Defiance says adios Honduras

Proposed changes in Honduran mining regulations have prompted Defiance Mining (DM-T) to drop its option on the Zopilote gold property, in the western department of Santa Barbara.

Defiance says the planned changes would significantly increase costs and make it more difficult to permit and develop new mines. The company has already ceased exploring in the country.

Zopilote has been a joint venture between Defiance and Doublestar Resources (DSR-V). Earlier this year, Defiance agreed to take a 60% interest in the project and assume operatorship by completing a feasibility study by early 2005. The deal also required Defiance to contribute its recovery plant at the nearby Vueltas open-pit, heap-leach gold mine following that operation’s closure.

Zopilote has a historical resource of 10.5 million tonnes grading 1.3 grams gold per tonne, though this estimate does not comply with National Instrument 43-101 standards.

In the first half of 2004, Defiance lost US$87,000 (or nil per share), compared with a year-earlier loss of US$4.1 million (US17 per share). The smaller loss is attributed to lower operating costs and amortization on mining properties owing to the cessation of mining at Vueltas earlier this year. Revenue between the two periods fell 18% to US$6.1 million as gold sales slipped 30%.

Vueltas generated $1.9 million in cash in the first half — 51% better than a year earlier. The cash was used to repay debt of the same amount. Leaching of residual material on the heaps returned 14,926 oz. gold by the end of July. Rising of the heaps is expected to deliver a minor amount of gold during the balance of the year. Reclamation at the mine site is under way.

At the end of June, Defiance had US$4.5 million in cash, consolidated working of US$5.3 million, and no long-term debt.

Meanwhile, Defiance shareholders are slated to vote on a proposed merger with Rio Narcea Gold Mines (RNG-T) on Aug. 30.