A mineral exploration company trying to develop a gold reserve in northern Manitoba it believes could become "Canada's next great gold mine" has landed financing that could see it through the development process.
Mega Precious Metals Inc. has signed a deal with Australian-based Pacific Road Resources Fund that could see the mining-focused fund invest as much as $40 million in the Thunder Bay-based exploration company.
The project in question is a gold resource called Monument Bay, located about 60 kilometres north of Red Sucker Lake, which is about 700 kilometres northeast of Winnipeg. The company's exploration work to date estimates the resource could contain 3.6 million ounces of gold.
In February, Mega announced there may also be tungsten deposits. Tungsten is a rare metal with strategic value. Much of the world's current supply comes from China.
Glen Kuntz, CEO of Mega, said the arrangement with Pacific Road is the kind of deal junior mining companies dream about.
"It has been a long time coming," Kuntz said.
The site has been explored by several different companies since the 1960s. None of the previous exploration took it as far as Mega has.
Pacific Road's arrangement is to make four staged investments starting with an initial tranche of $3 million in the form of a convertible debenture. If and when the bonds are converted -- at 11.2 cents per share -- it would give Pacific Road 19.9 per cent of the equity in Mega. Pacific Road is not obliged to make the additional investments but each would increase its stake in Mega.
The company's share price closed down two cents to 10 cents on Thursday.
Kuntz said if Mega meets Pacific Road's criteria, he's confident more investments will follow.
"It is very much staged," he said. "It's like a 5,000-foot runway where you build 1,000 feet at a time."
The initial funding will go toward producing a preliminary economic assessment and a pre-feasibility study, all stages along the way for a mine to justify the various permits it will require as well as proving its economically viability.
"This will take them right through to a bankable feasibility study," said an industry official.
That's the point where construction decisions are made.
Pacific Road has one other Canadian project in its portfolio. An industry official said a firm such as Pacific Road enters into an arrangement like this only after many conditions are met, including the attractiveness of the jurisdiction.
Kuntz said Pacific Road did rigorous due diligence and is aware Mega is in a long-standing dispute with Red Sucker Lake First Nation. Monument Bay is on the First Nation's traditional land.
Although the company and the First Nation signed a memorandum of understanding (MOU) a couple of years ago, relations soured earlier this year and the band tried to evict Mega from the community. The company sought a court injunction against the eviction, which still stands.
The two sides clearly have different views on the state of the relationship.
"The relationship with RSLFN is in a pretty steady state," said Kuntz.
He said the company has good relations with members of the community who work at the camp and believes the chief and council are interested in taking part in a newly established provincial mining council.
Red Sucker Lake First Nation Chief Les Harper said relations with the company are bad.
"They have breached our MOU," said Harper. "They have broken their promises."
Harper and other members of his band council were meeting with Mineral Resources Minister Dave Chomiak on Thursday afternoon.
Harper said the meeting has been set up to discuss issues regarding the court injunction.