Gold King eyeing production at Adelaide

Denver- based Gold King Consolidated (NASDAQ) plans to be in production within the first half of 1990 at the recently acquired Adelaide Crown open pit gold mine in Humboldt Cty., Nev.

The mining lease was acquired from a wholly owned subsidiary of Grand Teton Industries (VSE) in return for about $100,000(US) in cash and $1.1 million in assumed liabilities.

A due diligence study conducted by Minproc confirmed the proven reserve figure of 585,000 tons grading 0.043 oz per ton gold and 1.31 oz silver in the South pit. Because of previous stripping, the strip ratio will be about 2:1.

Metallurgical tests indicate heap leach recoveries will be in the order of 76% for gold and 18% for silver. Taking into account a credit for silver production, the company estimates a cash production cost of $230(US) per oz. At a planned mining rate of 60,000 tons per month, yearly gold production would total 20,000 oz.

In addition to proven reserves, the company estimates a further 165,000 tons grading 0.015 oz gold could be processed as run of mine ore. This material would not be crushed, but simply loaded on to the bottom of the leach pads with expected recoveries approaching 50%.

Gold King estimates that the project can be brought into production for $500,000(US). With much of the stripping completed and the first leach pad built, all that is required prior to loading the pads is the construction of the gold recovery plant and recovery ponds. The company has purchased a used Merrill- Crowe plant in Arizona that will be moved to the property shortly after the first of the new year. Gold King indicated that it is negotiating with a number of contractors to handle the mining operations.

The agreement with Grand Teton is divided into two areas, the South parcel, where the mining is planned, and the North parcel which is a prospective exploration area.

In the South parcel Gold King is to receive 100% of the net profits until payback after which the interest drops to 65% until Grand Teton has accumulated $885,000. At that point Grand Teton reverts to a 5% net profits interest. Grand Teton will receive 25% of net profits generated in the North parcel.

Gold King Consolidated has 36 million shares outstanding and trades at the 20 cents (US) level.