Holmer revs up drills in Timmins

Spurred on by rallying gold prices, Holmer Gold Mines (HGM-V) has renewed drilling at its high-grade Timmins property in northern Ontario.

Between 1996 and 1998, Holmer outlined five near-surface parallel zones, dubbed Upper, Hangingwall, Main, Footwall and Ultramafic. Except for Ultramafic, all are associated with a 200-metre-wide corridor of intense deformation and alteration thought to represent the western extension of the prolific Destor-Porcupine fault.

The Upper, Hangingwall and Main zones are characterized by quartz-tourmaline veins containing visible gold. The Footwall zone occurs at the contact between mafic and ultramafic rocks and is characterized by finely disseminated microscopic gold associated with minor pyrite, albite and silica.

The Ultramafic zone is said to be more akin to mineralization found in the Kirkland Lake region: gold associated with quartz-tourmaline veins carrying variable amounts of coarse-grained pyrite. Curiously, however, the gold is localized in carbonatites.

In 1999, consulting firm Watts, Griffis & McOuat pegged resources at 1.4 million tonnes averaging more than 9 grams per tonne. The resource is based on a cutoff grade of 5 grams and includes material in the inferred and indicated categories.

Using a 10-gram cutoff and a minimum width of 1 metre, Holmer blocked out 176,000 tonnes in the Main zone grading 28 grams. As at the other shoots, mineralization lies near-surface and remains open down-plunge.

Holmer had signed on St Andrew Goldfields (SAS-V) to mine a portion of the resource by open-pit methods and process the material at its nearby Stock mill. However, the partnership was terminated after gold prices soured.

The current drill campaign will include 4,000 metres of infill and stepout drilling in the High Grade zone to justify the driving of a decline. The stepout holes will progress to the west.

Down-hole geophysics also will be carried out on the Ultramafic zone, where, in 1997, four of five widely spaced holes returned variable amounts of gold over widths of up to 7 metres, between 550 and 850 metres below surface. The deepest hole, no. 97-56, cut nine intersections about 800 metres down; of these, six ran between 6 and 20 grams per tonne.

Meanwhile, Holmer is attempting to advance the half-owned Loma Hierro high-grade silver deposit in Cuba. The remaining stake is held by state-owned GeoMinera.

In the mid-1990s, Holmer sank 164 core holes there and extracted 345 tonnes for metallurgical testing to outline a near-surface reserve of 254,000 tonnes grading 542 grams silver per tonne. The reserve sits in the Main zone, which is one of 10 shallow deposits known to exist at the property.

Silver is mainly tied up with chlorides, rendering the reserve amenable to cyanide leaching. More than 80% of the metal was recovered after less than four days under leach.

A 1999 feasibility study pegged capital costs at US$7 million, including preproduction expenditures, and the internal rate of return at 57%. Payback was to be expected in 12 months, a year before the reserve would be depleted.

Cash production costs rang in at US$2.20 per oz.

A silver price of US$5.50 per oz. was assumed in the study.

Holmer has since updated its projections and submitted a copy to the Cuban authorities for review. A company spokesman confirmed the project’s viability at a silver price of US$4.70 per oz., which is well below recent trading ranges.

Holmer is funding the Timmins and Loma Hierro projects using proceeds from separate debt and equity financings. The company borrowed US$6 million and privately placed 2.5 million units at 20 apiece.

The loan is repayable in five years and bears interest at 8% annually. A one-time closing fee of 6% was also payable, and the lender is entitled to 1 million warrants that can be converted to shares at 30 apiece within the first year of closing and at 35 each in the second. Holmer intends to repay the loan from operating cash flow.

The private placement has yet to be approved by regulators. A unit consists of a share and a warrant that can be converted at 30 within the first year of the deal’s closing and at 35 within the second year.