Novamin near development of zinc and silver properties

Gold, zinc, silver, tungsten, molybdenum, bismuth, tin — Novamin Inc . holds properties with deposits of all those minerals and is on the verge of moving from exploration to development on two of them.

What’s more, an $8-million public offering in the near future should clean up a balance sheet now skewed as a result of the company’s formation in late 1985. That formation saw the company take the shell of Montreal Exchange listed Americ Mines, consolidate the shares and essentially buy out all the assets of Sulpetro Minerals.

The 95%-owned Rundle gold property in Ontario’s Swayze area about 65 miles southwest of Timmins, is the company’s prime focus at the moment. However, it is a zinc property near Ottawa and a silver property at Cobalt that offer the best chance of early development says President Robert Ginn.

Novamin’s 85%-owned Cadieux zinc property just outside Renfrew, Ont., might be the first to go from the exploration stage to development. The Cadieux property has a relatively small reserve figure outlined to date — about 800,000 tons — but it averages a grade of 11.2% zinc and 1.2% lead.

Management considers that a minimum of 1.2 million tons of such ore is necessary to justify mine development, and further drilling is planned for the property this year. Eldor Resources holds the remaining interest.

The 100%-owned Canadaka silver property near Cobalt, Ont., will be the subject of a $3-million exploration program over the next 30 months that will see Canacord Resources earn a 30% interest. Underground work is slated for early on in that program.

Canacord, in which Novamin holds a small equity interest, describes the property as “one of the largest single corporate land positions in the Cobalt silver camp.”

Novamin, with a staff of 18 including 10 in the field, is operator of those three projects. In fact, it is operator at most of the projects in which it holds an interest.

At Rundle, where previous work established 172,600 tons of reserves grading 0.258 oz gold per ton, the company has spent about $450,000 on drilling this summer. Results include 25.3 ft grading 0.262 oz in one zone and 13.8 ft grading 0.426 oz in another zone.

Some 23,000 ft of drilling in 21 holes this summer has expanded the mineralized area to a length of 1,700 ft from about 600 ft with ore grade intersections on both the most easterly and most westerly sections drilled.

Previous underground work by Hollinger Gold Mines established the 172,600 tons of reserves largely in the B zone. The A zone was first intersected in 1985.

The B zone has been tested along a length of 1,740 ft and near the shaft section to a depth of 1,230 ft. Significant values include:

Grade

Section Vertical (oz Core

depth depth (gold/ Length Hole # (ft) (ft) ton) (ft)

35 1150 S.E. 500 0.294 9.2

25 1837 S.E. 850 0.262 25.3

26 1837 S.E. 518 0.382 26.2

34 1837 S.E. 1,230 0.172 9.8

29 1900 S.E. 945 0.081 26.0

28 1970 S.E. 807 0.097 8.2

24 2034 S.E. 607 0.094 7.2

30 2230 S.E. 492 0.147 10.4

31 2625 S.E. 700 0.132 5.0

32 2890 S.E. 525 0.151 9.5

Lower values have also been encountered within this extensive zone of mineralization.

Of eight holes drilled to test the A South zone, an extension of the A zone, five intersected significant values as follows:

Grade

Section Vertical (oz Core

depth depth (gold/ Length Hole# (ft) (ft) ton) (ft)

33 1770 S.E. 443 0.090 14.8

23 1900 S.E. 443 0.426 13.8

29 1900 S.E. 853 0.620 3.3

27 1970 S.E. 246 0.058 8.2

The company plans to spend about another $450,000 on drilling this year.

Novamin’s financial statements should change markedly if the major public offering it is proposing is successfully completed. For example, when the company was formed it bought all the shares of Sulpetro Minerals from Sulpetro Ltd. and formed Novamin Resources, a wholly-owned subsidiary of Novamin Inc.. It had to pay a relatively small amount of cash, plus a $3.5-million promissory note and $7.5 million in redeemable preferred shares. In return, it gained all of the properties then held by Sulpetro.

Since then it has written off almost $5 million of property assets, the main reason for its $5.2-million loss for the year ended April 30, 1986, which in turn was the largest factor in increasing its deficit by the end of the fiscal year to $5.9 million.

Since its formation the company has also increased its interest in the Rundle property to the 95% it holds today and acquired a 100% interest in the Fostung property near Espanola, Ont., which contains tungsten, molybdenum, gold, silver, bismuth and tin mineralization.

A financing this fall will allow Novamin to cancel the promissory note and buy back all of the preferred shares for cancellation. In return it will pay Sulpetro $6.5 million and 400,000 commons shares of Novamin.

Dr Ginn is confident the financing will be successful because of the quality of the properties the company holds and because of the strong shareholder base already established. However, he would also like to see the public float of shares increase in order to improve the liquidity. Novamin stock is currently a thin trader on the Montreal Exchange because of the small float.

The balance of the funds from the offering would also improve the company’s working capital position. At the close of the 3-month period ended July 31, the first quarter in the company’s 1987 fiscal year, working capital stood at about $965,000.

The financing will not raise flow- through money which has to be directed to exploration expenses only. However, warrants will be attached, exercisable in 1987, that will entitle warrant holders to purchase flow-through shares. If those warrants are exercised it could provide the company with another $8 million to go toward explortion.