Bankers running short of time as Colomac fuel supply drops

Bankers who have already lent $90 million for construction of the Colomac gold mine must decide by the end of the month whether to put more money into the project. Otherwise operator NorthWest Gold (AMEX) will have no choice but to place the Northwest Territories gold mine on care and maintenance, said Greg Bowes, a spokesman for NorthWest’s controlling shareholder Northgate Exploration (TSE).

To keep the operation running this year, NorthWest must truck all of the necessary equipment along the frozen road from Rae/Edzo, N.W.T., to the mine site before the road begins to thaw out at the end of March.

If the banks decide to pledge more capital soon, truckers would still be able to transport the critical equipment, including fuel, and keep the mine operating through 1991.

Otherwise, the 285 personnel still employed at the operation will be laid off and the operation shut down. As NorthWest is processing 5,000-6,000 tons of stockpiled material, there is no need to keep personnel employed on the mining side of the operation at work, Bowes told The Northern Miner.

As a result, 55 have been laid off permanently and an additional 85 temporarily.

Meanwhile, as negotiations involving Northgate and a banking consortium led by Bank of America Canada continue, the mine is running at about 50% of capacity. Bowes said he expects the operation to produce 65,000-70,000 oz. for the year ended Dec. 31, 1990.

As well as mechanical problems in Colomac’s 10,000-ton-per-day mill, the high-cost mine has suffered from weak gold prices that fall well short of the US$410 average that NorthWest needs to achieve payback.

But even though the price of gold has risen to around US$390 due to the likelihood of a war in the Middle East, Bowes said the recent rally has been too brief to make any difference to the negotiations.

Talks are also continuing despite the fact that NorthWest has missed the Dec. 31 deadline on a $7.5-million loan. The company is seeking $20 million in new working capital for Colomac.