Bethlehem sees Goldstream progress

The Goldstream underground copper mine near Revelstoke, B.C., is expected to show improved results over the coming year.

In operation since its reactivation in May, 1991, the mine produced 21.6 million lb. copper from its official opening on June 1, 1991, to Jan. 1, 1992. The Goldstream mine is jointly owned by Bethlehem Resources (TSE) and Goldnev Resources (VSE). The two companies bought the property from Noranda Minerals in mid-1989 for $5.75 million, and after a year-long search, managed to raise the required project funding to reactivate the mine from two Japanese companies.

At Bethlehem’s recent annual meeting, Brian Kynoch, vice-president and chief operating officer, said he is very pleased with the mine’s performance noting it exceeded expected operating levels for the period from June 1, 1991, to May 31, 1992.

The mill processed 471,000 tons of ore during the period compared with a budgeted level of 424,000 tons. Kynoch said copper recoveries were also better, averaging 91.36% compared with an anticipated 90%. Copper in concentrate also improved slightly from planned levels, averaging 23.79% from 23%.

In all, the mine produced 34.7 million lb. copper to May 31, compared with an estimate of 34 million lb.

Kynoch said head grades and the Canadian-U.S. dollar exchange rate hurt results. The company forecast head grades at 4.46% copper with actual grades at 3.98%. Exchange rates were as low as $1.12 compared with a projected exchange of about $1.19.

Kynoch said the lower head grade was partially the result of lowering the cutoff grade in order to mine an additional two benches in the open pit. Noranda operated the mine for a short period in 1984, mining from both a small open pit, as well as a portion of the developed underground reserves. Low metal prices and poor recoveries forced Noranda to close the mine after less than a year in operation.

Kynoch said exchange rates are now moving in the right direction, recently sitting at about $1.19, while head grades have also improved. He said grades averaged 4.25% in March, 4.02% in April and 4.15% in May.

Bethlehem reported a loss of $275,000 for the year ended Jan. 31, 1992, and a cash flow deficit of $727,000 after changes in non-cash working capital. Kynoch expects an improvement in results for the current year due to the improvement in exchange rates and head grades as well as a hoped-for upward move in the price of copper.

According to its smelter agreement, the mine receives the average copper price in the month, three months after a given concentrate shipment arrives at the smelter in Japan.

Kynoch said the mine has finalized copper shipments up to about the end of November with an average realized price of about US$1.03 per lb., approximately equal to current levels.

Kynoch said the company has also renegotiated the mining agreement with Tonto Mining, Goldstream’s mining contractor, which is expected to lower mining costs by about 20%.

Adding further to the bottom line, a zinc circuit is now in operation at the mill and should produce in the order of 4.6 million lb. zinc in concentrate this year.

Recoveries for the circuit are currently running at about 22% and Kynoch said the company is hoping to average about 20% over the year.

During May, Kynoch said the mine generated an operating profit of about $1 million and he predicted Bethlehem will be able to substantially reduce its long-term debt over the next four quarters.

Long-term debt, as at Jan. 31, stood at about $3.18 million, and Kynoch said subsequent paydowns have lowered it to about US$2.3 million. The long-term debt pays interest at a floating rate related to a number of prescribed international quotations with the principal payable out of 70% of positive cash flow.

The lenders have the right to convert up to 25% of the outstanding loan into Bethlehem shares at 70% of the trading price to a minimum of 37 cents. Reserves at the Goldstream mine as at November, 1991, totalled 1.94 million tons grading 4.50% copper of which 501,000 tons grading 4.64% copper are in the developed area of the mine to the 655 level. The remaining 1.44 million tons grading 4.45% copper are included in the undeveloped area below the 655 level.

The company does not include zinc grades in its published reserves although Kynoch said they will likely be in the order of 2.5%.

Bethlehem estimates the total cost to further deepen the ramp and develop the balance of reserves at about $6 million. Kynoch said development of the down-plunge extension is in progress with the joint venture spending about $250,000 per month, all of which is capitalized.

Current reserves are expected to last about four years, and although the depth extension of the deposit has been intersected about 800 ft. below calculated reserves, Kynoch noted that the extension is not necessarily economic. Costs increase as the haulage distance to surface increases, and as a result, he said there will be an economic cutoff point at an undetermined depth below current reserves.