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Rambler Metals secures gold off-take for Ming mine

Rambler Metals & Mining (TSX-V: RAB, AIM: RMM) has entered into an agreement with Sandstorm Resources Ltd. (TSX-V: SSL) to sell a portion of the Ming copper-gold mine’s ‘life-of-mine’ gold production. Under the terms of the deal, Sandstorm will make staged upfront cash payments totalling US$20m, the first US$5m is available immediately.

“The agreement represents an attractive source of funding for Rambler allowing us to bring the Ming mine into production while still giving Rambler shareholders full upside exposure to 100% of the copper, silver and the majority of the gold production at the Ming mine", Rambler CEO and president George Ogilvie commented.

Upon completion and delivery of a satisfactory NI43-101 feasibility study, a second instalment of US$2m will be paid to Rambler. The company expects to complete the study in the second quarter of 2010. The remaining US$13m, will be paid once the Ming mine has been awarded all necessary permits, anticipated in Q3 2010. The company noted that Casimir Capital LP acted as Rambler’s agent in the negotiation of the deal and consequently Casimir will receive a 4.5% cash commission with each Sandstorm payment.

In return for the upfront payments, Sandstorm will be entitled to 25% of the Ming mine’s first 175,000 ounces of payable gold, and 12% of all payable gold thereafter. Initially the agreement will last for 40 years, and Sandstorm has the right to renew the deal for successive 10 year periods thereafter.

The Ming mine is located on Newfoundland and Labrador's Baie Verte Peninsula. Ming is Rambler’s primary focus, and it was initially a copper play, however, an extensive exploration programme conducted by Rambler over recent years has increasingly identified elevated gold grades.

In February 2009, a NI 43-101 compliant resource update, showed a total measured and indicated resource of 3.651 million tons grading 2.21 percent copper and 1.37 grams per ton of gold. Subsequently Rambler has had an increased focus on the potential for significant gold deposits in and around the surrounding area.

2010 promises to be a big year for Rambler as it continues to advance the Ming mine back into production.  Last month, the company hired key engineering personal, filling the positions of chief mine engineer and senior mine engineer for the project.

The company’s recent acquisition of the nearby Nugget Pond mill also represents a significant development. The Nugget Pond facility is a fully operational gold hydrometallurgical mill, which includes a gold concentrator. The facility will process base metal sulphides from Rambler’s Ming mine through the addition of a copper flotation circuit, as well as process the 'free gold' that exists in the Rambler geological system. Rambler acquired Nugget Pond from Crew Gold Corp (TSX: CRU, OTCBB: CRUGF) for C$3.5 million.

Whilst Nugget Pond was primarily acquired as a processing facility, the company recently said it was now investigating the gold resource potential within the 140L mining lease on the property which hosted a producing gold mine during the 1990s.

The Nugget Pond gold mine began commercial production in April 1997 at a milling rate of 350 mtpd (metric tonnes per day) and was later optimized to 500 mtpd.  After four years of profitable operations, production ceased in August 2001 due to depleting reserves and depressed gold prices. During operations the deposit produced a total of 168,748 ounces of gold from 487,765 tonnes of ore grading approximately 10.76 g/t.

Upon review of the digital database, which was compiled during the Nugget Pond mine’s closure, Rambler has estimated an exploration target of 13,000 to 15,000 ounces of gold contained within 50,000 to 66,000 tonnes grading at 7 to 9 grammes per tonne of gold. Rambler cautioned, however, that the estimated tonnes and grade are conceptual in nature and are based on previous diamond drilling results. Since the initial closure of the mine limited exploration has been completed on  the property and Rambler said there is a risk that further exploration will not result in the delineation of a new resource.

Rambler is also taking proactive steps to explore other potential prospects in the area, in September 2009 the company began evaluating the Deer Cove and Corkscrew/Big Bear gold prospects on the Baie Verte peninsular.

According to London-based stockbroker Seymour Pierce, the off-take agreement represents a big step towards securing the financing required to bring the Ming mine into production. The deal effectively provides, interest free, at least 60% of the outstanding project funding required, the analyst said.

The stockbroker rates Rambler as a ‘buy’ targeting 51p per share. Furthermore, Seymour Pierce said it has yet to factor in any gold production from the Nugget Pond resources or any of the local JVs.

Similarly natural resource focused broker Ocean Equities also had a positive outlook for the company following this morning’s update. According to Ocean Rambler has now removed its largest hurdle and will now be off and running towards production in early 2011. The analyst said it has a 6-12 month price target of £0.75 per share.