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By Shane Lasley
North of 60 Mining News 

Mantra Mining emerges as spin-out vehicle

NovaGold swaps its non-core Alaska properties for 22 percent interest in junior; new Alaska player aims to advance Ambler

 

Last updated 9/28/2008 at Noon



Mantra Mining Inc. became a major mineral property landholder in Alaska literally overnight when it agreed to purchase more than 485,000 acres of mining claims from Novagold Resources Inc. and Rio Tinto PLC.

In a C$20 million deal Mantra bought NovaGold's interest in six western Alaska projects including its option agreement to earn a 51 percent interest in the Ambler project about 290 kilometers, or 180 miles, southeast of the Red Dog zinc mine.

Mantra has agreed to pay $29 million to Rio Tinto, the owner of the Ambler property, by issuing 3.125 million of its common stock, valued at C$5 million, to the major over a 24-month period after the transaction closes. The junior will make two additional cash payments of $12 million each.

When these two deals close, the Vancouver B.C.-based junior will hold 100 percent interest of a major portion of the precious-metal-rich Ambler volcanogenic massive sulfide belt on the southern slope of the Brooks Range in Northwest Alaska.

Deal makes NovaGold majority shareholder

To purchase NovaGold's option to earn 51 percent interest in Ambler, subject to completing about $7 million in remaining earn-in spending, Mantra agreed to pay C$15 million in common shares of its stock. When the deal closes, Mantra will issue NovaGold 3.125 million common shares, valued at C$5 million, an additional 6.25 million shares are to be paid within 15 months of the initial closing.

In addition to the Ambler property, Mantra has agreed to acquire NovaGold's interest in the five other mineral properties, totaling about 397,560 acres, in western Alaska for C$5 million by issuing to NovaGold another 3.125 million common shares of Mantra stock.

"Although it is listed as a sale from an accounting viewpoint, we really view it more as a strategic investment in Mantra of our base-metal assets," NovaGold President and CEO, Rick Van Nieuwenhuyse told Mining News, "The Ambler project and our other early-stage, largely base-metal projects have been placed into Mantra, NovaGold becomes the largest shareholder of Mantra and it will be the same team working on the projects."

When the deal closes, NovaGold will own about 6.25 million common shares of Mantra and will receive an additional 6.25 million shares within 15 months of the date of initial closing. A total of about 12.5 million shares will give NovaGold around a 22.64 percent ownership of Mantra.

Mantra has named Nieuwenhuyse, Full Metal Minerals President Rob McLeod, and former Cook Inlet Regional Corp. Vice President Jerry Booth as company directors.

Focus on Arctic

The Ambler project includes the Arctic deposit, one of several known volcanic massive sulfide deposits found along the 110-kilometer, or 68-mile, strike length of the Ambler schist sequence of the southern Brooks Range.

The focus of NovaGold's exploration since it signed the option on the property in 2004 has been on the Arctic deposit, which is covered by 17 patented mining claims. Results of two exploration holes of the junior's 2007 drill program suggest the potential of significant expansion of the Arctic deposit.

Mantra has agreed to reimburse NovaGold for all direct spending, up to $2 million that the company or its affiliate incurred on the Ambler project, from June 1, up to the date the acquisition closes. NovaGold's CEO said the company did some confirmation drilling on the main Arctic deposit during a modest 2008 exploration program.

Mantra will pick up the exploration where NovaGold left off.

The company's primary focus will be on the Arctic deposit where it plans to complete additional in-fill drilling in 2009 to further upgrade the resource in support of a pre-feasibility study, Mantra President Raj Chowdhry told Mining News.

NovaGold has agreed to provide the labor for Mantra's 2009 exploration program.

In February NovaGold released a NI 43-101 technical report in which SRK Consulting Inc. estimated an indicated mineral resource of 16.8 million metric tons of ore at the Ambler project, containing 1.5 billion of pounds copper, 2.2 billion pounds of zinc, 350 million pounds of lead, 500,000 ounces of gold and 32.3 million ounces of silver. In addition, according to the report, the property has inferred mineral resources of 11.9 million metric tons of ore containing 900 million pounds of copper, 1.3 billion pounds of zinc, 210 million pounds of lead, 0.3 million ounces of gold and 32.3 million ounces of silver.

"The Ambler Project ranks as one of the largest and richest undeveloped VMS deposits in the world, based on the SRK resource estimate on the Arctic deposit containing nearly 30 million (metric tons) grading in excess of 8 percent copper equivalent," Chowdhry said.

The report, which SRK is currently updating for Mantra, recommends an additional $3.1 million of exploration in support of a pre-feasibility assessment for Ambler.

Mantra plans to begin engineering and metallurgical studies as well as environmental baseline work recommended in the SRK report in order to scope out a development plan and preliminary economic assessment report for the Arctic deposit.

Expanding horizons in Alaska

Chowdhry told Mining News that the company is looking at other projects in Alaska. He said he was pleased that Alaskans voted down Ballot Measure 4, and he wants to know more about the attitude in the state toward mining.

"I am interested in a few other larger projects in Alaska as well, and if the mood is good, then it is a good time to step in and see if we can expand our horizons in Alaska," Chowdhry added. "The new mantra should be; we should carry on as NovaGold has done. We should go down the same road as NovaGold is going, to see what we can accomplish."

 

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