Kria Resources to acquire Xstrata's deposits

SAINT JOHN - Xstrata Zinc Canada is expected to sell two lucrative base metal properties near Bathurst to Toronto-based Kria Resources for roughly $18.5 million in cash and $7 million in shares over three years. Kria said Tuesday it will acquire Xstrata's Halfmile Lake and Stratmat properties, billed as the Bathurst mining camp's largest undeveloped deposits of zinc and lead. "There are not many resources in the world with the size and grades that we have in these two properties," said Kria president and chief executive Mike Hoffman. "We're optimistic about base metal prices in the future, and we have to do the studies, but we think this can be economic and we can bring it into production." The acquisition comes as Xstrata's Brunswick Mine, the largest underground zinc mine in the world, is expected to be phased out by 2010 due to depleted resources, leaving a major void in mining activity in New Brunswick. Currently, mining is a $1.6-billion industry and is expected to be one of two key drivers of the province's GDP growth this year, next to construction. Hoffman said Kria will conduct scoping and feasibility studies over the next 12 to 18 months and, pending favourable results, will build a mine within another three years. Previous studies conducted by Xstrata and its predecessor companies show metallurgy at the Halfmile Lake deposit area is similar to that of the Brunswick Mine, Kria said in a statement. "This looks like a good quality asset with a lot of work that's already been done on it, and we're looking forward to moving it ahead," said Hoffman. "Xstrata will be a shareholder and having their experienced team with us is a major plus." Under the deal, Xstrata has a first right to buy any portion of minerals produced from a mine and can re-purchase a 50 per cent interest in the properties if the tonnage and grades of the property's resources are high. Among other conditions, Kria must also make an additional payment of up to $5 million after five years of production, pending favourable zinc prices. Hoffman said the New Brunswick government's support for mining development and the province's electricity, road, highway, rail and port infrastructure create a favourable location for a new mine. He said the Bathurst region also boasts a highly skilled workforce and, once Xstrata shutters its Brunswick Mine, some of the 800 employees left without a job could be shifted over to Kria's operations down the road. "There are very skilled people in the Bathurst area with regards to mining and the timing works well for us, because as one mine closes, another starts," said Hoffman. Kria is a junior mining company focused on lead, zinc, copper and nickel commodities. In addition to the Bathurst properties, the firm owns a copper-zinc sulphide deposit near Leaf Rapids, Man. Source: nbbusinessjournal