Gold Canyon is a former mine in the Gold Bar district in Nevada's Battle Mountain-Eureka trend and is surrounded by claims owned by McEwen which include its Gold Bar mine that commenced production at the start of the year.
"Selling Gold Canyon appreciably increases Fremont's financial flexibility. It gives us the ability to generate a significant non-dilutive capital infusion, through the sale of any McEwen shares, which will be helpful as we evaluate opportunities that can add immediate and long-term shareholder value," said Fremont CEO Blaine Monaghan.
McEwen's Gold Bar development project includes four satellite pits of the original Gold Bar mine: Gold Pick, Gold Ridge and two pits at Cabin Creek. Gold Canyon is about 900m from the Gold Ridge pit and is part of the same mineralised system and could provide additional sources of mineral as McEwen seeks to ramp up production from Gold Bar.
Drilling by Fremont earlier this year intercepted a previously unrecognised mineralised zone about 60m below the pit floor.
Fremont has an option to earn a 100% interest in Gold Canyon by making payments totalling US$802,500 to Ely Gold Royalties over a five-year period. The option will be subject to a 2% net smelter return royalty, which can be reduced to 1% for $3 million.
First gold was poured at Gold Bar in February with commercial production achieved in May. The company's 2019 guidance for the mine is 42,000oz as it aims to produce at 62,000oz a year for seven years. It hosts a measured and indicated resource of 819,000oz and inferred resources of 201,000oz.
Shares in McEwen Mining (TSX:MUX) are trading at C$2.44, valuing the company at $883 million.
Shares in Fremont Gold (TSXV:FRE) are trading at C9¢, valuing the company at $5 million.