St. Andrew to produce at Stock Twp. property

It came as no surprise to the shareholders and other interested onlookers when the announcement came that St Andrew Goldfields will proceed to production on its Stock Twp. gold mine near Timmins, Ont.

After all, the stock had already jumped by almost $1 to close at $7.25 on the Toronto Stock Exchange as rumors abounded just prior to the company’s June 30, annual meeting.

The discovery of a gold-bearing sulphide deposit to the north (the N2 Zone) of any previously explored area on the Destor Porcupine fault had also made production look almost inevitable.

But, none of that took away from the sense of excitement when President Warren Armstrong made the announcement to a large group of expectant shareholders at the company’s annual meeting in downtown Toronto.

“We contemplate a start-up before the end of l988,” said Mr Armstrong who estimates annual rate of production at around 30,000 oz at an operating cost of $325 or $250(US) per oz.

However, if the higher grade North 2 zone ore is used for initial mill feed, annual production would increase to 38,000 oz and unit costs would drop to a more favorable $200(US).

Preliminary estimates from drilling in the North 2 zone located 300 ft north of previously explored ore zones, indicate 762,200 tons of proven and probable ore grading 0.23 oz gold per ton. The N2 zone now extends laterally 850 ft and vertically from 200 to 1,000 ft below surface and with an average horizontal zone width of 28 ft.

Mr Armstrong estimates capital costs in the $15-million range.

The planned initial milling rate will be 500 tons per day but to accommodate future expansion, the mill design will incorporate a crushing and grinding circuit with a capacity of up to 1,000 tons per day.

“The start-up milling rate is based solely on the currently delineated ore reserves at the main Stock Twp. mine,” said Mr Armstrong.

The company hasn’t included the potential reserves of three additional known and only partly tested gold deposits at the new East zone flanking the main Stock Twp. deposits within 3,000 ft of the shaft and the Shoot and Porphyry deposits located six and seven miles respectively east in adjoining Taylor Twp.

The Stock and Taylor twp. properties were acquired following an agreement in February, l986, with Labrador Mining and Exploration (Hollinger) and Esso Minerals Canada (Imperial Oil). Under the terms of the agreement, St Andrew bought Hollinger’s remaining 50% interest in 101 mining claims (approximately 4,000 acres) along the Destor Porcupine Fault.

According to Mr Armstrong, proven and probable reserves at the main Stock Twp. mine are currently estimated at 1.5 million tons of average grade 0.183 oz gold per ton. Those estimates include the newly discovered high-grade North 2 zone containing close to 800,000 tons at an average grade of 0.23 oz.

Reserves calculations are taken to an approximate depth of 1,000 ft from surface but are open for extension both laterally and to depth. “Don’t for a minute think that we have found it all,” said vice- president of exploration Harry Michie, who will wait until the company’s next annual meeting before announcing deposit tonnage and grade of the east zone.

While St Andrew Goldfields is in a strong cash position, with more than $8 million uncommitted, management plans to fund the pre- production and mill construction project independently with new financing.

According to Mr Armstrong, new financing will be all or mostly equity. “We plan to direct existing cash to continued exploration and development of the currently known additional and nearby deposits,” he said.

St Andrew Goldfields was incorporated in l983, after a $14-million equity issue to explore and develop the Stock Twp. gold property which was acquired from St Andrew’s parent corporation, Quebec Sturgeon River Mines.

St Andrew is 58% owned by Quebec Sturgeon which is part of the Coniagas Group. While St Andrew shares responded to the recent production decision by jumping to $7.25 on the Toronto Stock Exchange, the share price remained below its 52-week high of $8.50.

In 1987, the company plans to spend $4.15 million on exploration and of that amount, $1.15 million is slated for the continuing underground program at Stock Twp.

An additional $2.12 million is slated for exploration on the Porphyry Zone at Taylor Twp.