Placement with Hemlo Gold helps Viceroy in California

A $10-million private placement with Hemlo Gold Mines will enable Viceroy Resource Corp. to purchase crushing, conveyor and stacking facilities for its Castle Mountain project in San Bernardino Cty., Calif. The $21-mil lion(US) gold mining operation is scheduled for production later this year, initially at 5,000 tons per day.

The original estimate of $12 million only included contract crushing which would have reduced capital requirements while increasing operating costs. Open pit mining, which will be contracted out, has been sent out for tender, says Viceroy President D. Ross Fitzpatrick.

Noting that Viceroy has $25 million in working capital and $10 million in notes from Hemlo Gold, Fitzpatrick concludes they are “in fairly good shape.” The crushing, conveyor and stacking system is the largest-cost component in the project, he adds. Incidentally, the system is similar to that used by Pegasus Gold at its Florida Canyon project in Nevada.

Final drawings for the system are being completed and Viceroy has applied for permits to begin construction. The company plans to increase production to 8,000 tons when warranted but he notes the gyratory crusher has a 12,000-ton capacity. The higher production rate will, of course, depend on reserves and a waste discharge permit is on hand for the rated capacity of the gyratory crusher. Reserves are currently 24 million tons grading 0.06 oz gold per ton in three zones.

Recent exploratory drilling identified two additional areas of interest. Widely-spaced holes extended the Lesley Ann deposit to the south and a new zone called the Hart Tunnel was located immediately southeast of the Oro Belle deposit, he points out.

The Bureau of Land Management has issued a decision letter approving Viceroy’s plan of operations for the Castle Mountain project. Two appeals have subsequently been filed against that decision, says Viceroy.