Apollo Gold Announces Entry into Letter of Intent to Sell Montana Tunnels Mining, Inc.

Apollo Gold Announces Entry into Letter of Intent to Sell Montana Tunnels Mining, Inc.

Apollo Gold Corporation announce that it has entered into a letter of intent with Elkhorn Goldfields LLC (“Elkhorn”) pursuant to which Elkhorn has agreed to purchase all the outstanding capital stock in Montana Tunnels Mining, Inc., an indirect wholly owned subsidiary of Apollo (“Montana Tunnels”), which includes the 50% interest held by Montana Tunnels in the joint venture agreement with Elkhorn Tunnels, LLC (an affiliate of Elkhorn), the Diamond Hill mine and mill and any and all ancillary assets for a purchase price of US$9 million, payable as described below. The Montana Tunnels mine has been on care and maintenance since April 30, 2009.

R. David Russell, President & CEO of Apollo, and Patrick Imeson, Chairman of Elkhorn Tunnels, LLC, jointly state, “The working relationship as joint venture partners at Montana Tunnels has been a great working relationship over the last 3.5 years and also financially positive for both companies.” Mr. Imeson further states, “Elkhorn Tunnels has good synergies with other owned mining assets located near Montana Tunnels, which will add to its ultimate financial plan. Elkhorn Tunnels looks forward to reinitiating the Montana Tunnels mine in the near future.”

The terms of the letter of intent provide for staged cash payments in the aggregate amount of US$5 million payable over a 7-month period, of which a non-refundable deposit of $250,000 was paid on or about October 19, 2009. The payment schedule provides for two additional non-refundable payments of $250,000 each to be paid no later than November 25, 2009 and December 25, 2009 (the “Non-Refundable Payments”), followed by three separate payments of $250,000 payable on January 25, 2010, February 25, 2010, and March 25, 2010, a payment of $1,500,000 payable on April 30, 2010 and a payment of $2,000,000 payable on May 31, 2010 (collectively, including the Non-Refundable Payments, the “Cash Purchase Price”). The letter of intent provides that any missed scheduled payment will result in the termination of the letter of intent (unless otherwise negotiated) and retention by Apollo of the Non-Refundable Payments. The balance of the purchase price in the amount of US$4 million is payable through a 4% net smelter royalty (“NSR”) with payments commencing coincident with the start of production and to be paid from production until such time as a total of US$4 million is paid. Upon full payment of the Cash Purchase Price, title to the capital stock of Montana Tunnels will be conveyed to Elkhorn, subject to the NSR. In addition, Apollo and Elkhorn have agreed that they will review other property owned by Montana Tunnels (outside of the current open pit operations and any expansions of the open pit, including the “M-Pit” 1) for future exploration possibilities and that, at Apollo’s option, the parties may form a joint venture to pursue such exploration possibilities.

Based on the foregoing, the parties have agreed to move forward with the preparation of definitive transaction documents to finalize the transaction.

Share this post