Hemlo Gold makes $10 Million loan to Viceroy

The Castle Mountain property owned 100% by Viceroy Resource Corp. (TSE) is another step closer to becoming a new heap leach gold producer in California.

A joint venture and credit agreement on the project was officially signed by Viceroy and Hemlo Gold Mines (TSE), and under its terms, Hemlo Gold has advanced $10 million to Viceroy for mine production purposes.

Based on a detailed engineering study completed in mid-1987, Viceroy intends to place the property into production at a rate of 8,000 tons per day. During the past year, the company raised about $25 million through private placement financings to provide funds for full- scale production and extensive exploration drilling.

The $10-million loan is subject to a convertible note whereby Hemlo Gold may exercise its right to acquire common shares of Viceroy at a price of $16.78 per share. Hemlo Gold currently has about a 12% interest in Viceroy.

In addition, Hemlo Gold was granted the right to earn a 50% interest on 54 sq mi of land not yet explored by Viceroy by spending $5 million over five years. Viceroy retains exclusive ownership of the 10-sq-mi core area which includes the Castle Mountain mine site located in San Bernardino Cty.

The project has total open pit mineable reserves of about 25.9 million tons grading 0.055 oz gold per ton. Drilling during late 1987 and early 1988 resulted in the discovery of three more mineralized zones; Viceroy’s preliminary estimate of the total geological reserves associated with the new deposits is 13.5 million tons grading 0.046 oz.

While metallurgical tests to date show the ore is clean, with little or no cyanide-consuming minerals or acid-generating sulphides, Viceroy reports that gold recoveries are not expected to exceed 65-70% as the ore is dense, with a portion of the gold encapsulated in silicious material. A crush size of -3/8 inch and a 120-day leach cycle has been recommended for commercial production.