Golden Reward expansion in jeopardy

There’s gold in them thar ski hills. And if mining permits are not granted, that is where the gold will stay.

The risk that it may prove difficult to get approval for expansion of the Golden Reward mine near Lead, S.D., has induced Wharf Resources (TSE) to write down US$9.5-million on its investment in the project.

Wharf owns 60% of Golden Reward and Dakota Mining (TSE) holds the remainder.

Developing unpermitted reserves would disrupt the surface of a local cemetery and could affect the operation of a ski hill. To move the cemetery, Wharf must get consent from the families of the interred. The company will also have to arrange for surface rights and furnish evidence that mining would not interfere with adjacent land uses, such as the ski hill.

Wharf took a US$1.1-million writedown in 1994 to account for reserves near the cemetery. Reserves in other unpermitted areas contain 314,000 oz. gold.

Permitted reserves will be mined out by the end of 1996. And while the project continues exploration on permitted ground, Wharf has announced it will shut down the mine once reserves are depleted.

The new writedown will cut Wharf’s 1995 earnings by US49 cents per share, and Goldcorp (TSE), which owns 50.3% of Wharf, will earn 25 cents less per share. Dakota Mining’s CFO Robert Gilmore says Dakota “can’t conclude that a writedown is warranted,” and does not expect it will be hard to get permits or deal with local landowners.

Goldcorp has also proposed to fold Wharf into the parent company and exchange 0.56 of a Class A subordinate voting share of Goldcorp for each share of Wharf. The arrangement is subject to shareholder and regulatory approval.