ORE HORIZONS The Metalore gold discovery What stalled development?

The gold discovery by Metalore Resources not only sparked a staking rush into the Beardmore area of Ontario, but a stock market play as well. Announced by The Northern Miner in March, 1986, the news of Metalore’s discovery of a deep mineralized zone on its Brookbank project in Irwin Twp. ignited an explosion of buy orders for Metalore common shares on the Toronto Stock Exchange. Within days, Metalore’s shares surged to a high of $15 from $7.50 before settling back. Additional drill holes, released in the following week, signalled another move which saw the common shares sail past the $20 mark. During the first half of 1987 the shares reached a high of $34.

Although the market performance has been impressive, exploration and development of the deposit have been stalled. The gadfly in Metalore’s plans for early production is Ontex Resources, a company which holds a 10% net profits royalty in the Brookbank property. Last year Ontex filed a suit with the Supreme Court of Ontario against Metalore and its president, George Chilian, claiming damages of $500 million or return of the property.

Ontex optioned the property to Metalore in 1981. In 1983, Metalore purchased Ontex’s remaining interest in the claims and reduced the company’s interest to a royalty. Ontex alleges that Metalore withheld material information concerning results from certain drill holes which enabled the company to buy out Ontex’s interest. Metalore, which has filed a counter suit seeking damages from Ontex for undue delay of the project, dismisses Ontex’s allegations as being “entirely without foundation and an abuse of the judicial process.”

For Metalore the Ontex suit is more than a legal headache. It effectively stalls a major shaft-sinking program proposed by Hudson Bay Gold. The company, an affiliate of Anglo American Corp. of South Africa, signed an option agreement with Metalore giving Hudson Bay the right to earn a 100% interest in the property. Metalore would be left with a 2% net smelter royalty , or the option to increase it to a 60% net profits royalty after Hudson Bay pays back its original investment. However, the program, which would include the sinking of an 1,800-ft shaft, requires the consent of Ontex — consent which to date has been denied.

As a result, Hudson Bay has delayed underground exploration and is only involved with some surface exploration on site. The legal action between Ontex and Metalore is at the discovery stage with no resolution in sight.