Franco-Nevada’s 1990 plans focus on Hemlo gold claims

An after-tax profit of $3.5 million reported recently by Franco- Nevada Mining (TSE) was attributed by the company to a royalty held on American Barrick Resources’ (TSE) Goldstrike gold mine in Nevada. But Toronto-based Franco- Nevada is already looking at ways to bring the newly acquired Interlake gold property near Hemlo, Ont., into its financial picture in the near future.

Two months ago, Franco-Nevada paid International Interlake Industries (VSE) $1.65 million for a 100% stake in 31 claims containing deep extensions of the Golden Giant mine of Hemlo Gold (TSE), and the Williams mine of Teck (TSE) and Corona (TSE). Together the two gold mines produced about 900,000 oz. last year.

As the property’s Lower zone, hosting 2.9 million tons of grade 0.35 oz. gold per ton, is located about 3,000-5,000 ft. below surface, production potential has always appeared to be a distant prospect.

The depth of the reserves and a prohibitive 40% net profits royalty no longer held by Interlake explains why Teck and Hemlo Gold were willing to give up an option on the property. The expense involved in reaching such deep-seated reserves also proved prohibitive to their development, said a Toronto analyst.

But following an assessment of the project’s in-situ gold mineralization, Franco-Nevada Chairman Seymour Schulich is attempting to structure an agreement that might attract at least one major to bid for the property.

According to a study completed recently by Watts, Griffis & McOuat, the property’s three main zones contain 9.5 million tons of grade 0.19 oz. gold.

“We could bring it into production much sooner than anyone thinks,” said Schulich, who believes it could be developed in five years, not 10 as is commonly estimated. That message will be relayed to company investors during a tour of six European cities this week.

Meanwhile, Franco-Nevada owns a 4% net profits and 5% net smelter royalty on the Goldstrike mine where production is expected to increase to 900,000 oz. in 1992 from 207,000 oz. last year.

For the year ended March 31, 1990, the company reported net earnings of $3.5 millon or 29 cents per share, compared with $1.5 million or 13 cents per share in the previous year. Revenues for the year increased to $5.8 million from $3.2 million last year.

Franco-Nevada reported fourth- quarter net earnings of $1.3 million or 11 cents per share on revenues of $1.9 million compared with $630,000 or 5 cents per share on revenues of $1.4 million during the 1989 quarter.

The company recently declared a 10 cents per share dividend payable March 30 to shareholders of record March 15.006 0508,0206,0304,0008 Franco-Nevada Mining (TSE) $000s except per-share items Year ended March 31 1990 1989 Revenue $5,828 $3,203 Net earnings 3,518 1,516

per share 0.29 0.13004