Golden Shield places Mirado bet on hold

Like most junior exploration companies which attempt to make the leap from explorer to successful mine operator, Golden Shield Resources is experiencing some growing pains.

Exuberant at having pulled off one of this year’s more noteworthy deals — Golden Shield bought the old Kerr Addison mine and mill complex at Virginiatown, Ont., from Kerr Addison Mines in June for $38 million — it set out to expand ore reserves at the old property.

As part of the purchase, Golden Shield also bought a 42% interest in the Larder Lake project west of the mine and 50% of Kerr Addison’s interest in the Dasserat claim group covering an 8-mile area east of the mine in Quebec.

When the deal was completed, Kerr Addison had a 30% controlling interest in Golden Shield with an option on three million shares plus a $5-million debenture convertible at $4.50 per share. Toronto- based Consolidated TVX Mining also retained a 20% interest in Golden Shield.

But as Toronto-listed Golden Shield has recently found, the road to gold production is seldom easy. Gold Heist

Armed robbers recently escaped with a $300,000 gold bar from the Virginiatown gold mine. Although the gold bar is insured, neither the gold nor the armed robbers have been seen since.

In another setback for the company, Golden Shield recently reduced its 1988 production estimates despite the fact that renewed exploration at the Kerr Addison (where reserves are sufficient to last 10 years) has established possible reserves of 561,100 tons averaging 0.130 oz gold per ton on four new zones.

After predicting that combined production from Kerr Addison and the Mirado gold mine would reach 61,750 oz by 1988, Golden Shield is aiming for 50,462 oz following a shutdown at Mirado.

Having already mined 50,000 tons of open-pit and 20,000 tons of underground ore from the 100%- owned Mirado mine near Kirkland Lake, grades were found to be in the 0.12 to 0.17-oz range. Diamond drilling had previously indicated 345,000 tons of 0.34. “Unless gold prices rise drastically, I feel the Mirado project isn’t going to make it,” Golden Shield President Ray Mongeau told The Northern Miner.

With Mirado on hold, the 1,350- tpd Kerr Addison mill is currently operating 300 tpd below capacity. As a result, Golden Shield is currently arranging a major financing to increase its interest in the Cheminis Barber Larder project from 13% to 55% and provide additional tonnage for the mill. Annual Meeting

In his most recent production schedules, Mongeau says Barber Larder and Cheminis will produce a combined total of around 9,000 oz by 1989.

As announced at the company’s recent annual meeting, Golden Shield is negotiating a 20-million Swiss-franc loan from Geneva- based Banque Gutzwiller Kurz Bungener S.A.

Under the terms of a proposed financing a 20-million Swiss franc bond will be posted to Golden Shield at an annual rate of 5 3/4% over five years starting on Nov 30. At current conversion rates, the bond would be worth $18,384,000. Proceeds will be used to pay off a $5.4-million loan to the Canadian Imperial Bank of Commerce and $1.1 million to Gordon Capital of Toronto.

Golden Shield will also spend $2.4 million plus $800,000 to increase its interest from Eldor Resources in the Cheminis mine and Larker Lake project and install a crusher at the Kerr Addison mine site. After paying $800,000 to process the loan, Golden Shield would still have $6 million for working capital and future acquisiton purposes, said John Tait, Golden Shield’s secretary-treasurer.

In other news the company says it has been encouraged by exploration results at its 50%-owned joint venture Dasserat property two miles east of the Kerr Addison mine. Partner Kerr Addison Mines also has a 50% interest. Overlying Sediments

To test a mineralized structure which Kerr Addison Mines chief geologist Dale Hendricks says is covered by 2,000 ft of overlying sediments, the company is currently conducting 30,000 ft of diamond drilling.

“After drilling just six holes at the north end of the project we found sludge samples representing a gold-bearing mineralized porphyry,” said Hendricks.

With five drills working on the 2019 East, 1415 East, 1026 East and 38154 N-X-Cut zones, Golden Shield President Ray Mongeau said his company is currently attempting to prove up reserves at the Kerr Addison mine.

Underground diamond drilling during September tested the 3815- 79 N-X-Cu5t and intersected a true width of 42 ft grading 0.23 oz gold per ton and 21 ft of 0.17 oz.

Following that, he said the so- called Town, Mill and Lake zones have yet to be explored. Located 500 ft, 800 ft and 1,300 ft respectively south of No 3 shaft on the 1,000-ft level, they have largely been ignored by Kerr Addison mines.