[miningmx.com] -- GREAT Basin Gold warned shareholders that a deal to sell stockpiled ore from its Hollister mine for treatment at Newmont's Midas mill to earn $26m could be delayed due to a legal dispute with an outfit called Queenstake Resources USA Inc.
Great Basin has agreed with Newmont to sell it 40,000 tonnes of ore containing silver and gold to generate cash as it tweaks its own Esmeralda mill to treat ore from the Hollister mine nearly 500km away. Hollister is in Nevada.
Newmont and Great Basin are in talks about when to send the ore across to Midas. Great Basin CEO Ferdi Dippenaar reckons this could be in the next few days and played down the legal dispute mentioned in the management discussion and analysis (MDA) document for the first quarter.
In a paragraph lacking much detail, Great Basin said it is disputing the validity and terms of a toll milling agreement
with Queenstake in November 2009.
"The dispute related to facts surrounding the entering into of the agreement, the express and implied representations made to the Company [Great Basin] in connection with the agreement, its terms including length, Queenstake's performance obligations under it and whether an effective right of first refusal to purchase the Company's Hollister project was granted," the MDA document read.
"The parties are attempting to resolve their differences through negotiations but there can be no assurances that litigation will not ensue nor what outcomes may be expected from negotiations or litigation," it said.
"The dispute may delay the processing of ore through the Newmont agreement."
Dippenaar told a conference call: "Like all these things we actually do hope, and remain in discussions --that negotiations will be successful. It's typically unnecessary, but it has happened. Hopefully we can resolve it within the next day
Newmont wants to treat the ore in "one campaign" and has to prepare to do so to avoid blending the material with its own. "We are dependent on them saying fine, they're calling for it but we've been in ongoing discussions over the last few days of when the timing actually is," said Dippenaar.
As far as Great Basin understands the matter, resolution with Queenstake is not necessary before sending the ore to Midas. "At this stage we do not expect a delay in that," he said.
Newmont will pay 75% of the estimated value of the ore upfront within five days of delivery at a fixed price of $1,000/oz of gold and $17/oz silver. The outstanding amount will be paid once the ore has been crushed and assayed.
Great Basin hopes to secure proceeds from around 30,000 gold equivalent ounces from the Newmont transaction in the second quarter. A further 20,000 gold equivalent ounces should be recovered at Great Basin's Esmeralda mill and sold during the
At the end of the March quarter, Great Basin had 48,702 tonnes containing 48,500 gold equivalent ounces stockpiled at Hollister.
It's Burnstone project in South Africa is on track to begin production in July, with a vertical shaft completed and refurbished mills freshly arrived on site for installation.