Proceeds of Grant gold to solve Silverado problem

Living up to expectations has generally been a problem at Silverado Mines’ (VSE) Grant gold project near Fairbanks, Alaska. Milling at the troubled mining operation recommenced Dec 1, and since that time 2,700 oz of gold have been recovered from 27,400 tons of feed; this works out to an average head grade of approximately 0.11 oz gold.

Initial throughput was provided from a stockpile of about 10,000 tons of material remaining from underground mining in 1985. Surface mining began during January in the Ethel zone and later from the Elmes zone which is located on the nearby Dobbs property. Trenching and drilling along the Ethel- Elmes structure has been directed towards finding open pit ore.

Additional modifications were made to the mill at year-end and a larger crusher was installed on a rental purchase basis. By the end of February, the mill was handling 277 tons per day, Silverado notes. The company also says that recent mining on the Elmes ore system has disclosed good grade ore “which is sporadically raising millhead grades to the 0.2-0.5 oz gold- per-ton level.”

In April, 1984, Silverado entered into a joint venture agreement with Aurex Inc., an Alaskan corporation controlled by Marubeni America and Tri-Con Mining a related company. Under the agreement, Silverado contributed the Grant mine and Range Minerals’ No 1 properties located near Fairbanks in consideration for a 55% interest in the venture.

Tri-Con earned a 5% interest and Aurex a 40% interest in the Grant mine project joint venture through their pro rata expenditure of $5 million (US). Equity contributions in excess of the $5 million were made by Silverado, Aurex and Tri- Con. In October, 1985, Tri-Con sold its 5% interest in the Grant mine project to Aurex and those rights were transferred Oct 5, 1985.

The following January, Aurex withdrew from the project, returning its 45% to Silverado; but Aurex is entitled to a return of its investment of $7.3 million on a non- interest-bearing basis. The repayment could also include funds from the sale of Grant mine assets including the property itself.

In a filing with the Securities and Exchange Commission in Washington, D.C., Silverado noted that “gold production from Dec 1, 1987, through March 31 have not generated sufficient cash flow to meet the company’s operating, tuneup, modification, exploration and capital costs for the Grant mine.” But the company said it was confident that proceeds from surface mining would “eventually satisfy its cash requirements necessary to sustain current levels of operation.”

As of Feb 29, the company had a working capital deficiency of $477,393 and current liabilities of $1.7 million. At last report Silverado was negotiating with the purchaser of the gold output from the Grant mine for a line of credit to be repaid in gold.