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Great Basin Gold buys Esmeralda mill and mine in Nevada for US$2 mln

Great Basin Gold Ltd said it signed an agreement to buy Metallic Ventures Gold Inc’s Esmeralda processing plant in Nevada, inclusive of the Esmeralda mine and infrastructure, for US$2 million.

The mill can currently process up to 350 tons per day. Re-commissioning and reconfiguring of the mill is expected to take at least 120 days. Further upgrades to improve the recovery of gold and expand the mill capacity will be evaluated and implemented during this phase at an estimated cost of approximately US$8 million. Operating costs of the mill are estimated to be US$40 per ton.

The company's decision to purchase the Esmeralda mill follows an extensive evaluation process whereby various milling options for its Hollister project were considered. Esmeralda is approximately 290 miles from the Hollister project with 80 percent of that distance over paved interstate roads. Transport costs from Hollister are estimated at US$55 per ton.

The Esmeralda Mill was operational until 2004 when it was placed on care and maintenance. The Mill processes ore through a carbon-in-leach (CIL) process with tailing deposition into an adjacent impoundment. Other features of the mine include crushing facilities, stockpile areas, waste rock facilities, roads and other miscellaneous areas. MVG holds the required permits that allow for the operation of the mining, milling and associated crushing activities.

One of the principal conditions to the transaction is the transfer of all permits required to operate the mill and associated facilities. The facility has a reclamation liability of approximately US$2 million which requires a bond of that amount be put in place by the company.

The Esmeralda property has mineral resources, and these resources will be the subject of a detailed review and estimate that is NI43-101 compliant. Preliminary observations and analysis of data from the underground workings suggest that a high grade epithermal vein - type target, not dissimilar to the Hollister, is present.

At Hollister, good progress is being made with the underground development. Trial stoping continues to prove valuable in allowing for a better understanding of the vein structures and mineralization, and the future mining conditions. At this stage, it appears that the strike length of the whole vein system will probably be extended. Initial results of the trial mining have indicated that the current mineral reserve, which does not take into account these potential vein extensions, will be reduced, as some of the veins cannot be mined economically.

With early trial stoping results and additional infill diamond drilling that has been completed, the Hollinger's resource model is being updated for release in the first quarter of 2009.

Exploration at the Hatter Graben discovery, 1 mile to the east, has delivered good results to date and is exhibiting similar high grade mineralization and structure to the Hollister Block; however it is too early for resource estimates, Great Basin Gold said.

President and CEO Ferdi Dippenaar said: "After careful consideration and independent assessment of the Esmeralda Mill and mine, we are sure that this acquisition represents a strategic advantage for Hollister and will provide the company with control over our processing capacity as well as reduced cash costs. At a total of US$95 per ton, the milling costs will be significantly lower than the 20 percent revenue royalty, which is based on the gold price, currently paid for toll milling operations.

“The company is in advanced negotiations towards securing a senior secured note debt financing with warrant coverage to conclude the Esmeralda acquisition and contribute to the equity funding requirements of its Burnstone project in South Africa," he added.