Borealis to place Fat Lake assets into new subsidiary

Calgary-based Borealis Exploration (ASE) says it plans to form a new subsidiary before bringing its Fat Lake gold project into production next year.

To be named Borealis Fat Lake Mine Ltd., the new entity is scheduled to be capitalized at 25 million shares. Equity will consist of Fat Lake’s Susan claim, $5 million in supplies and equipment and $3.2 million in additional project funding.

In 1990, five million shares of Borealis Fat Lake Mine Ltd. will be offered to the public at $4 per share while Borealis retains the other 20 million shares, the company says.

Located 90 miles southwest of Rankin Inlet in the Northwest Territories, the Fat Lake property is expected to be in production at a rate of about 5,000 tons per month by late 1989. Pending exploration successes, the company is hoping to increase the Fat Lake throughput to 10,000 per month or 30,000 oz gold annually.

With underground exploration still in progress, proven reserves down to 67 m stand at 52,500 tons grading 0.325 oz gold per ton. Drill indicated reserves to a depth of 200 m stand at 184,000 tons of grade 0.307 oz.

Exploration at Fat Lake is being financed via a $25 million(US) goldbacked bond which is scheduled to be repaid out of production from the property. Between now and production startup, Borealis is driving a 40-m ramp below surface and exploring along drifts at that level.

“While some milling of ore grade material from the drifting and from one stope at the 20-m level is scheduled for this year, the over-all strategy is to mine only the quantities necessary to test the mill,” Borealis says.

The property is located 229 miles from the nearest Manitoba Hydro lines and since most of the equipment has been flown in via Hercules helicopter, initial production costs are expected to be in the $370(US) per-oz range.

However, Borealis may eventually be able to use sea transportation during the summer months and President Rodney Cox says he hopes to reduce production costs to around $250(US) per oz.