Geomaque nears production decision at Vueltas del Rio

Junior producer Geomaque Explorations (GEO-T) has received an environmental permit for its Vueltas del Rio gold project in northwestern Honduras, paving the way for construction to begin in the coming months.

Initial engineering and cost studies, including site planning, mine design and metallurgical testing, are under way. These will be followed by engineering studies in the first quarter of 1998, with mine construction slated to begin in the second quarter.

The study will focus on the San Juan and Main zones, both of which are amenable to open-pit mining methods and heap-leach processing.

Previous operators outlined a combined oxide resource, to a depth of 40 metres, of 5.5 million tonnes grading 1.7 grams gold per tonne. Infill drilling at San Juan was completed by Geomaque in the third quarter, whereas drilling at the Main zone continues.

Since acquiring the project earlier this year, Geomaque has attempted to boost resources to the reserve category by drilling 25,000 metres on 20-to-25-metre centres. Results from the latest 23 holes drilled in the Guitarron and Caracol areas of the Main zone were recently released.

All 23 holes intersected oxide and primary sulphide mineralization, with some holes extending the oxide zone below the 40-metre mark. In addition, gold grades appear to increase near the Caracol area, in the western portion of the zone.

Gold values reported in oxide material varied from 0.56 gram per tonne over 4.75 metres to 9.12 grams over 3 metres. In unoxidized material, values ranged from 0.78 gram over 19 metres and 34.29 grams (cut to 34.286 grams) over half a metre.

Significant intersections in oxide material include:

* 42 metres (from 4 to 46 metres) grading 1.33 grams, including 3 metres of 9.12 grams, in hole 177;

* 38.95 metres grading 1.66 grams in hole 194, of which the first 21.95 metres graded 2.44 grams; and

* 24 metres (from surface) grading 2.14 grams in hole 200, of which 13 metres graded 3.68 grams.

Highlights of intersections in primary sulphide mineralization include: * 19 metres (from 29 to 48 metres) grading 0.78 gram in hole 197, of which the final 6 metres graded 1.62 grams;

* 16 metres (from 62 to 78 metres) grading 1.2 grams in hole 198; and * 6 metres (from 26 to 32 metres) of 2.45 grams in hole 199.

Unlike previous owners, Geomaque believes the underlying sulphide mineralization may prove minable. Initial results from column tests showed potential for the material to be heap leached.

“The sulphides were previously looked at only from a milling point of view,” says Geomaque’s president, John Patterson. “If it turns out that they are amenable [to heap-leaching], then we nearly double our resources just on what we’ve found to date.”

Patterson adds that the low-gold grade in the sulphide mineralization renders a milling operation uneconomic.

Results are still pending for 17 other holes drilled in the southwestern part of the Main zone.

Meanwhile, lower costs and increased output at the company’s only producing mine, the San Francisco, in Mexico’s Sonora state, have translated into record earnings.

For the three months ended Sept. 30, the junior earned US$796,000 (or 2 per share) on revenue of US$6.01 million, compared with earnings of US$426,000 (1 per share) on $3.68 million in the corresponding period of 1996.

Gold production for the third quarters of 1996 and 1997 was 18,268 oz. and 9,265 oz., respectively. For the quarter ended Sept. 30, the company sold 16,548 oz. of its production at an average price of US$363 per oz., compared with an average realized price of US$397 per oz. in the similar period of 1996.

Cash costs between the two periods dropped to US$211 from US$263 per oz., while total operating costs slipped to US$258 from US$298 per oz.

During the recent quarter, 680,000 tonnes of ore, mined at a stripping ratio of 3.9-to-1 and grading 1.08 grams gold, were crushed and placed on the leach pad.

Exploration drilling boosted reserves to 27.9 million tonnes grading 0.91 gram gold (excluding reserves which were mined out in the third quarter) — an increase of 20% over figures reported at the end of 1996.

Drilling at the current pit, which will continue until year-end, is proving up reserves downdip and to the east and west. In addition, a 30-hole program will test the Chicharra target, situated 2.5 km west of the mine.

For the first nine months of 1997, earnings amounted to $1.44 million (4 per share) on revenue of $14.53 million, compared with $1.26 million (4 per share) on $8.87 million in the corresponding period last year.

In order to focus on the San Francisco and Vueltas del Rio projects, Geomaque plans to sell to Orezone Resources (ORZ-M) its interests in three projects in Burkina Faso.

The company will transfer its interests in the properties to Orezone in exchange for 500,000 shares. As part of the deal, which is still subject to regulatory approval, Geomaque will subscribe for a private placement of an additional 500,000 Orezone shares, as well as retain the right to participate in future financings.