Higher cost won;t stop Golden Bear

Homestake Mining (NYSE), which has a 73% interest in North American, has taken over as operator. Project management was being handled by a jointly-controlled operating company which will still exist; the new arrangement will enable North American to utilize the personnel and technical expertise of Homestake said Jack Thompson, North American’s president. (Thompson is also a key executive at Homestake Mining and the president of Homestake International Minerals, a wholly- owned subsidiary).

“I am pleased that the Golden Bear project is back on course,” said Thompson. “The Golden Bear mine may prove to be a long-lived success. It is North American’s job to see that everything possible is done to facilitate such an outcome.”

Homestake acquired control of North American a year ago after a takeover battle with Pezgold Resource Corp. (VSE), now a Prime Group Company. Robert Hunter and Robert Dickinson, both of whom are now involved with Continental Gold (VSE), managed to squeeze another $1 per share out of Homestake, bringing the offer to $5 per share, worth approximately $30 million.

At North American’s annual meeting, Thompson said he was optimistic the project would recover its capital but he conceded anything beyond that would require additional reserves. In all likelihood, they would be underground reserves which would have a higher recovery cost associated with them.

Referring to the 600,000 tons of proven ore in the Bear zone, Thompson said that reserve occurs along 600 m of strike and they have eight kilometres of total strike length to work with. New exploration areas will require underground drifting for access purposes. He said $750,000 has been budgeted for this on a yearly basis.

Citing the $10-million overrun for road construction, Thompson said that cost was really out of the company’s control. Road routing was changed at the last minute by the government and the joint venture didn’t have time to complete a new engineering assessment for the road. The original route required eight bridge crossings compared to 22 for the amended route which proved to be expensive, he said.

But Thompson said that several key items were left out of the original feasibility study including electric distribution on surface and in the mill, potable water supply, sewage plant, etc. A number of items were also understated including the cost of the aerial tramway which will service both the underground and open pit from a centralized loading pocket. “Operating costs have gone up too but they still look good depending on what assum ptions you use,” he added.

Cash operating costs are expected to range from $210-$240(US) per oz, the higher value associated with the underground operation.

Based on the current construction schedule, commercial production could begin by the end of November although mill tuneup will begin before that, he said. The company has been trying to find used equipment but he said that market is very competitive and they haven’t been too successful.

Procurement is nearly complete and $31 million had been spent on the project by the end of March. Orders for another $8 million in equipment are in place. Grinding equipment (semi-autogenous) was among the first things ordered and the roaster is being fabricated. Because of the refractory nature of the orebody, roasting will be required in the recovery process, something Homestake has considerable expertise with. Sized at 360 tonnes per day, the plant will use the latest in extraction technology to recover over 90% of the gold in the ore. The plant will use dry grinding, fluidized bed roasting and carbon-in-pulp leaching to produce an average of 65,000 oz gold per year, he said.

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