Jerome, Muscocho inching towards Swayze mine goal

Jerome Gold Mines (ASE) has arranged for a private placement through First Toronto Capital Corp., to fulfill its obligations at the Jerome mine joint venture at Swayze, Ont.

Under an agreement with partner Muscocho Explorations (TSE), Jerome Gold is contributing on a 50/50 basis to a $9-million exploration program designed to prove up sufficient reserves by December to warrant a future production decision.

Located in Osway Twp., the Jerome mine is a former gold producer which operated briefly between 1941 and 1944. It produced about 57,000 oz gold and 15,105 oz silver grading 0.174 oz gold per ton before labor shortages during World War II forced an early closure.

In an option agreement with E. B. Eddy Forest Products, Jerome has the right to acquire the 63-claim property for $2.5 million on Dec 1. “At the moment it looks likely that the option will be exercised,” said Jerome President Charles McAlpine who won’t make a final decision until later this year.

With known reserves now standing at 437,320 tons of grade 0.193 oz, the joint venturers say 750,000 tons would justify a decision to buy the former producer which underwent a feasibility study in 1985.

Based on 311,000 tons of grade 0.201 oz, capital costs of a 400-ton- per-day operation in 1985 were estimated at $11 million with a break- even production cost of $225(US). But since gold was selling in the $310(US) range, Jerome decided not the put the property into production.

Nearly three years later, a surface drill program focusing on the South zone is continuing to produce encouraging gold values. Located about 400 ft south of the original Jerome vein, the South zone hosts a drill indicated reserve inventory of 126,320 tons of grade 0.175 oz.

The South zone reserves were recently added to reserves in the Main vein which still stand at 311,000 tons grading 0.201 oz.

The private placement with First Toronto Capital affiliate China First Capital Corp. will provide an initial $900,000 for Jerome’s participation in the venture.

He said China First will purchase two million flow-through Jerome shares at 45 cents per share plus warrants to buy an additional two million shares at 60 cents for one year. Following the transaction, China First will hold 2,667,000 Jerome shares representing a 44% interest

Since Jerome is required to provide $4.5 million at a monthly rate of about $1 million, arrangements are being made for the sale of additional flow-through shares, the company said.

Meanwhile, a dewatering program on the 1,138 ft, 3-compartment shaft has progressed to the 400-ft level and the hoist and headframe have been partially rehabilitated.

In addition, an underground program, consisting of exploration drifting, detailed mapping, sampling and drilling will get underway almost immediately. “The big belief is that we will pick up the downward extension of the Main zone by drilling from an underground drift on the 500-ft level,” said McAlpine.