The Paymaster gold project at Timmins, Ont., faces an uncertain future now that Placer Dome (TSE) has decided to take a $31-million writedown on the value of its interest in the property.
Although Placer will complete a feasibility study on the project by year-end, the company says it is unlikely to develop the Paymaster deposit anytime in the near future.
Placer owns a 64% stake in Paymaster while American Reserve Mining (ME), a Vancouver-based junior, holds a 36% interest. Placer bought its controlling interest for $18 million and has spent close to $20 million dewatering, rehabilitating and exploring the old mine from the 6,025-ft. level. “It’s a viable deposit, but when we made the purchase in ’89, we were looking for an additional source of ore for the (adjacent) Dome mine,” said Hugh Leggatt, a spokesman for the company. He said that in light of recent employee cutbacks and reduced production, the Dome mine is no longer in need of supplementary reserves.
Placer is also unlikely to become involved in such a small-scale future operation, he said. Paymaster is estimated to contain a relatively minor reserve of just one million tons grading 0.25 oz. gold per ton. But for American Reserve Mining (ME), the project still holds the promise of attractive returns. Referring to an independent feasibility study, American says the deposit would produce about 43,000 oz. gold per year at a cash cost of US$240 per oz. A $13.9-million investment would be needed to bring the deposit to production at a rate of 500 tons per day.
American is currently discussing its options, including a custom milling contract at the Dome mill, with Placer. Leggatt said the gold producer will decide whether or not to retain its 64% interest in the project when its own feasibility study is complete.
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