Pan American Silver, an established Timmins mine operator, is investing $8 million into Galleon Gold to begin test mining at the West Cache project, outside the city.
Toronto-based Galleon has been making preparations to extract an 86,500-tonne underground bulk sample to gain some valuable intel for an upcoming pre-feasibility study on how to mine the 11,580-hectare gold property, 13 kilometres west of Timmins.
The closure plan for the up-and-coming West Cache project was approved by the provincial energy and mines ministry last April, which includes permission to take the sample. Galleon has not yet made a decision to construct a mine.
Galleon said in a news release that the Pan American funding would be used for surface development surrounding the sample extraction.
The test mining program and the information gathered from the sample will help Galleon in its mine planning, with its future exploration programs, on mining methods and mill processing, and with the gold recoveries. No date was provided in the release as to when the sample will be taken.
In a related side deal, Galleon is making arrangements with Lake Shore Gold, a Pan American subsidy, to process the minerals from the sample at the Bell Creek mill, a 40-killometre haul distance from West Cache.
The two parties have signed a memorandum of understanding and are working toward a definitive toll processing agreement.
The Pan American funding comes in the form of unsecured convertible debt financing, according to an Aug. 13 Galleon news release, that would make Pan American an almost 20 per cent owner in Galleon.
In following securities laws, the transaction is on hold until Dec. 14 and is subject to approval by the TSXV.
Pan American is a major Canadian silver and gold producer with operations in the Timmins mining camp as well as Mexico, Peru, Brazil, Bolivia, Chile and Argentina. The company's Timmins West mine is seven kilometres southwest of West Cache.
In a statement, Galleon Gold president-CEO R. David Russell said Pan American’s investment signals an endorsement of his project.
“Our metallurgical testing indicates processing at the Bell Creek Mill will yield excellent gold recoveries and dovetail well with Bell Creek’s current milling operations. Pan American has a proven template of hauling ore from their Timmins West Complex, located adjacent to West Cache, to their Bell Creek operations. We expect the toll milling arrangement will be beneficial to both companies and we look forward to working with their team to finalize the definitive agreement and progress towards Galleon Gold’s first pour.”
