Wheaton agrees to sell George Lake, slims boardroom

Junior gold producer Wheaton River Minerals (WRM-T) has inked a letter of intent to sell its George Lake gold project in Nunavut, to Kinross Gold (K-T), which already holds an option to earn a 70% stake in the project, which it also operates.

Kinross can acquire the property outright by issuing 4 million of its shares to Wheaton. The transaction is subject to completion definitive documentation and regulatory approvals, and is expected to wrap up by Dec. 14, 2001.

Under a 1999 option deal, Kinross has been earning a 70% stake, which it could do by spending $20 million by the end of November 2004. To date, the company has spent $6 million, including 11,000 metres of diamond drilling during 2000. Kinross’ work has focussed on the Goose Lake deposit, where an indicated and inferred resource of 3.9 million tonnes grading 12.5 grams gold per tonne has been outlined.

Kinross recently began a 3,000-metre drilling program focused on a possible down-plunge extension of the Goose Lake deposit, to between 400 and 500 metres below surface. Deep intersection so far include 13.3 metres (starting at 320 metres below surface) grading 23.6 grams gold per tonne. Two other intercepts averaged 33.7 grams over 2 metres and 22.4 grams gold over 2.8 metres.

Goose Lake is the largest of six deposits at George Lake. Combined, the five other deposits host a total of 3.9 million tonnes averaging 10 grams gold, in both indicated and inferred categories.

Meanwhile some significant changes are sweeping Wheaton’s boardroom. The company’s CEO Ian McDonald is resigning, effective Sept. 30, 2001, but will remain on the company’s board of directors. Kerry Knoll, Peter Tredger and Dunham Craig will relinquish their respective roles at the end of September. Knoll will also resign his position as a director. John Kalmet, Wheaton’s president and COO will remain until the end of October.

Effective October 1, Ian Telfer, currently a director, will take over as the company’s CEO. Teffler says, "The new streamlined Wheaton River is in an excellent position to become one of the key consolidators in the mid-tier of the gold industry."

Wheaton says the changes in management are being made in conjunction with the closure of its Golden Bear mine in northwestern British Columbia and the agreement to sell the George Lake project. The reduction in management is expected to cut administrative costs in half.

In August, Wheaton announced that with mining and crushing completed at its 89%-owned seasonal Golden Bear mine in northwestern British Columbia, it would turn its attention to becoming a mid-tier gold producer.

Decommissioning and re-vegetating at Golden Bear are underway. Production from final leaching at the mine is expected to produce about 33,000 oz. of gold, beating earlier 2001 production estimates by 10%, and making it five better-than-expected years in a row.

During its life, the mine produced more than 265,000 oz. of gold at a cash cost of about US$170 per oz. Feasibility estimates pegged lifetime production at 215,000 oz. Production peaked in 2000 at 94,000 oz.

Wheaton’s remaining assets include the Bellavista heap-leach deposit in Costa Rica, where the company awaits a rebound in gold prices before forging ahead. The project has been granted various tax and customs advantages, but Wheaton wants to hedge a significant portion of production at no less than US$350 per oz. before moving forward. This would require a spot price around US$300 per oz. Capital costs are pegged at US$28 million.

The company also has a 89% interest in the Red Mountain deposit in northern British Columbia. A feasibility study there is focusing on the viability of relocating the Golden Bear mill to process a high-grade core of 700,000 tonnes grading 12 grams gold over 4-5 years.

Wheaton will close its Toronto office and move its headquarter to the existing operations’ office in Vancouver.

Wheaton currently has about $25 million in cash.