Royal Oak secures financing for Kemess

A group of institutions have committed to purchase US$45 million of secured notes from Royal Oak Mines (RYO-T), conditional to satisfactory documentation and completion of due diligence.

The funds are the last piece of financing that Royal Oak requires to complete construction of the $430-million Kemess South gold-copper mine project in north-central British Columbia.

Construction of the project began in July 1996, and is approximately 82% complete. As of Oct. 31, the company had spent approximately $295 million.

To date, Royal Oak has committed about $422 million to purchase orders for equipment and construction contracts.

The company has already received $130 million in payments from the British Columbia government, as part of a $166 million economic assistance package that was arranged as compensation for the expropriation, in 1993, of the Windy Craggy copper-cobalt deposit.

The Kemess South mine is slated to start up in April 1998. Production is forecast to average 250,000 oz. gold and 60 million lbs. copper per year over a mine life expected to exceed 16 years. The cash cost is projected to average US$79 per oz. gold, based on a copper credit of US$1 per lb., and the operating costs are pegged at $6.75 per tonne of ore.

Undiluted minable reserves are calculated at 204 million tonnes grading 0.22% copper and 0.62 gram gold per tonne, with a stripping ratio of 1.28-to-1. The reserve estimate is equivalent to 4.06 million oz. gold and 990 million lbs. copper.