Acquisition may be in works for Royal Oak

A new corporate strategy, a new venture into China and, possibly, a new acquisition will serve as building blocks for the growth of Royal Oak Mines (TSE), President Margaret (Peggy) Witte told shareholders at the annual meeting.

The previous corporate strategy, put into motion in the early 1990s, involved acquiring, at bargain prices, under-performing mining assets. As a result, the company today has four operations in Canada with a nominal annual production capacity of about 500,000 oz. gold. Included in that list is Colomac, situated north of Yellowknife, N.W.T., which is now in the startup phase.

“That strategy was appropriate for times of low gold prices, but prices are higher now,” Witte said. “It is a sellers’ market, acquisitions have become more expensive, and we have more competition because a number of other companies, such as Kinross and Miramar, have adopted similar strategies.” Royal Oak’s goal is to become a 1-million-oz.-per-year gold producer, and Witte hinted that another acquisition may be in the works to bring the company closer to this target.

But Royal Oak is also hoping to grow as a result of in-house exploration and development projects or joint ventures.

Ross Burns, vice-president of exploration, said the company plans to spend $3 million on minesite exploration this year, plus a similar amount on exploration in other areas. The largest portion is allocated to a land position near Timmins, Ont.

The more advanced of these projects include Nighthawk Lake near Timmins, which has a mineral inventory of 1.5 million tons grading 0.167 oz. gold per ton. Prestripping is taking place and open-pit mining will begin this summer. Meanwhile, at the Matachewan project near Kirkland Lake, Ont., drilling is aimed at doubling the existing geological resource (4.7 million tons of 0.117 oz. gold) and delineating 1 million oz. of mineral inventory. Drilling is also being carried out on the Hallnor project near the existing Pamour mine and mill near Timmins. The program is aimed at defining a target of 600,000 tons grading 0.30 oz. gold.

Farther afield, Royal Oak has acquired mining opportunities in China through its equity investment in Asia Minerals (ASE). Copper, zinc and gold are the commodities of interest on projects that Asia Minerals intends to pursue in China.

Royal Oak has other investments in junior companies, including a 41% stake in Trader Resource (TSE), 30% in Geddes Resources (TSE) and 22% in Athabaska Gold Resources (TSE).