Jerome, Muscocho need reserve increase soon

With a November deadline to consider, Jerome Gold Mines (ASE) and Muscocho Explorations (TSE) are currently working against the clock to prove up enough reserves to place the old Jerome mine near Swayze, Ont., into production.

Operated briefly between 1941 and 1944, the mine produced about 57,000 oz gold and 15,105 oz silver grading 0.174 oz gold per ton before labor shortages forced the Mining Corporation of Canada and Hollinger Consolidated Gold Mines to close the mine down.

About 311,000 tons of 0.19 oz representing about 50% of the known 4,000-ft strike length is known to be contained in the Main zone. After Jerome optioned the property in 1983, it and Muscocho are contributing on a 50/50 basis $8 million to expand those reserves.

“To support a 400-ton-per-day milling facility, we are looking for between 750,000 and one million tons before November,” said President Charles McAlpine at the company’s recent annual meeting in Toronto.

Operator Muscocho must find that amount by the end of November so that Jerome can raise $2.5 million to buy the 63-claim property from E.B. Eddy Forest Products. If Muscocho fails to meet the 750,000 ton target, E.B. Eddy has the right to buy its way back to a 40% interest or earn a hefty 10% net smelter return on production. E.B. Eddy

Meanwhile, under an option agreement, Jerome is making monthly payments to E.B. Eddy of $25,000 per-month.

A shaft dewatering program is going well, said McAlpine who is confident that the property will live up to expectations. The 1,100-ft shaft has been dewatered to the 420-ft level and a hoist was scheduled to be commissioned last week.

In a bid to find enough gold intersections to justify driving an exploration drift at a depth of 500 ft, Muscocho has been drilling the South zone since December.

Results from the first two surface holes include 6.9 ft grading 0.17 oz and 1.1 ft grading 4.83 oz. The same program also intersected 5 ft of 0.12 oz and 0.145 oz across 6 ft at depths of between 762 ft and 775 ft on the Main zone.

After encountering a 6-ft section grading 0.12 oz in a new North zone, the partners will probe for parallel zones to the north of the Main zone. The new North zone has also been earmarked for exploratory drilling.

Jerome’s share of expenses at Swayze will total $4 million by September, said McAlpine. In an attempt to meet its obligations, the company recently arranged for a $233,000 private placement with Transgold Resources of Toronto.

The placement gives Jerome $253,0000 in working capital and warrants to buy 500,000 common shares at 35 cents and 170,000 at 80 cents could provide the company with an additional $311,000. When the warrants are exercised, Transgold will own 9.5% of Jerome’s 3.5 million outstanding shares. On Oct 31, Jerome reported a year-end deficit of $825,293 or 29 cents per share compared with $756,806 or 59 cents per share during the same period last year. The Jerome issue was trading recently on the Alberta Stock Exchange at 52 cents .