Investment Comment Gordex is worth a look

While investors scurry to find a shelter from the recent stock market debacle, gold could still provide a refuge from the recession which analysts say could be just around the corner.

Current thinking states that to avoid a long recession governments may pump money into the economy and gold companies could be the first to benefit.

If that’s the case, a junior gold play like Gordex Minerals which was recommended recently by a British brokerage house as a definite buy, could be worth looking at. Like some of the best junior gold stocks, it has proven reserves in the ground and seemingly plenty of growth potential.

Since British investment firm Kleinwort Grieveson Securities last visited the company’s Cape Spencer mine in Saint John, N.B., the property has been brought successfully into commercial production.

Canada’s first primary heap leach mine is expected to produce 7,500 oz this year at a cash cost of $200(US) per oz and approximately 11,000 oz in 1988. As reported (N.M., Aug 24/87) reserves delineated by 92 drill holes now stand at one million tons grading 0.057 oz gold per ton. Anomalies Found

However, exploration at Cape Spencer has focused on only 3% of the 1,500-ac property and there seems to be lots of potential to increase those reserves considerably. Meanwhile several other anomalies found close to the existing reserves in the previous program will be drilled in 1988. As part of a $2.5-million expansion, Gordex is converting the operation from heap leaching to a vat leaching mode. By simply covering the ore pile with a light nylon tarpaulin, Gordex will be able to operate 24 hours per day year round.

At the same time, Gordex is also expanding its production to reach 100,000 tons this year rising to 250,000 tons in 1988. The company has also acquired another gold property on the Canadian eastern seaboard.

Located 60 miles southwest of Halifax, N.S., near Bridgewater in the old “Molega” gold mining district, the property consists of a development licence of 43 claims.

Attracted by recent drilling which intersected 22.4 ft of 0.34 oz, Gordex will spend $1 million on exploration and development work to obtain a 100% working interest.

Gordex shares traded recently on the Montreal Exchange at $1.81 in a 52-week range of $2.90 and $1.35. When the Kleinwort report was published, Gordex had 3.44 million shares outstanding and a market capitalization of $8.08 million. Convertible Note

At that time the company was preparing a prospectus for a Toronto Stock Exchange listing. Kleinwort recently placed $700,000 of a 10% convertible note as part of a $1.4- million fund raising. A tse listing would qualify the convertible note in addition to raising $3.4 million.

If the listing is completed by the end of November, Kleinwort says the stock can be forcibly converted at $2.35 per share.