This is a sizeable and important acquisition for First Class Metals to make, which adds a later-stage project to an existing portfolio of earlier-stage resource interests at the discovery and pre-discovery points.
The bonanza-style grade discovery of 93.3 g/t gold made by Nuinsco on a nearby claim area recently shows the project’s very high prospective potential. It also underlines the continuing execution and shrewd pursuit by the management of its ‘Close-ology’ exploration approach.
It is welcome, to see that the initial acquisition consideration and exploration costs in the next year or two are financed through the CLN issue, which has been structured in an intelligent way to minimise future dilution, given the upward conversion prices to 22p.
We continue to recommend the shares as a ‘Buy’ at 12.75p and suggest investors position themselves in the stock before any potential bonanza-style grades similar to Nuinsco’s find of 93.3 g/t gold are replicated on First Class Metals’ own permit area.
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