MinVen writes off Blackdome, but gold production continues

Denver-based MinVen Gold (TSE) has written down the carrying value of its Blackdome gold mine near Clinton, B.C., and is also looking to sell its one-third interest in the Golden Reward mine near Lead, S.D. The Blackdome mine has been a small (200-ton-per-day) but successful high-grade producer since the start of production in 1986. The underground mine turned out 53,384 oz. gold and 116,236 oz. silver to MinVen’s account last year at an average cash cost of US$306 per oz. of gold. But James Anderson, president of MinVen, said the grade of ore being mined at Blackdome declined significantly beginning in December.

“Though this is not unusual for Blackdome in a given month, the ore grade has not improved through March, 1990,” he stated.

The average head grade at Blackdome was 0.69 oz. gold per ton in 1989, and current reserves are reported as 69,074 tons with an average grade of 0.49 oz. gold and 2.17 oz. silver.

Anderson also noted that MinVen was “disappointed” in its efforts to replace the high-grade gold ore mined at Blackdome over the last year. As a result, the company reduced the book value of the mine by $17.37 million on a pretax basis in the fourth quarter of 1989.

Despite the writedown, Anderson emphasized that operations at the mine would continue, including an exploration program focused on an area showing “strong potential” to the south of the mine.

While news that reserves and grade are in decline at Blackdome was not unexpected, MinVen’s decision to sell its one-third interest in the Golden Reward mine was more of a surprise because it was a fairly recent (early 1989) acquisition.

Golden Reward is a seasonal heap leaching operation, completed in late 1989 at a capital cost of about $26 million, considerably higher than originally estimated because of delays and increased environmental requirements.

The mine was commissioned in November and full operations are expected in mid-1990. According to United Coin Mines (TSE), which has a 662/3% interest, Golden Reward is expected to produce 75,000 oz. gold and 200,000 oz. silver annually.

Under the joint venture agreement, MinVen is required to give United Coin 30 days’ notice and the opportunity to buy, although it is not bound to accept a United Coin offer. Wharf Resources (TSE) is a substantial shareholder of United Coin and operates a heap leach mine adjoining Golden Reward.

Anderson said that funds raised from the sale would be used primarily for debt reduction and capital projects at other MinVen properties with greater growth potential.

“While the project has a good future, we believe that MinVen can make good use of proceeds from the sale to pursue other, more significant opportunities,” Anderson stated.

A spokesman from MinVen declined comment on what those opportunities might be, or if they possibly represent new projects that the company might be planning to acquire.

Because of the Blackdome writedown, MinVen revised its previously released financial results for 1989. The company’s consolidated revenues for the year ended Dec. 31 totalled $48.4 million on sales of 98,085 oz. gold, compared with consolidated revenues of $34.2 million on sales of 68,131 oz. gold in 1988. The company’s production is from five operating mines in the U.S. and in Canada.

Primarily as a result of the writedown, MinVen recorded a consolidated 1989 loss of $16.4 million or 62 cents per share, compared with earnings of $91,000 or 1 cents per share for 1988. MinVen Gold (TSE) $000s except per-share items Year ended Dec. 31 1989 1988 Revenue $48,405 $34,205 Net earnings (loss) ($16,441 ) $91

per share (62 cents ) 1 cents