After spending almost two years in a fruitless struggle to achieve profitability, Skyline Gold (TSE) plans to suspend mining operations this fall at its Johnny Mountain gold project in northwestern British Columbia. Ron Shon, chairman, said the decision was directly related to the company’s inability to continue to develop new reserves at the Stonehouse deposit “with ore grades that would be economical to mine at current gold prices.”
Shon said the company would retroactively charge $30 million of development cost against earnings in its second-quarter financial statement.
The announcement of the mine closure comes less than a month after the British Columbia government announced plans to build a road into the remote Iskut River camp in 1991. As it stands now, Skyline relies on air transport to reach its mine and to haul concentrates to Wrangell, Alaska.
In the past four months, however, the price of gold has declined about 12% to the US$350-360 range.
The 350-ton-per-day Johnny Mountain mine, the first to produce in the Iskut River region, has turned out 75,000 oz. gold, 123,000 oz. silver and 1.96 million lb. of copper from the Stonehouse deposit since production began in August, 1988.
Skyline has other exploration targets between the Stonehouse deposit and the Snip deposit (being developed by Cominco and Prime Resources) at the base of Johnny Mountain that will be tested in an “accelerated” exploration program this summer.
The company is seeking a major company to explore and develop its acreage, including already defined targets at the Bronson Creek, Bonanza West, C-3, Windsock and Cornice prospects.
Should new reserves be found, Skyline noted that construction of a road into the Iskut River camp would lower operating costs and be “an important factor in any decision to resume mining operations in the future.”
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