Augmitto on threshold of Beauchastel decision

After nearly fours years of renewed momentum under new management, Augmitto Explorations is just two months away from a production decision on its wholly- owned Beauchastel Twp. gold property in Rouyn, Que.

All that stands between the Toronto company and an October 1988 production date is an application for a $3-million infrastructure grant and a $4.7-million flow- through financing needed to fund the sinking of a new exploration shaft on the project’s Patrick zone.

To conduct additional exploration on the zone located 1,400 ft north of the company’s main target area, Augmitto is planning to sink a 3-compartment vertical shaft to the 1,000-ft level.

However, since the shaft could also be used to access the mine through the main carbonate zone, President Norman Brewster isn’t sure whether Augmitto will qualify for both Canadian Exploration Expense (cee), and a Mining Earned Depletion Allowance.

Under current federal tax rules, flow-through investors are entitled to a 100% writeoff for every dollar invested in Canadian exploration plus a Mining Earned Depletion Allowance entitling investors to 33 1/3% for every invested dollar.

“If the shaft doesn’t qualify for meda then we will have to raise the additional funding through a private placement,” said Mr Brewster who expects the mine to employ 160 people on site when it’s up and running.

Since Augmitto received a $600,000 federal exploration grant in 1984, he doesn’t anticipate any problems with the infrastructure funding which will provide only a small portion of the operation’s $26 million capital requirements.

Barring unforseen difficulties he expects the details to be completed by early September.

Assuming Mr Brewster’s projections are correct, the 100-ha Beauchastel property will be Augmitto’s first mine. Located five miles southwest of Rouyn-Noranda on the Cadillac-Larder Lake Break region, it is close to several known mining camps.

A production decision is also contingent on a feasibility study that will be presented to the company’s board of directors this week.

“It all looks extremely positive,” said Mr Brewster who is negotiating a $10-million gold loan from an Australia-based bank which he declined to name.

To provide a degree of comfort for the company’s predominantly English financiers, the Augmitto president is also seeking a local geological engineering firm to play a monitoring role at Beauchastel.

Nevertheless, with production expected to begin around September, 1988, the property should produce around 57,000 oz annually with current reserves supporting a mine life of eight years.

The reserves, as calculated by A.C.A. Howe International U.K. Ltd., show 1.9 million tons of proven, probable and possible tons at 0.17 oz gold per ton and over 900,000 tons of inferred reserves at 0.16 oz.

According to Mr Brewster, these figures include a 15% dilution at a grade of 0.01 oz * They are based on more than 80,000 ft of surface and 10,000 ft of underground drilling, completed since August, 1986. A 3,000-ft decline ramp to a depth of 500ft and drifting have also been completed.

Using a gold price of $400(US) per oz, the estimated cash cost for Beauchastel is $222 per oz with operating profits expected to be $100 million over eight years.

While Augmitto will continue to look for new acquisitions via a yet-to-be-named subsidiary, Mr Brewster said Beauchastel will remain the prime thrust of the company’s activities.

Augmitto shares were trading recently on the Toronto Stock Exchange at $1.95, just below its 52-week high of $2.55 but well above its 80 cents low point.