Trout Lake, Crofoot improve for Granges

Record production was achieved by Granges (TSE) at its two producing mines during 1992.

The company holds a 29% interest in the Trout Lake polymetallic mine near Flin Flon, Man., and operates the Crofoot-Lewis heap leach gold-silver mine in Nevada through its 67% owned Hycroft Resources & Development (TSE). Trout Lake, owned 44% by operator Hudson Bay Mining and Smelting (TSE) and 27% by Manitoba Mineral Resources, produced 26.5 million lb. of copper, 86.2 million lb. of zinc, 34,016 oz. of gold and 348,749 oz. of silver during the year compared with 23.8 million lb. of copper and 76.2 million lb. of zinc in 1990.

Production at the Crofoot- Lewis mine totaled 94,340 oz. gold and 151,553 oz. silver in 1991, up from 92,600 oz. gold in 1990.

Despite the production gains, lower metal prices hurt earnings, with Trout Lake providing operating earnings to Granges of $1.3 million (down from $4.6 million) and the Crofoot-Lewis interest netting an operating loss of $689,000 compared with a gain of $4.3 million.

Cash flow, after changes in working capital, totaled $6.3 million, down from over $11 million in 1990.

Granges finished the year with a working capital position of about $25.6 million, down significantly from almost $40 million at the end of 1990. The company did however, repay most of its long-term debt, bringing its total long term liabilities down to about $1.0 million from $18.6 million. Much of the company’s current debt is related to Granges guarantees on Hycroft’s debt. Granges is accountable for about $10.6 million in Hycroft convertible debentures and bonds.

The company expects reserves at Hycroft’s Crofoot-Lewis mine to be exhausted by 1994, with significant gold production from the leach pads ceasing in 1995. In its recent annual report, Granges states that it is actively exploring for additional reserves, but adds that there is substantial doubt that more ore will be found.

In addition to debt guarantees to third parties, Granges holds over $15 million in Hycroft bonds and debentures, and the company notes that all cash flow from the mining operations beyond that required for operations will be used to repay that debt to Granges. Granges goes on to note that there is uncertainty as to whether Hycroft’s future cash flows will be sufficient to fully repay the debt.

Exploration at the Trout Lake mine continued throughout 1991 with considerable success in identifying additional mineralized zones below existing underground workings.

The Trout Lake orebody consists of two main parallel lenses of massive and stringer sulphides hosted in fragmented volcanic rocks.

Reserves now stand at about 5.7 million tons grading 1.9% copper, 5.7% zinc, 0.04 oz. gold and 0.36 oz. silver per ton, providing at least six more years of reserves.

Following the completion of a hangingwall crosscut this year, the joint venture plans to spend $3.8 million on deep drilling to further define the deeper zones.

Granges also holds a significant land position in the Flin Flon area and plans to conduct further exploration this year, concentrating on polymetallic base metal targets.