Pacific Trans gets closer to Ketza finance solution

Pacific Trans-Ocean Resources (TSE) has taken the first step toward satisfying its financial commitments at the Ketza River joint venture near Ross River, NWT., the company said recently.

Pacific Trans-Ocean has paid equal partner Canamax Resources (TSE) an $850,000 instalment on monthly cash calls owed for July and August and delivered the first 2,000 oz of gold to principal lender Lloyds Bank Plc.

The payments are sufficient to maintain Pacific Trans-Oceans’ 50% stake in the Ketza River mine which has suffered both cost over-runs prior to going into production, and lately a significant dilution factor.

While the start-up problems put Pacific Trans-Ocean in arrears to both Lloyds Bank and Canamax, the initial teething difficulties weren’t totally unexpected.

Due to the nature of the oxide orebody and the operation’s remote location, Ketza River is regarded as the riskiest venture in Canamax’s stable of new gold producers.

It is expected to produce 50,000 oz gold a year at an annual operating cost of $219(US) per oz.

To give the joint venture the kind of flexibility that they felt was necessary to mine one of the few underground oxide orebodies in North America, the partners spent an extra $6 million in preproduction development.

Using a square set mining method (in some areas) which requires a considerable amount of timbering and bolting has also contributed to higher costs at Ketza. The costly technique is necessary to cope with the soft nature of the ground and ore.

“The extra money allowed us to prepare more stopes and have a lot more flexibility in areas where we could mine the deposit,” said Rick Mazur, Canamax’s financial analyst. “In any small mining operation, it is important to have as many working places as possible to blend ore grades and meet mill head grades.”

About four months after the first gold was poured at Ketza, the joint venture operation is running at capacity and initial cash costs of $375 per oz are being met.

However, over the next few months operator Canamax will look at ways to minimize a dilution factor which is related to the backfill taken as part of the cut and fill mining method.

“We hope to get our costs down to about $320 per oz,” said Mazur who claimed that millhead grades are running at about 0.3 oz gold per ton compared to 0.44 oz anticipated in the feasibility study.

“We are just evaluating different ways of backfilling and we will also look at different mining methods when we get higher in the stopes,” said Mazur. James Greenough, Pacific Trans- Ocean’s vice-president finance is attem pting to arrange for a $3-million interim financing with a Canadian lender. “What we are trying to do is get some breathing room to more properly restructure financially,” Greenough told The Northern Miner.

“The terms of the financing will allow the company to meet its short term financial commitments,” he said. If necessary Pacific Trans- Oceans’ directors have offered to lend the company over $1 million as a bridge until the $3-million financing is in place.