Brookbank exploration on track despite suit

“A third drill is to be added in the near future,” President George Chilian of Metalore told shareholders at the company’s annual meeting.

The drill program is designed to confirm and extend a known area of mineralization where geological reserves have been estimated previously at 1.3 million tons of material grading 0.3 oz gold per ton.

“About $1 million will be spent on the property by Placer Dome in the next nine months,” said Chilian. “A feasibility study will also be undertake n that could include underground work.”

Results from the recent surface stripping and sampling program designed to evaluate potential open pit material (110,000 tons at 0.10 oz per ton) are not yet available, Chilian said. Placer Dome only has to provide semi-annual reports of its work to Metalore, so it could be months before any results are available to the public.

“Sometimes when you have a legal action against you, as we have at present, a little information can be harmful,” said Chilian.”We’re in no rush to release th e results of Placer Dome’s work.”

Chilian also told the annual meeting that two other gold zones outside the main deposit look “extremely promising,” but he was unable to provide d etails regar ding the grades of mineralization encountered.

A new grid, comprising some 50 miles of cut line, has been established over one of the westerly mineralized zones, and drill testing is planned.

As part of an option agreement signed last March, Placer Dome must spend $7 million over a 33-month period to earn a 50% interest in 200 claims own ed by Metal ore in Sandra, Irwin and Walters twps., north of Beardmore, Ont.

By placing the Brookbank property into production, Placer Dome would earn a full 100% interest in the property with Metalore retaining a 50% net pr ofits royal ty. The major mining company also has options to purchase another 150,000 Metalo re shares over a 33-month period at prices ranging from $50 to $125 per share.

“We made a darn good deal with Placer Dome,” Chilian told some 50 Metalore shareholders attending the annual meeting.

The tightly held shares of Metalore have traded at around $30 recently on The Toronto Stock Exchange. Of the 1.6 million shares issued and outstanding, about 32% are owned by George Chilian.

Metalore’s shares have traded as high as $52 in the past, and Chilian said he has no plans to further dilute the company.

Commenting on the company’s extremely small public float, Chilian said, “That’s one of the things which makes Metalore unique.”

Geologically, the Metalore property is underlain by a series of mafic volcanic rocks in fault contact with metasedimentary rocks to the north. The Brookbank zone is said to be predominantly hosted by sedimentary rocks .

“Relative to the Beardmore camp’s past gold producers, the Brookbank deposit is not a typical quartz-vein-type situation,” said John Mason, resident geologist for the Ministry of Northern Development and Mines.

“They (Metalore and Placer Dome) are basically working on a fault-zone deposit model,” he explained. The Brookbank deposit occurs along a major fault structure which has been traced for at least 10 km in the Beardm ore greenstone belt. “Th e fault probably represents some kind of hydrothermal plumbing system for the go ld mineralization,” said Mason, adding that a large diorite intrusive also cuts the fault system near the gold deposit.

“There could be at least two or three significant deposits along the Brookbank fault system,” he added, noting that “an alteration zone to the west is identic al to one hosting the Brookbank deposit.”

Gold mineralization is hosted by a pyritized and silicified carbonate unit along the contact between mafic volcanics and sedimentary rocks. The go ld is associ ated with fine disseminated pyrite (2%-10%) and widths of up to 32.6 ft grading 0.23 oz gold per ton are typical of the deposit.

Just a few years ago, Placer Dome established a new exploration office based in Thunder Bay, and the company has been taking a close look at a numbe r of green stone belts throughout northwestern Ontario as part of its general exploration s trategy.

But sources say Placer Dome has been maintaining a very low profile as it explores the Metalore claims, partly because the lawsuit over the prope rty’s ownersh ip is still before the courts.

While Brookbank is the leading exploration project in the Beardmore camp at present, there are at least 15 other work programs under way elsewhere in the gree nstone belt, according to Mason.

Meanwhile, far from the muskeg and rock outcrops of northern Ontario, the legal battle between Metalore and Ontex Resources (ASE) for control of the Brookbank property continues. The earliest trial date at which the two companies could meet in court will be Sept 4, 1990, according to Burto n Tait, a lawyer for Metalore.

Ontex launched a $500-million lawsuit against Metalore two months after the Brookbank discovery was announced in the spring of 1986. The latter com pany has si nce launched a counter-suit of its own against Ontex.

Edward Godin, vice-president of Metalore, said the two junior companies made previous attempts to reach a settlement out of court, but that proved impossible.

“I have no intention of making a settlement with Ontex,” Chilian told shareholders at the meeting. “The issue will now have to be settled in court.”

Ontex, which holds a 10% carried interest in the Brookbank claims, is seeking return of the property and as well as other damages. Ontex alleges Metalore brea ched fiduciary duty by failing to share certain drilling information about the d iscovery with Ontex, while it gained control of the property and staked more cla ims in the area. That type of argument helped Corona win back the Williams gold mine at Hemlo from LAC Minerals in a recent landmark court victory.

But Chilian maintains “there are no similarities with the LAC- Corona case and the Ontex-Metalore dispute.”

Observers say the Metalore- Ontex case could hinge on whether sufficient evidence can be brought forward to indicate a “fiduciary relationship” existed betwee n the two companies and whether it was breached by Metalore.

Metalore, which has limited revenue from some producing gas wells, spent nearly all its after-tax net income of $215,318 last year on legal fees related to th e Ontex lawsuit.

“We’re not happy with this,” said Chilian. “The dispute has already dragged on for more than three years.”

The infuriated Metalore president told shareholders: “As far as I’m concerned, the lawsuit has been nothing but a blackmail attempt to shake as much out of us as possible.” Ontex, which trades at around $1.20 on The

Alberta Stock Exchange, has some 4.8 million shares outstanding and would be an easy takeover candidate for cash-ri ch Placer Dome to swallow if a court decision went in favor of Ontex.

But with the court date more than a year away, the two companies will have to bide their time, while Placer Dome continues to explore the property.

A spokesman for Placer Dome in Toronto said he had no comment on the current legal dispute between Metalore and Ontex involving the Brookbank proper ty.

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