Gold price forces shut down of Canamax’s Kremzar, Ketza

Unless gold prices improve dramatically in the near future, Canamax Resources (TSE) will wind down production temporarily at two of its three Canadian gold mines. A company spokesman said the Ketza River and Kremzar mines, which together employ 215 workers, are being operated on a monthly basis. Production will be gradually phased out throughout the rest of this year.

With production costs of US$375-380 per oz., controller Tom Lough said Canamax wouldn’t consider reopening the mines until the price of gold rises from US$350 to more than US$400.

Ketza, situated near Ross River, Y.T., produced 10,994 oz. in the first quarter of 1990 but its oxide orebody was scheduled to be depleted by the end of this year. The Kremzar mine near Wawa, Ont., produced 6,551 oz. in the first quarter.

“We don’t believe we should be operating mines unless they can produce gold profitably,” Lough told The Northern Miner.

While the Bell Creek operation at Timmins, Ont., will continue to operate at capacity — it had first- quarter output of 6,292 oz. — Canamax executives are meeting with bankers to discuss the company’s financial situation.

At the company’s recent annual meeting in Toronto, President Wayne Lenton said he expected Canamax to produce 100,000 oz. this year and that a hedging program guaranteed an average return of US$425 per oz. But according to Lough, it is still too early to determine what the company’s 1990 output will be.

Canamax’s long-term debt of $19.6 million was reclassified last year into a term tranche of $13.9 million and a working capital tranche of $6.06 million.

Although Canamax reported a net loss last year of $700,000 or 4 cents per share, Lough said it is up to date so far with the $1.5 million it is scheduled to repay this year on the term tranche.

Under an agreement, the company was scheduled to begin making residual payments of $1.5 million per quarter on the term tranche beginning in the first three months of 1991. The working capital tranche doesn’t mature until Dec. 31, 1992.

Lough also declined to speculate on how many employees would be laid off as a result of the production stoppage. Ketza has produced 74,000 oz. gold since it opened July 1, 1988, while Kremzar, which entered commercial production Dec. 1, 1988, has churned out 37,500 oz.

A spokesman for Amax Gold (TSE) said it has no plans to sell the 10.4 million Canamax shares it has acquired for what he called investment purposes. Those shares, which traded recently at $1.15 in a 52-week range of $3.85 and $1.10, represent a 45% interest.

“We are continuing to evaluate the situation,” said Amax treasurer Mark Lettes. “Right now, nothing has changed.”