New Goldstrike reserves a bonus to Franco-Nevada

A short-term pain for long-term gain mining strategy at the Goldstrike mine in Nevada, reduced Franco-Nevada Mining’s royalty and net profit returns during the first quarter of 1987.

Franco-Nevada retains a 4% net smelter royalty and 5% net profit interest on the Carlin goldbelt property which is being operated by American Barrick Resources. In operation since 1979, the heap leach mine produces 44,000 oz gold per year.

The Toronto-based company reported losses of $409,000 on revenues of $165,000 for the period ended June 30, up from a $190,000 deficit on revenue of $82,000 during the same period last year.

Franco-Nevada’s cash position stood at $3,365,000 at the end of the 1987 first quarter, up from $929,000 during the first quarter of 1986.

However, since Barrick has promised substantially increased production from Goldstrike during the second half of this year, Franco Nevada is anticipating a much improved second quarter. Surface oxide reserves at Goldstrike are now in excess of 20 million tons grading 0.053 oz gold per ton. That compares with 11 million tons at the end of last year. Deep exploration drilling at the Post- Goldstrike deposit has indicated possible sulphide reserves of over three million tons grading 0.3 oz.

“A new discovery has been made approximately 3,000 ft northwest of Goldstrike’s Post deposit,” says Franco-Nevada President Pierre Lassonde. “Eight holes have been drilled on this deposit indicating possible sulphide reserves of six million tons at an average grade of 0.2 oz gold per ton.” he said.

According to the company, this deposit remains open and will be delineated with further drilling. It straddles the boundary of the Franco-Nevada Post-Goldstrike land and seven drill rigs are currently in operation.

However he could not say how much his company will earn from an increased reserve estimate.

As reported (N.M., Aug 17/87) Franco-Nevada says it will spin out all its non-producing assets to a new wholly-owned subsidiary called Euro-Nevada.

The new company will pay for this acquisition and finance its operations by offering its shareholders rights to purchase 12 shares for $1.05 each for each share of Euro- Nevada received via the dividend.

A preliminary prospectus was filed recently with regulatory authorities.

Franco-Nevada shares were trading recently on the Toronto Stock Exchange at $14.75, just below its 52-week high of $16.75 but well above its $1.55 low point.