Marigold will give Rayrock 13,0-00 more ounces of gold

The decision to go ahead with the Marigold gold project in central Nevada will bring Rayrock Yellowknife Resources’ (TSE) net gold production to around 50,000 oz a year, the annual meeting was told.

The Marigold mine, expected to produce from 55,000-60,000 oz gold per year, will add about 13,000 oz to the Rayrock account, said President David Crombie. The balance comes from the company’s interests in the Dee, Pinson and Preble gold mines, also in Nevada.

The Marigold mine is a joint venture in which Rayrock, Placer Dome (TSE), and Lacana Mining (TSE), each hold a 23.3% direct interest, with Rayrock as operator.

No decision has yet been made on whether the Marigold will be a heap leach operation, or whether a mill will be built, Crombie said. But he indicated that a mill will “probably” be built for the mine, which boasts about 12 million tons in four separate deposits.

A 1,200-1,500-ton mill was being considered, should the operation go that route. Together with tailings disposal, it would cost about $8-9 million. Total development cost would be around $39 million, if a mill is built.

Detailed engineering work is being done now, Crombie said. Stripping of waste, with overburden of up to 150-ft depth, will be one of the biggest jobs at the site. Five 120-ton trucks and a large shovel have been purchased for this job.

The Rayrock president said financing for the project is under discussion, But it will most likely be via a gold loan, he said, in which gold is borrowed then sold into the market, using the mine production to repay the loan.

At the Dee gold mine, at the north end of Nevada’s prolific Carlin belt, Rayrock (as operator, 29.3% interest), has started a deep drilling program below the pit bottom, David Hutton, vice-president exploration, told the meeting.

The hole from the pit bottom, he said, is a “real wildcat target,” and is just one of three areas in which deep drilling is planned.

An area to the southwest of the pit has the most potential to add to reserves, Hutton said.

The Bellavista gold project in Costa Rica, a joint venture with Midland Gold Corp (VSE) and Westlake Industries (VSE), should go to the feasibility study stage later this year. The property has proven and probable reserves of more than 10 million tons, grading 0.05-0.07 oz gold per ton. Drilling is in progress.

A drill program is also being started on the Chilean copper-silver Ivan project, where Rayrock is looking for about 3-4 million tons of reserves, Hutton said. Indicated reserves are 2.1 million tons grading 4.86% copper, and 0.50 oz silver. At the present price of copper, this would be a profitable operation, he said.

Hutton said that in total Rayrock this year will manage some $10 million in exploration spending, about $4 million of which will go directly to Rayrock’s account.

Asked whether the company would be doing more exploration in Canada, he said it was in fact building its activities in Canada, but that Rayrock has “been getting more mileage from our U.S. exploration dollar.”

Rayrock had earnings of $1,111,000 or 12 cents a share in the first quarter of this year, Crombie told the meeting, compared with earnings of $1,128,000 or 11 cents a share in the similar period last year. Revenue was $8,147,000 in the latest period, against $8,150,000 last year.

Gold sales in 1988 were 7,642 oz at an average price of $457(US) an oz, compared to 7,583 oz at $406 per oz in the 1987 first quarter.

As at March 31, Rayrock had working capital of $43.6 million.