Geomaque extends hand to the market

Cash-strapped Geomaque Explorations (GEO-T) will attempt to raise $1.5 million by privately placing 22.2 million treasury shares.

Haywood Securities is brokering the deal, which values the shares at 6.75 apiece and subjects them to a four-month hold period. After that, they can be traded freely on the open market.

Geomaque plans to use some of the net proceeds to continue exploring around the Vueltas del Rio heap-leach mine in Honduras. In May, the mine became the junior’s sole producer when the San Francisco mine in Mexico drained its last drop of gold.

Earlier this year, Geomaque halved Vueltas del Rio’s reserves to better reflect mining costs and recovery rates. The pit shell now encloses about 2 million tonnes of ore grading 2.47 grams gold per tonne, though several areas nearby demand follow-up study.

Vueltas del Rio cranked out 14,760 ounces in the first half of the year at a cash operating cost of US$308 per oz. Production, costs and operating cash flow all improved in the second quarter, reflecting the completion of the new leach pad and concurrent renewal of mining in February.

In late 2001, about a year after blasting the first bench, Geomaque suspended mining after recoveries from the original pad failed to live up to expectations. The suspension was followed by a general restructuring of the company’s debt and credit agreements.

Recovery rates in the new pad surpassed 70% in the second quarter and are expected to gradually increase to the targeted rate of 80%. Combined with improved mining rates, the increase should result in more metal production.

Nevertheless, Geomaque remains firmly in the red, having lost $1.8 million (or 2 per share) in the second quarter and $2.6 million (5 per share) in the first half of the year. Revenues in the periods topped $3 million and $4.6 million, respectively.

On June 30, Geomaque had $480,000 in cash and a working capital deficiency of $1.3 million. The company had just over $15 million in total assets and $11 million in total liabilities.

Geomaque has just under 118 million shares outstanding. This excludes any shares related to the private placement.