Castle Mountain churns out profits

The Castle Mountain open-pit, heap-leach mine in San Bernardino Cty., Calif., continues to spin profits for 75% owner Viceroy Resources (TSE).

Earnings for the six months ended Sept. 30 totaled $2.9 million on sales of $29.8 million.

Cash generated from operations exceeded $15 million during the 6-month period, compared with $16 million for the same period in 1994. Castle Mountain produced 71,671 oz. gold during the period, which is about 10,000 oz. less than expected. The shortfall, partly due to unusually heavy rainfall in August, is expected to be fully recovered over the next two quarters.

Ore delivered to the leach pad during the second quarter averaged 11,751 tons per day at an average grade of 0.053 oz. gold per ton and a stripping ratio of 0.52-to-1.

Cash costs for the 6-month period totaled US$162 per oz., and these are expected to increase as production moves into lower-grade reserves and a higher stripping ratio. As of March 31, proven reserves totaled 29 million tons grading 0.035 oz. gold at a stripping ratio of 2.65-to-1. Possible reserves amount to 7.1 million tons grading 0.034 oz. gold.

Gordon Fitzpatrick, a spokesman for Viceroy, says cash costs are projected at US$170 per oz. for the year, increasing to US$180-200 per oz. in 1997, US$220 per oz. in fiscal 1998 and US$250-265 per oz. thereafter.

Viceroy’s projected reserves and costs are based on the premise that a new mining contract will be arranged at Castle Mountain.

MK Gold (NASDAQ), which owns the remaining 25% interest in the Castle Mountain mine, is in dispute with Viceroy over contract mining at the operation. MK Gold holds the current mining contract at the site and disagrees with Viceroy’s contention that the contract ends in August 1996.

Viceroy recently launched a lawsuit against MK Gold over the issue and hopes to have the dispute resolved by mid-1996.