Claude buoyed by gold and gas (March 05, 2004)

Stronger gold and natural gas prices helped Saskatoon-based Claude Resources (CRJ-T) cruise to a profit in 2003.

For the year, Claude reported net earnings of $1.9 million (4 per share) on gold revenues of $25.8 million and oil-and-gas revenues of $9.4 million. This compares with 2002’s loss of $1.6 million (3) on gold and petroleum revenues of $20.4 million and $7 million, respectively.

Cash flow from operations, before adjustments, more than doubled to $7.8 million between the two periods.

From its underground, high-grade Seebee gold mine in Saskatchewan, Claude sold 50,800 oz. gold in 2003, up from 41,500 oz. a year earlier as a result of successful mine development between the 510-metre and 650-metre levels.

This lower development was made possible by extending Seebee’s shaft from the 395-metre level to the 600-metre level — a project completed in late 2003 at a cost of C$2 million.

Claude’s average realized gold price in 2003 was C$508 (US$362) per oz., up from C$490 (US$312) per oz. in 2002.

However at the same time, and despite the higher volume, total cash operating costs rose slightly to US$253 per oz. in 2003 owing to the stronger Canadian dollar.

Production in 2003 from Claude’s oil and natural-gas properties in the Prairies held steady at 224,000 barrels of oil equivalent (boe), but average prices realized soared 37% to C$38.73 (US$27.60) per boe.

Despite these overall positive trends, Claude’s fourth quarter was a little shaky, with the company posting net earnings of $319,000 on revenues of $8.4 million, off from the $1.7 million earned on $9.8 million in the fourth quarter of 2002.

Of note, fourth-quarter gold sales volume dropped 1,500 oz. to 13,500 oz., and petroleum production slipped 6%, too.

Claude’s balance sheet remains strong, with no long-term debt and limited exposure to gold-derivative contracts.

The company closed out 2003 with 55.3 million shares outstanding, generating a market cap of C$105 million at presstime.

On the exploration front, Claude has released interim results from its Madsen high-grade gold project in the northwestern Ontario’s Red Lake camp, where Placer Dome (PDG-T) is working under an option agreement struck with Claude in 2000. Placer Dome can earn a 55% interest in Madsen by spending C$8.2 million before year-end and delivering a bankable feasibility study over the following two years.

As operator, Placer Dome drilled 49 holes at Madsen in 2003 totalling 29,047 metres. This included 2,313 metres in five drill holes and two wedge-off holes of infill work on the Treasure Box target within the north Russett Lake area.

Treasure Box lived up to its name, producing high-grade gold intercepts within a series of individual, narrow veins generally less than 0.30 metre wide.

Claude says that, with few exceptions, gold values appear confined to quartz-tourmaline veins with nuggety visible gold and pyrrhotite.

Within a 25- to 50-metre corridor, individual veins are separated by brittle metabasalt ranging from 20 cm to 10 metres.

The wallrock, though pervasively altered, returned only geochemically anomalous gold values.

A new round of drilling on Treasure Box began in the new year, and will include 12 drill holes totalling 3,400 metres.

Placer is trying to better understand Treasure Box’s relationship to the main Madsen mine trend, which has a ductile, shear-hosted, sulfide-replacement style of mineralization.

At last count in 2000, the main Madsen system held indicated resources of 790,000 tonnes grading 12.3 grams gold per tonne and inferred resources of 740,000 tonnes at 8.6 grams gold.

Meanwhile in Manitoba, Claude has signed an option agreement to earn a half stake in Pioneer Metals‘ (PSM-V) 100%-owned, 630-ha Nokomis Lake gold property, which is situated just north of the latter’s wholly owned Puffy Lake gold mine, about 70 km northeast of Flin Flon.

Claude can earn a 50% working interest by paying $35,000 in cash and spending $215,000 on exploration before August. The property is subject to an underlying 2% net smelter return royalty.

Claude describes Nokomis as a shear-related, tonalite-hosted lode gold system with a historical (i.e. non 43-101 compliant) resource of 349,110 tonnes grading 6.10 grams gold, including a near-surface resource of 100,000 tonnes exceeding 13 grams gold.

Plans for Nokomis in 2004 include line-cutting, geological mapping and sampling over the known mineralized zones, and stepout diamond drilling.Based out of Vancouver, Pioneer also owns the Bonito gold-silver project in New Mexico and the Grace gold-copper project in B.C.