Mishibishu activity grinds to a halt

Activity in the Mishibishu Lake area of northern Ontario has come to a virtual standstill over the past year, following a string of disappointments for the area’s two major players, Central Crude (TSE) and the Muscocho group of companies.

This season, the only known drilling in the area is being financed by Mishibishu Gold (VSE). Vancouver-based Mishibishu, which is testing at least three copper-lead-zinc anomalies, is earning a 49% interest in the 107-claim Loon Lake property on the west side of the Mishibishu camp from Granges (TSE). Mishibishu also has plans for its nearby Pukaskwa River gold property. “It’s a pretty lonely place out in the Mishibishu belt at the moment,” says project manager Peter Dasler.

The Muscocho group, devastated by Echo Bay Mines’ (TSE) disinvestment in 1990, has been jilted twice since. Last Christmas, Hemlo Gold Mines (TSE) withdrew a $9-million bid for the Magnacon mill and related infrastructure, citing environmental costs. Shortly after, Belmoral Mines (TSE) backed away from a similar offer when the gold price took a dive below US$360. Flanagan McAdam Resources (TSE) and Muscocho Explorations together own a 75% interest in Magnacon. Vancouver-based Windarra Minerals (TSE) holds the remaining 25% interest.

Crude has also been wounded by senior company conservatism. In February, Hemlo Gold, Crude’s partner on the Eagle River gold project, recommended that production at the site be deferred until gold prices improve. Hemlo’s feasibility study concluded that at a gold price of US$375 per oz. and a mine-only capital cost of $21 million, the deposit would provide an 18% return on capital.

The only producing gold mine in the near vicinity is Magino, equally owned by affiliates Muscocho Explorations and McNellan Resources (TSE). With an improved average throughput of 650 tons per day, the mine managed to churn out 15,238 oz. gold in the first six months of 1991. As of Dec. 31, 1990, Magino’s property-wide reserves are 1.24 million tons grading 0.16 oz. per ton.

But the operation’s picture in the once-thriving Mishibishu camp could change if Richard Nemis, president of Crude, fulfils his dream to turn Eagle River into a producer. At a meeting held in May, Nemis told shareholders he would proceed at the development site, “with or without” the help of 60% stakeholder Hemlo Gold. To raise the required capital for production, he proposed a combination of debt and equity financing.

In a recent interview with The Northern Miner, Nemis, who has drawn up two alternative mine plans, said he will have a decision on Eagle River by year-end.

The fully permitted, 600-ton-per-day Magnacon mill, which is currently sitting idle, has not escaped Crude’s attention.