Tough times for Golden Shield; management team main shareholder

Kerr, which sold the long-producing Kerr mine in Virginiatown to Golden Shield in 1987, has now sold its 22% interest in Golden Shield, for just $10, to three officers of the company: A. D. G. Reid (chairman), Raymond Mongeau (president) and John Tait (chief financial officer).

Last year it was reported (N.M., May 16/88) Kerr was negotiating with DRX Inc. in the United States for the sale of its Golden Shield holdings for $12.6 million.

Golden Shield, which produced 31,159 oz from the Kerr mine and about 3,070 oz from its Barber Larder Lake project, has faced a number of obstacles since taking over the Kerr mine, including a steady drop in the price of gold.

Reid said at the end of 1987, forward gold sales netted the company $630(C) per oz; by May, 1989, that price had fallen by almost 30%, to $448. “On an annualized basis, this projects to a difference of more than $6 million,” he said.

A proposed flow-through offering in 1988, to provide funds for exploration of the Larder Lake project, fell through, resulting in a shortfall in working capital, Reid said. Several contractors have brought litigation against the company and a construction lien has been registered on some properties.

Underground exploration of the Kerr mine was performed last year, resulting in the discovery of new zones. Mine reserves have been increased from one million tons grading 0.113 oz gold per ton at the end of 1987 to 3.2 million tons grading 0.123 oz at the end of 1988.

Milling results for 1988 were disappointing. Head grade averaged 0.099 oz, below what was forecast, and the gold recovery dropped by 7.3% to 90%.

The company attributes the milling problems to metallurgical troubles associated with the processing of Barber Larder Lake ore with Kerr mine ore. Milling of the Barber Larder Lake ore has been discontinued. For 1988, Golden Shield recorded a net loss of $6.9 million and a deficit at the end of 1988 of $18.7 million. During the first quarter of 1989, the company reported a loss of $1 million, compared with $169,045 for the same period last year.

During the quarter, with the head grade averaging 0.1 oz, production totalled about 8,780 oz.

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