Richmont buys into Patricia

Small gold producer Richmont Mines (RIC-T) is investing $1 million in Toronto-based junior Patricia Mining (PAT-V) in order to help the latter advance its wholly owned Island Gold project, near Wawa, Ont.

Richmont will subscribe for 2 million Patricia shares priced a 50 apiece, and gains an option to earn a 55% interest in the Island Gold project by either by putting it into production or spending $10 million.

After vesting, and if further financing is required, Richmont has agreed to provide additional financing to the joint venture up to a maximum of $10 million.

The $1-million financing will be plowed into a 12-month exploration program that will entail surface drilling, dewatering of the existing Lochalsh ramp, underground drilling, and both lateral and vertical underground development.

Inferred resources at Island Gold stand at 2 million tonnes grading 8.3 grams gold per tonne (544,000 contained ounces) at a cutoff grade of 5 grams gold per tonne. This is part of a larger inferred resource of 20.6 million tonnes grading 2.35 grams gold, or 1.6 contained ounces, at a 0.75-gram cutoff. The property also hosts a mothballed, fully permitted, 650-tonne-per-day mill and related mining infrastructure.

Patricia has hired Dundee Securities, which is proposing a further $2.5-million financing.

Richmont just finished a profitable second quarter, earning $1.5 million (or 9 per share) on revenue of $15.5 million. However, the results did not measure up to the second quarter of 2002, when bonus grades at both the Hammerdown and Beaufor gold mines resulted in earnings of $3.7 million on revenue of $20 million.

The Hammerdown mine, near King’s Point, Nfld., produced 13,704 oz. gold in the recent quarter at an average cash cost of US$210 per oz. Ore grades were near the reserve grade of 17.5 grams gold per tonne. In 2002, second-quarter production was 21,509 oz. at an average grade of US$160 per oz.

Similarly, head grades at the Beaufor mine, near Val d’Or, Que., were back to reserve levels of nearly 7.2 grams gold per tonne. Beaufor produced 15,754 oz. in the quarter, down from 18,865 oz. a year earlier, and cash costs increased to US$225 from US$168 per oz.

The rise in the Canadian dollar’s exchange rate with the U.S. dollar pushed up operating costs company-wide, which averaged US$219 per oz., compared with US$164 in the corresponding period last year.

Richmont subsidiary Louvem Mines (LOV-V), which owns half the Beaufor mine, earned $1 million (4 per share) on $4 million in revenue.