Rubicon Minerals (TSE:RMX, AMEX:RBY) received a vote of confidence in the potential of its Phoenix Gold Project with an agreement that will see larger industry peer Agnico-Eagle (TSE:AEM, NYSE:AEM) invest C$70 million into the company for a 9.2% equity stake (approximately 21.67 million shares).
The non-brokered private placement, which was announced at market close last night, is expected to be completed today at a price of C$3.23 per share. At market close last night shares in Rubicon were trading hands for C$3.06 per share.
Agnico-Eagle has also been granted rights to participate in subsequent issuances to maintain its level of ownership. Perhaps more important to Rubicon, the two companies are also set to negotiate a technical services agreement that would allow Rubicon access to Agnico-Eagle's geological and engineering mining team.
"Our strategic investment highlights Rubicon's good work in the Red Lake Gold Camp. This transaction is consistent with our approach of investing in prospective opportunities in supportive and welcoming mining jurisdictions,” Sean Boyd, Vice-Chairman and CEO of Agnico-Eagle commented.
Rubicon intends to use the capital for additional drilling, studies, testing and other development work at F2 Gold System, which is the core focus of the larger Phoenix Gold Project.
"We are very pleased to welcome Agnico-Eagle, a company with extensive expertise in the development of underground mines, as a strategic shareholder,” David Adamson, President and CEO of Rubicon Minerals commented. “Their investment represents a significant validation of our efforts to date and recognizes the development potential of our Phoenix Gold Project.”
In June, Rubicon Minerals released results of a preliminary economic assessment (PEA) on the F2 Gold System, indicating a cash cost as low as US$214 per tonne of processed material. The report, prepared by AMC Mining Consultants, estimated the F2 System will produce 180,000 ounces of gold per year in the base case scenario over a life of 12 years, with a production rate of 1,250 tonnes per day. This, according to the study, would yield a net present value of $433 million, at a 5% discount rate, and a pre-tax 28% internal rate of return, with a payback period of 3.3 years from the start of production.
These base case results were calculated using a gold price of $1,100 per ounce, the company said, and increase when using a higher, spot gold price. Indeed, using a gold price of $1,500 per ounce, net present value, using the same discount rate, would jump to $933 million, while the pre-tax internal rate of return would climb to a impressive 48%.