City turns to Barrack for help with Cinola

Owned 100% by City Resources (Canada) (TSE), the mine is expected to produce 185,000 oz of gold in its first full year, 167,000 oz in its second, and about 146,000 oz thereafter for a further 10 years. But the company has to overcome some difficult hurdles the clear before production can begin: environmental objections to the open pit operation and finance initial capital costs which are now estimated at $119.9 million.

But a new corporate development is expected to result in the company being strengthened financially and technically by an association with Barrack Mines Ltd. of Australia, a diversified mining and minerals processing company. Barrack is expecting to produce 120,000 oz of gold and 20,000 tonnes of copper this year from three operating mines.

Under the terms of a recent agreement with City Resources Ltd. of Australia, Barrack (through its 95%-owned subsidiary, Central Coast Exploration), will inject $7.6 million(A) in City Australia in consideration for 22.857 million of its shares. City Resources and City Resources Asia together own about 52% of the outstanding capital of City Canada.

“With (Barrack’s) current strong production base and mine development track record, this will be of considerable assistance in progressing the Cinola project through the financing, engineering and construction phases into production,” says City Canada Vice-president Reno Calabrigo.

The agreement also has a number of other provisions which are subject to fulfillment of certain conditions, including a review of City Australia’s operations and assets to be completed by April 30. Barrack’s subsidiary will also acquire a parcel of 82 million City Australia shares held by two large shareholders in exchange for the issue of 27.3 million of its shares.

At this stage, Barrack will assume management of City Resources, aimed City Canada noted, “at fast track development of the advanced projects held by the City Group”. In addition, the Barrack subsidiary will have the right to take up an issue of shares by City Australia being the balance of the 82 million shares at 35 cents (A) not taken up by shareholders in a recent rights issue.

Calabrigo said he fully expects the Cinola project will be among those to be fast-tracked on the road to production. With mineable reserves of 27.3 million tons of 0.072 oz gold, the company is planning a 6,600-ton-per-day mining open pit operation with an over-all stripping ratio of 2:45:1.

The ore at Cinola is refractory because most gold is associated with or contained in the sulphides. To liberate the gold, fine grinding and almost complete oxidation of the sulphides is necessary. Based on recent test work, City Canada will use a nitrate oxidation method (nitric acid leaching) of ore followed by neutralization and cyanidation. Gold recoveries of 92% are expected. Operating costs are anticipated to equate to $230(US) per oz for the life of the mine.

Calabrigo said the company plans to finance the Cinola project through a gold loan (to about 70%), which would mean the company would need to raise about a further $30.0 million to bring the project onstream.

Through its subsidiary, Barrack also recently acquired a 40% interest in City Australia’s advanced polymetallic Reward project near Charters Towers in Queensland, and an 80% interest in the Magpie silver-lead-zinc prospect through the expenditure of up to $4.5 million(A) on the project.

“City Resources Australia is very complimentary to Barrick with its substantial mineral resources portfolio established by a highly experienced exploration team,” said Denis Hogan, chairman of the Barrack group of companies. Outside of precious metals, Barrack is reported to be looking to further growth through its investment in silicon metal and copper production.

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