Echo Bay mandate is to increase gold production

The Lupin mine, in the Northwest Territories, continues to be the cornerstone of Echo Bay’s Canadian operations, and accounts for 40% of the company’s annual gold production. Lupin ranks fifth among Canada’s top 10 producing gold mines.

The Edmonton-based company, which began its life 25 years ago as a silver producer near Port Radium, N.W.T., poured some 550,000 oz of gold last year, most of which (60%), came from its open pit mining operations located in the western United States. Echo Bay’s strategy has successfully focused on low-cost heap leach gold mining operations located in Nevada.

With a stable of seven producing mines and nine development and expansion projects under way, the company describes its aggressive corporate strategy as one of Gold + Growth.

“Echo Bay is dedicated to growth,” said President John Zigarlick in a report to employees of Echo Bay Mines. “A little over five years ago Lupin, our first gold mine, went into production. Now we are the fourth largest gold producer in North America. We’ve achieved growth by developing our properties, by acquiring new ones, and most recently, at Cove, by discovering a new gold deposit.”

Cove, a gold-silver discovery located one mile from Echo Bay’s McCoy mine in Nevada, was by far the most important event for the company in 1987. The total precious metals content of the Cove deposit accounts for a major part of the company’s current reserves.

Following a recent optimization study completed by Pincock, Allen & Holt, the final mining plans for the McCoy/Cove property were announced recently. The company expects production from the McCoy/Cove mine will triple by 1990 to about 330,000 oz of gold from the current 100,000 oz in 1988.

Although its main focus continues to be the western United States, Echo Bay began last year to place more emphasis on Canada by establishing a new exploration headquarters in Vancouver, and by strengthening its minority interest position in the Muscocho group of companies, which are active in Ontario’s bustling Mishibishu Lake gold camp. Muscocho deal

Echo Bay recently increased its ownership interest in the Muscocho group of companies by purchasing additional common shares of Muscocho Explorations (TSE) on the open market during the third quarter of 1988.

Conversion of $23.5 million of convertible debt securities into common shares brought Echo Bay’s ownership interest to 26.9% of Muscocho Explorations (TSE), 22.8% of Flanagan McAdam Resources (TSE), and 27.8% of McNellan Resources (VSE).

The Muscocho group opened Canada’s newest gold mine, Magino, near Wawa, Ont., in October last year. The mine, with a daily production rate of 400 tons, is expected to yield an annual gold production of about 40,000 oz. Another soon-to-be producer for the Muscocho group, will be the Magnacon project, also located in the Mishibishu Lake area of Ontario.

Regarding the Muscocho deal, Echo Bay president, John Zigarlick said, “We can participate in their (Muscocho’s) growth without diverting our own people from current projects. Muscocho has the team to do the whole job,” he said.

While Echo Bay continues bullish on prospects in the Mishibishu Lake area, it gave the thumbs down sign last year to the Cameron Lake project located near Kenora, Ont. After spending $6.7 million on an underground evaluation program, the company deemed the deposit, owned by Nuinsco Resources (TSE), as uneconomic at current gold prices.

Through Nuinsco, Echo Bay held a 53.8% interest in the Kenora area gold property, which it said would require a minimum gold price of $550(US) per oz in order to be economic. In November, the company agreed to sell its controlling interest in Nuinsco for $6.7 million or 87 cents per share. The sale to Deak International Resources of the block of 7.6 million Nuinsco shares resulted in a loss of $2.9 million(US) to Echo Bay. According to a spokesman at Echo Bay, Deak plans to bring the property into production. New exploration office

During the third quarter of last year, Echo Bay transferred the headquarters of its Canadian exploration operations from Edmonton to a new office in Vancouver, B.C., to co-ordinate the company’s growing explora tion activities in the northwestern area of the continent.

With several exploration and development projects under way in western Canada and Alaska, the company is placing a noticeable emphasis on that region of the continent. Its 85%-owned Alaska- Juneau project has the potential to be a 15,000 ton per day operation producing up to 200,000 oz per year by 1991. Confirmation diamond drilling and channel sampling are under way, and collection of a 125-ton bulk sample for metallurgical testing has been initiated, the company reports.

Echo Bay recently signed an agreement with Magna Ventures (VSE) and Silver Princess Resources (VSE) to explore and develop the Doc property near Stewart, B.C. Echo Bay can earn a 50% interest in the property by spending $8 million on exploration and development over the next three years. Upon delivery of a feasibility study for commercial production, it can also acquire a further 5% interest by making cash payments to Magna and Silver Princess.

The Doc property is located in the Sulphurets area where Newhawk Gold Mines (VSE), Granduc Mines (VSE) and Catear Resources (VSE) have advanced projects.

Echo Bay’s current work program on the Doc property calls for 10,000 ft of diamond drilling and 800 ft of underground drifting on the Q17 vein. Magna previously estimated the mineral inventory of the Q17 vein (in all categories, uncut and undiluted) to be 207,000 tons grading 0.32 oz gold and 1.38 oz silver per ton open in all directions.

According to Magna, at least four other parallel gold veins were discovered and explored on the property. Possible reserves in the other veins were estimated by Magna to be 263,000 tons grading 0.23 oz gold and 1.25 oz silver, for a current mineral inventory totalling 470,000 tons grading 0.27 oz gold and 1.31 oz silver per ton.

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