SherrGold exceeding production forecasts

The MacLellan gold mine owned by SherrGold Inc. (TSE) is performing so well that recent production forecasts have been improved by the company. Speaking at the annual meeting in Toronto, Stephen Dattels, chairman of SherrGold, says that 1989 gold output is expected to reach 70,000 oz.

In May, the company said that first quarter performance from the mine near Lynn Lake, Man., suggested that 1989 output would reach 65,000 oz (N.M., May 30/88).

The improvement follows a change in mining method to long- hole open stopes which have reduced mining costs and improved grade control. Prior to that change, the mine had been burdened by excessive dilution and high operating costs per oz of gold produced. SherrGold was purchased early this year by Hayes Resources (TSE) from Sherritt Gordon Mines. Dattels is also chairman of Hayes.

Production in April and May was 4,663 oz and 4,899 oz of gold respectively, SherrGold president Peter Goodwin told the meeting. Along with increasing production, costs have been reduced to $325(US) per oz from more than $400 per oz. The objective by year-end is $260 per oz of gold. “We’re confident of exceeding our target of 56,000 oz this year,” Goodwin added.

Dattels noted that when Hayes purchased the mine, a loss of $500,000 per month was being generated. Today, the MacLellan is making a monthly profit of $700,000. Based on these earnings, Dattels forecasts earnings per share of 20 cents in 1988, 50 cents in 1989 and $1 in 1990.

In order to better reflect the new ownership of the company, shareholders approved a name change to LynnGold Resources. Approval was also granted for the purchase, from Hayes, of a small 93-sq-mile parcel of land and the mine and mill assets of the shut down Fox Lake mine, also near Lynn Lake.

The company will be paying one million shares from treasury to Hayes. At a price of $3.60 per share, that is equivalent to $3.6 million. One shareholder queried the chairman about the deal. Concern is that Hayes is getting one million SherrGold shares for assets which will have little if any impact on the company in the near future. The Fox is a depleted copper mine and the claims, although having gold potential, were initially staked for their polymetallic mineral potential.