Nickel Plate to push Lacana over 100,000 oz gold in ’88

The future for Lacana Mining can only get better. The Toronto-based mining company, which in fiscal 1987 produced 39,000 oz gold (and about 781,000 oz silver) from its share of several North American mining operations, will receive a big boost in 1988 with a full year’s production from Mascot Gold Mines’ Nickel Plate gold mine in British Columbia.

Lacana, part of the Royex group of companies, owns 50% of Mascot, and the Nickel Plate mine, which poured its first gold in April of last year, is expected to turn out 130,000-150,000 oz during fiscal 1988 at an operating cost of about $170(US). (Lacana has changed its fiscal year from one based on the calendar year to the 12-month period Oct 1-Sept 30.)

During fiscal 1988, Lacana’s share of gold production from all of its projects is expected to total 110,000 oz. Lacana President G. J. Leathley told shareholders at the company’s recent annual meeting that Mascot produced 24,000 oz between April and Sept 30, 1987, and slightly more than that total between Oct 1 and Dec 31 (Lacana’s first quarter of fiscal 1988). The current production rate is 2,550 tons ore per day with recoveries of 85%; about 9,000 oz gold were produced in January.

“Some revisions to the crushing plant should allow the plant to be capable of running at 3,000 tons per day, and this coupled with other plant modifications will allow the mill to run at 2,700 tons per day and 88% recovery,” Leathley said. Higher earnings

On the financial side, Lacana reports earnings for the nine months ending Sept 30 of $11.3 million, about 14% higher than earnings for the full 12 months of fiscal 1986. On a per-share basis, earnings for 1987 were 52 cents before, and 57 cents after, extraordinary items, compared with 63 cents before, and 80 cents after, extraordinary items for the full 12 months of 1986. (Earnings from Mascot’s Nickel Plate mine operations are not included in Lacana’s 9-month fiscal 1987 figures.)

The company’s issued shares increased last year from 13 million to 25 million.

For the first quarter of fiscal 1988, Lacana reports earnings (unaudited) of $2.99 million (12 cents per share) before, and $3.6 million (14 cents per share) after, extraordinary items. For the same three months in 1986, earnings were $1.8 million (13 cents per share) before, and $3.8 million (31 cents per share) after, extraordinary items.

In Nevada, the Dee, Pinson and Preble mines had a record year, Leathley said. During the 9-month fiscal 1987, Lacana’s share of the mines’ output was 26,000 oz gold. The operating cost is expected to rise from $165 per oz last year to $200 per oz this year, in part because of a lower ore grade, Leathley said; total production is expected to be similar.

To cover operating costs this year at the mines, sufficient gold has been sold forward averaging about $480 per oz, he said.

At Santa Fe, which is 100% owned by Lacana, the first gold pour is expected before the end of 1988. “We have sufficient reserves for at least five years to produce about 50,000 oz gold per year plus 150,000 oz silver,” Leathley said of the heap leach project. The capital cost is estimated to be $13 million; a gold loan is being considered as a means of financing the project. Feasibility report

Also in Nevada, Lacana has a 23% interest in the Marigold project, which has reserves of almost five million tons grading 0.08 oz gold per ton. A feasibility report on the project is under study.

In Mexico, the Torres complex, in which Lacana has a 30% interest, had a record year in gold production and profits, Leathley said. During the 9-month fiscal 1987, Lacana’s share of the output was 12,888 oz gold and 780,713 oz silver.

Money spent on exploration during 1987, in the U.S. mainly on the Santa Fe property and on several Canadian properties, totalled $6 million, Leathley said.

In northwestern Ontario, the company has a 17% interest in the Musselwhite property, which is to undergo a $15-million exploration program during the next 15 months. An exploration shaft will be sunk, with underground drilling planned. Reserves to date stand at six million tons grading 0.2 oz. Sulphurets looks good

At the gold-silver Sulphurets property in northern B.C., production could be under way early in 1989, Leathley said. Sulphurets is operated by Newhawk Gold Mines, which has a 60% interest in the project; last year Lacana converted its 30% interest in the property into a 43% controlling interest in Newhawk.

In addition to precious metals, Lacana produces industrial mica at its Suzorite plant in Quebec. Production of mica, which is used for plastics reinforcement, asbestos replacement products, joint cement, oil well drilling muds and coatings, increased 16% (to 10,900 tons) during fiscal 1987 compared to the previous year. A $3-million expansion is under way to expand plant capacity.

Earnings from Lacana’s oil and gas operations during the 9-month fiscal 1987 totalled $4.2 million, about 37% of the over-all net earings of the company in 1987, J. D. Gunn, vice-president petroleum, told the annual meeting. Both oil production and gas sales have picked up considerably since Sept 30, he said.

“Whereas our oil production is currently at or near capacity, our gas production is currently only about 60% of capacity due to a variety of economic and contractual restrictions,” Gunn said.

“If the current resurgence in demand for natural gas continues, we could double our daily production over the next two years from existing proven reserves.”