Clifton Star and Osisko joint venture terminated, Osisko pulls out

Clifton Star Resources (CVE:CFO), a junior mineral exploration company, reported on Friday that its joint venture partner Osisko Mining Corp. (TSE:OSK) has pulled out of its Duparquet mining project in Quebec.
Osisko had the right to acquire a 50% stake in the Duparquet project, located in the Abitibi region, in return for $70 million in exploration expenditures from 2010 to 2013, as well as for extending loans to Clifton to fund option payments on the property.
In a statment today, Clifton said that Osisko had presented a budget for the current year that did not meet the minimum spending requirements under the joint venture deal.
According to Clifton, it then asked Osisko for clarification of its intentions, as no drilling been carried out on the property since last summer. Clifton decided to halt the trading of its shares yesterday to address rumours that Osisko had chosen to withdraw from the project, and has since received confirmation, resuming the trade of its stock.
Under the terms of joint venture option agreement, a 30-day notice is required prior to the termination becoming effective.
President and CEO of Clifton, Harry Miller, told Proactiveinvestors that the company views this development as positive, as it gives the Vancouver-based junior control of the operations once more, as well as the ability to drill on property that hasn't been touched in a year.
He said four drills are currently standing by, until technical details with Osisko are sorted, with independent consultants currently evaluating a plan of action for the plus 5.3 million ounce project going forward. More information on the proposals will be released next week, added Miller.
The Duparquet gold project includes the Donchester, Beattie, Central Duparquet, and Duquesne tailings deposits. Just earlier this week, an updated measured and indicated resource was released for Donchester, totaling 1.33 million gold ounces, as well as an additional 302,000 ounces of inferred gold. Beattie's estimate was also revised, and is now projected to host an in-situ inferred resource of 2.77 million ounces.
According to Miller, the estimated ounces on the entire project values Clifton at around $30 per ounce, a severe discount to its Quebec peers, he said, making the company signficantly undervalued.
Miller re-iterated the company's confidence in the property, citing its "ideal location", surrounding infrastructure and historical production. Future potential partners are already being scouted, with a new experienced team set to takeover the operation.
"The company wishes to thank Osisko for the professional manner in which it carried out its obligations under the joint venture agreement and for advancing the project. The company looks forward to the opportunity of improving the projects viability," Clifton said in the statement.
Clifton, with near $16 million in its treasury, plans on drilling through the summer, fall and winter of this year for additional targets, with plans to engage in a pre-feasibility study by next spring. Production is expected in 2015.
Under the terms of the joint venture, if Osisko would decide to withdraw from the partnership, Clifton could decide whether to convert the entire amont of the loan made to the company into common shares of Clifton, at a conversion price of $3.12 per share, plus interest.
Separately, Clifton said that the company is actively looking for a replacement for Miller, who will not be extending his contract at the end of the year. Clifton shares lost 22 cents or 9.28% to $2.15 on Friday afternoon.