Rayrock Yellowknife looking good for `89

While the company continues to be largely gold oriented, geologist Hutton’s hopes are high for a copper project in Chile, for which a production decision could come before year-end. This would be carried out through Midland Gold Corp. (VSE), a 56%-owned exploration and mine development company active in Costa Rica, Ecuador and Chile.

Strong on exploration and diversification, Rayrock ploughs back roughly 35% of its cash flow into a continuing search for new mines. “Our objective is to increase the value of our shares. And we’ll stick to mining — the business we know best,” says David Crombie, its president and chief executive officer.

Rayrock’s gold mining operations continue to be concentrated in the western United States where it has established an enviable track record for low-cost production. It operates the Pinson, Preble and Dee open pit mines in Nevada, owning a 26.5% interest in the Pinson and Preble and 29.3% of Dee. These produced 13l,480 oz last year at a cost of $170(US) per ounce.

Soon to come on stream will be the new Marigold operation in northern Nevada in which it holds a direct 23.3% interest and is project operator. This highly promising, 30-sq-mi property is being developed as a combined milling and heap leach operation. A 1,250- ton mill will treat the higher grade ore while lower grade material will be heap leached at an annual rate of 730,000 tons for a combined output of 60,000 oz annually.

Marigold already has four defined orebodies with reserves of 4.3 million tons of mill grade ore at 0.105 oz and 7.6 million tons of heap leach ore grading 0.026 oz, good for 10 years of operation. Marigold has an exploration budget of $850,000 for this year, with the high probability that additional orebodies will be discovered. Copper mine looms

Feasibility work is now under way at the Ivan copper property in northern Chile on which $1.4 million was spent last year. The orebody, which consists of both oxide and sulphide material, is a tabular shaped deposit 650 ft long with widths of 65 to 130 ft. Partially developed underground, it extends to a depth of at least 1,150 ft and is now estimated to contain 3.8 million tons grading 2.9% copper.

Present thinking is for an 800-ton flotation mill and a 1,000-1,500-ton heap leach plant, Hutton told The Northern Miner following the meeting. Cost of such a project would run to $25-$30 million. With a well-developed infrastructure and a good labor force in the area, cost to produce a pound of copper is estimated at 50 cents (US).

Rayrock now owns 100% of Western Ag-Minerals Company, a highly profitable producer and marketer of fertilizer, which it purchased for $22.6 million. “This investment gives Rayrock a base for long term cash flow and earnings,” Crombie told the meeting, pointing out that it generated a cash flow of better than $5 million last year from gross sales of $24.9 million.

A specialty fertilizer, this is mined in a highly efficient mechanized underground operation near Carlsbad, New Mexico, with ore reserves good for 40 years at the present extraction rate. “Western Ag now has a replacement value in excess of $100 million,” Crombie said.

Referring to its 63%-owned Discovery West Corp. (TSE), Crombie said “we are looking forward to a real increase in oil-gas production in the next few years. That company’s 1989 exploration budget is approximately $4 million.”

Rayrock has recently taken a substantial equity position in Platinova Resources (TSE), and has teamed up with that company on a gold project in Greenland.

Rayrock’s first quarter earnings rose to $1.45 million or 15 cents per share, up from $1.11 million or 12 cents in the same period last year. Revenue was $14.68 million compared to $8.15 million reflecting in part the increased ownership of Western Ag-Minerals.

For the full year Rayrock estimates an operating profit of $17.9 million from revenues of $62 million. Of this profit, gold is expected to account for 57% (half its production has been sold ahead at $446(US)), 36% from industrial minerals and 7% from oil-gas.

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