Gowest Gold Ltd. on Jan. 23 said it entered a nonbinding letter of intent with Northern Sun Mining Corp. to jointly own and operate the latter's Redstone mill in Ontario, which has a capacity of 1,500 tonnes per day of ore.
The companies started negotiating the deal in June 2016 to use the mill to process material from Gowest's nearby Bradshaw gold deposit.
Gowest will pay C$11.5 million in two installments to purchase a 50% stake in a joint venture company to be established by Northern Sun, which will transfer all the Redstone mill assets to the new entity.
The Redstone mill is just south of the Bradshaw deposit, which forms part of Gowest's North Timmins property, and will meet anticipated ore processing requirements.
Upon closing the transaction, Gowest will pay a first installment comprising about C$5.8 million in units with a deemed value of 15 Canadian cents each. Each unit will comprise 1 common Gowest share and 0.5 of a common share purchase warrant, with each whole warrant exercisable at 16.5 cents per share for 18 months following closing.
A second installment of C$5.8 million will be due on or before the first year anniversary of closing and will be settled either in cash or shares at Northern Sun's option.
The joint venture company and Gowest plan to enter deals, on market terms, allowing Gowest to process ore produced from a proposed 30,000-tonne bulk sample. The joint venture will also reserve an average of 500 tpd capacity for Gowest's future ore processing.
The closing of the transaction is subject to, among other things, definitive agreements expected to be completed by Feb. 28.