Claude squeaks by in second quarter

Higher headgrades and stronger gold prices enabled Claude Resources (CRJ-T) to offset the weaker U.S. dollar and record a small profit for the 3-month period ended June 30.

Net earnings totalled $107,000 (or nil per share) on revenue of $6.8 million, compared with a net loss of $1.04 million (2 per share) on $4.5 million in the second quarter of 2002. The recent profit brings earnings in the first six months to $700,000, which came on revenue of $14 million.

Including changes to non-cash working capital, cash flow rang in at $447,000 in the recent quarter, versus a deficit of $1.4 million a year earlier. However, after investing and financing activities, Claude began the current period with a deficit of $554,000.

The Seabee gold mine in Saskatchewan cranked out 12,500 oz., or 62% more than a year earlier. Headgrades were up 39%, averaging 7.9 grams per tonne in the recent quarter, reflecting the input of the high-grade 2B zone.

Direct mining costs actually climbed by 18% as more (but smaller) stopes were mined; however, the costs were spread out over more ounces, so total cash costs actually fell by US$58, to US$266 per oz. Also, a 10% increase in realized prices was more than offset by a weaker U.S. dollar.

Deeper shaft

By November 2003, Claude expects to have deepened the mine shaft by 200 metres, to 600 metres below surface, thus enabling it to mine larger, higher-grade stopes at depth. This, in turn, should lead to a reduction in future unit costs, as well as increased production.

Two stopes now under development have averaged 10-12 grams, and both are expected to contribute to projected production in 2003 of 52,000 oz.

Claude is funding the project with proceeds from a non-brokered, $3.75-million private placement completed earlier this year. Since then, the company has raised an additional $3.2 million via the exercising of 2.5 million warrants it had issued a year earlier.

A 45,000-metre drill program aimed at propping up reserves is under way. At Dec. 31, reserves stood at 661,200 tonnes grading 8.03 grams per tonne and inferred resources, at 1.4 million tonnes grading 8 grams.

Exploration continues in the West Porky area, about 3 km to the north. A recent ground geophysical survey, along with mapping and prospecting, suggests that the targeted gold-bearing structure is more continuous than drilling suggests.

Mineralization in the Main zone is characterized by shear-related sulphide-replacement in calc-silicate-altered mafic volanics and by free gold in a silicified feldspathic arenite with which the volanics contact. Both zones run parallel to the southeasterly trending, steeply dipping contact, and each plunges moderately to the southeast, pinching out or being truncated by a felsic dyke along the eastern margin.

Pyrite and pyrrhotite are the dominant sulphide minerals, though arsenopyrite is present as well. However, only a weak correlation has been made between arsenopyrite and gold.

Two drilling programs have confirmed the zone’s continuity along 400 metres of strike length, on 50-metre centres. Mineralization has been intersected down to 250 metres below surface.

Reported gold values vary from 1.32 grams over 2.4 metres of silicified arenite to 54.96 grams over half a metre of calc-silicate alteration. Mineralized intervals are generally less than a few metres long, though a 19-metre intersection of calc-silicate alteration averaged 3 grams.

Veining

The newly discovered West zone exists in the feldspathic arenite and has returned up to 33.22 grams over 2.95 metres. Gold also is found in quartz veins, and Claude reports that 7.28 metres of veining yielded 2.73 grams per tonne.

Both the Main and West zones are part of the Currie Rose property, which is subject to a 30% net profits interest held by Currie Rose Resources (CUI-V).

Regarding the Madsen gold project in Red Lake, Ont., Claude expects to receive an update from partner Placer Dome Gold (PDG-T) by September. To date, the major has sunk 17,103 metres in 31 holes, mostly to follow up on last year’s discovery of a zone north of the historic mine.

Placer can earn a 55% interest in the Madsen property by spending $8.2 million and tabling a bankable feasibility study by 2005. This year’s budget is set at $3 million.

The historic Madsen mine is in the same camp as Placer’s Campbell mine, with which it shares geological and mineralogical characteristics. For instance, the known targets are enclosed by a wide quartz-iron-carbonate vein system hosted by metabasalts resting atop a structural contact with a komatiite unit.

Claude also has interests in oil and gas wells. The operations contributed $794,000 to second-quarter revenue, slightly more than a year earlier, and $2.1 million to 6-month revenue, or 66% more than in the first half of 2002.

At June 30, Claude had $10.8 million in working capital.