News

December 04, 2008

Geologix Highlights The Full Paradox Of These Markets As Drilling Success Becomes A Potentially Fatal Weakness

By Rob Davies

Mining deals come in all shapes and sizes. And when negotiations have been completed it is often hard to know who has got the better end of the trade. One cliché holds that the best deals are ones in which both parties feel short-changed. In exploration the buyer usually aims to get as much metal out of it as possible. But in the unusual case of Geologix Explorations the company may be wishing that actually there was a little less metal involved - the deal it negotiated on the San Agustin property in Mexico with vendor Silver Standard now looks likely to backfire simply because the exploration results have been so good.

The story goes like this: in 2006 Geologix agreed to option the property by spending US$2 million on the San Agustin property, a spend which was mandated to include 15,000 metres of drilling. The option would be exercised by the payment of US$20 for each ounce of gold and US$1.00 for each ounce of silver delivered up in the resource statement at the completion of the programme. Not a bad deal you might think. That is until you look at the resource statement of 6th November which disclosed that...