Deak negotiating financing for Kerr mill modification

Financing of an ambitious scheme by Deak Resources (TSE) to mill gold and base metal ore at Virginiatown, Ont., could result in the company more than doubling its share capitalization by 1993. Shareholders at the recent annual meeting were told the company is negotiating a $15-million commodity-based loan facility which would allow for the modification of the old Kerr mill to process base metal ore.

Deak has about 10.1 million shares outstanding. Combining its various current commitments with private placement subscriptions, options and warrants, the company could have a fully diluted capitalization of about 23 million shares by 1993.

Deak, which acquired the Kerr mill and mine following the bankruptcy of former owner Golden Shield Resources, has been mining on the property and operating the mill for several months. President W.G. Cooper said the mill is currently operating at a rate of about 500 tons per day.

The Virginiatown mine was a steady gold producer for a half- century. It was formerly operated by Kerr Addison Mines (TSE), which sold it to Golden Shield Resources.

The Kerr mill capacity is 4,500 tons per day. Deak Chairman Malcolm Slack said the company has plans to boost the rate of the gold circuit to 3,000 tons per day, with the base metal circuit able to operate at up to 1,750 tons per day. A third circuit, to provide custom- milling services and with a capacity of 1,500 tons per day, is also planned.

To feed its mill, Deak has acquired mining rights to certain properties in northeastern Ontario and northwestern Quebec through agreements with a number of companies, including Noranda (TSE), MacDonald Mines (COATS), Armistice Resources (ME) and Northfield Minerals (ASE).

The company lists a current gold reserve of almost 2.6 million tons grading 0.17 oz. gold per ton, the largest source of those reserves being the Kerr mine.

Among its base metal (zinc and copper) reserves, Deak lists tonnage “scheduled for production” of five million tons. It also lists additional base metal reserves of 3.5 million tons in the “minable” category.

Slack said the open pit West MacDonald zinc mine of Les Mines Gallen (Noranda/MacDonald) is being dewatered and could be ready for a production startup in September. A custom-milling arrangement would likely be negotiated.

Deak owns a 50% direct interest in the Kerr mill. The other 50% interest is owned by GSR Mining Corp., which is 70% owned by GSR Acquisition Corp., which is 90% owned by Deak.

Slack said Deak is seeking a new major equity shareholder. The company’s major shareholder, with a 36.4% interest, is Deak International Resources Holdings.

In addition to Slack and Cooper, George Archibald, Douglas Hume and Keith Taylor were elected to Deak’s board of directors.