September 22, 2009 / 5:12 PM / 9 years ago

UPDATE 1-Abbastar,Denison Mines sign option deal on gold project

* Sign deal on Talbot Lake gold project * Abbastar has right to earn 100 pct interest in project

Sept 22 (Reuters) - Canada’s Abbastar Resources Corp ABA.V said it had signed a deal that will give it the option to acquire an 100 percent interest in Denison Mines’ (DML.TO) Talbot Lake gold project in northern Ontario.

Shares of Abbastar Resources fell 17 percent to 25 Canadian cents, while those of Denison Mines were up nearly 10 percent at C$2.25 in Tuesday afternoon trade on the Toronto Stock Exchange.

Under the deal, Abbastar said it may earn an initial 70 percent stake by incuring expenses of $4 million over five years. Abbastar may opt to earn an additional 30 percent stake by paying $250,000 and expending an additional $3 million on the project on or before Sept. 30, 2017.

If Abbastar elects not to earn the additional 30 percent, a 70-30 joint venture of Abbastar and Denison will be formed and governed by a committee comprising two people from each company.

“Acquiring such a significant high grade gold asset in this strong precious metal market bodes well for the future of Abbastar,” Chief Executive John Good said in a statement.

“Given the strong market demand for gold, the Talbot Lake gold project has become a very important and valuable asset in the growth of Abbastar,” he added.

The Talbot Lake project, which is located within the gold producing Uchi Subprovince of northwestern Ontario, has produced in excess of 40 million ounces of gold, Abbastar said. (Reporting by R. Manikandan in Bangalore; Editing by Maju Samuel)

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