Columbus Gold (CGT.V) has announced it granted Nordgold an option to earn a 50.01% interest in the Paul Isnard property by making at least $30M in exploration expenditures within 3 years and completing a Bankable Feasibility Study. The agreement also stipulates Nordgold has to pay Columbus $4.2M by May 2014 so Columbus can buy back an underlying royalty on the project.
We are cautiously optimistic about this deal, as we think Nordgold will bring in a lot of technical expertise, and there’s no way Columbus would have been able to cough up $30M in exploration expenditures and $4.2M for the royalty purchase in a stand-alone scenario. As such, we are confident the Paul Isnard project will now grow at a faster rate than we previously thought. The project currently has a resource estimate of approximately 5.4 million ounces of gold, but there still is considerable exploration potential.
On top of that, Columbus Gold is now a real takeover play, as Nordgold (previously Severstal Gold) has almost always bought out its minority partners (for instance High River Gold last year). We expect Nordgold to make an offer to acquire Columbus Gold further down the road.
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Disclosure: The author holds a long position in Columbus Gold. Please see our disclaimer for current positions.
