U.S. REPORT (December 23, 1991)

Homestake Mining (NYSE) and Goldstake Explorations (TSE) have suspended work on the Whitewood Creek tailings project in South Dakota until gold prices improve.

The project, a 50-40-10 joint venture among Homestake, Goldstake, and Strawberry Hill Mining contains proven reserves of 14 million tons grading 0.05 oz. gold per ton. A permit for production was expected to be granted by the Department of Environment and Natural Resources by the end of this year.

Idaho-based Coeur d’Alene Mines (NYSE) reports net income of US$804,000 on revenues of US$14.3 million for its 1991 third quarter ended Sept. 30. This compares with third-quarter 1990 net income of US$448,000 on total revenues of US$17.1 million.

The company produced 16,397 oz. gold and 1.47 million oz. silver during its latest quarter, compared with 20,207 oz. gold and 1.52 million oz. silver produced during the 1990 third quarter.

Coeur d’Alene produced 4.15 million oz. silver and 43,912 oz. gold during the first nine months of this year, compared with 4.09 million oz. silver and 47,800 oz. gold produced in the first nine months of 1990.

A net loss of US$472,390 was reported for the 9-month period, compared to net earnings of US$3.59 million a year earlier.

Pending government approvals, Coeur d’Alene expects its proposal to merge with Callahan Mining (NYSE) will be submitted to a shareholder vote in December.

Callahan reports a loss of US$8.5 million for the first nine months of this year, compared with a net loss of US$1.34 million in the same period of 1990. This year’s third-quarter loss was US$6.4 million, a significant increase from the 1990 third quarter when a net loss of US$345,000 was reported. The company said its third-quarter results include previously announced writedowns of its Ropes gold mine in Michigan and of the Caladay project in Idaho.

Toronto-based Morgain Minerals (VSE) has purchased the Higgins polymetallic prospect in New Hampshire for US$85,000.

Sold by Standard Metals, a private New York-based company, the property was originally explored for its sulphide production potential.

But a polymetallic volcanogenic massive sulphide deposit within the bounds of the property is estimated to be at least 320 ft. wide and stretches for an inferred strike length of 3,000 ft.

Morgain believes the deposit could contain reserves in the 12-20 million range. Its estimate is based on one hole drilled in the 1970s, which returned an average of 5.84% zinc, 1.54% lead and 0.48% copper over a true width of 32.5 ft. Although the hole started and ended in mineralization, only the massive sulphide portion was assayed. The core was not assayed for gold and silver.

To protect the downdip extension of the main sulphide zone, Morgain has optioned three contiguous properties for initial cash payments of $6,000. In other areas of New Hampshire, the company has optioned three massive sulphide prospects for initial cash payments of $5,000.

Morgain says it is currently discussing financing for a major exploration program with a number of mining companies and private groups.

A group of mining professionals is seeking to acquire the North American mining and exploration assets of Asamera Minerals (TSE), including its key asset, the Cannon gold mine in Wenatchee, Wash.

A low-cost operation, the Cannon mine has produced an average of 150,000 oz. gold per year for six years, with associated silver production at more than 200,000 oz. per year.

The mine is the centrepiece of a minerals-based portfolio put on the block by Gulf Canada Resources, Asamera’s parent company. Over the past several years, a number of companies have been involved in negotiations to acquire Asamera’s assets, but no deal was ever concluded.

The latest acquisition effort is led by Mark Anderson, who has managed the joint venture Cannon mine since 1986. Asamera holds a 51% interest and is operator, while Breakwater Resources (TSE) holds the remaining interest. Anderson said he left Asamera to concentrate on securing the financing necessary to buy Asamera Minerals, including its Canadian exploration assets, even though he views his chances of success at one in four.

“I did it to avoid any perception of conflict of interest by potential sources of financing,” he said.

Anderson’s team includes Allan Marter, former chief financial officer of Crown Resources, and Gaylord Watkins, a Calgary-based lawyer and exploration geologist. The group is looking at traditional bank financing as well as equity investor participation.

Besides the Cannon mine, which has minable reserves of over three years and substantial exploration potential, Asamera’s portfolio includes a prospective mineral property in Nevada and gold exploration projects in Canada’s Northwest Territories where recent drilling returned encouraging values.

Lower metal prices appear to be taking their toll on the bottom line of Hecla Mining (NYSE), which reported a loss of US$4.7 million on revenues of US$28.9 million for its latest quarter ended Sept. 30. This compares to earnings of US$600,000 on revenues of US$46.7 million in the 1990 third quarter.

Total gold production fell to 37,963 oz. in the third quarter from 59,653 oz. in the comparable period last year, which the company attributed to lower production from the Yellow Pine heap leach operation in Idaho. Hecla said its Republic mine in Washington is continuing to perform well, producing nearly 60,000 oz. gold so far this year. The underground mine project is also reported to have good potential for discovering additional ore reserves.

The company’s silver operations are continuing to suffer losses due to the depressed price, with falling lead and zinc prices also having a negative effect on revenue realized from the Lucky Friday mine in Idaho and the Greens Creek mine in Alaska.

But Hecla said the operations continue to run efficiently, with both mines achieving a lower cost-per-ton during the first nine months of 1991 than in the comparable period last year.

Consumption of rhenium in the U.S. in 1990 decreased by about 6%, the U.S. Bureau of Mines reports.

In the U.S., rhenium is recovered as a byproduct of molybdenite recovered as a byproduct of porphyry copper ore from seven mines in the western states. Users are supplied by domestic production and imports, with the latter having a large increase last year.

The major uses for rhenium last year were in bimetallic platinum-rhenium catalysts (to produce high octane) gasoline and in jet engine high-temperature superalloy components.

Azco Mining, a private Delaware company, is planning to merge with International Baron Resources (VSE). Azco reports that it owns four “major copper deposits,” the most advanced being the Sanchez project near Safford, Ariz.

A final feasibility study completed by consulting engineers, Fluor Daniel Wright, recommended the project be brought into production at a projected output of 56 million lb. of cathode copper per year.

Using heap leach solvent extraction and electrowinning technology, the project is projected to produce copper at a cash cost of US49 cents per lb. The Sanchez deposit, as defined by outcrops and 150 drill holes totalling 190,000 ft., is currently known to be over 2,000 ft. in diameter and thickness.

Preliminary estimates place Sanchez in-pit reserves at about 168 million tons grading 0.34% copper at a 0.20% copper cutoff. There is an additional 23.1 million tons of low-grade ore averaging 0.18% copper at a 0.15% copper cutoff. A floating cone optimization technique outlined an ultimate pit measuring 3,700×3,600 ft. in plan extending to a depth of about 1,200 ft. below the pit rim. Total waste is estimated at 206 million tons for a strip ratio of about 1.08-to-1.

The feasibility calls for a mining rate of 10 million tons per year over the mine’s 16.8-year life. In addition, the mining schedule calls for a maximum of two million tons of low-grade ore per year to be sent to the crusher with any excess considered waste. The average yearly crusher feed, including low grade, is estimated at 11.4 million tons.

The initial leach pad will have a capacity of about 35 million tons, covering the first three years of the mine’s operation. Preliminary metallurgical studies indicate copper recoveries will average 82% over the life of the project.

Capital cost is estimated at US$75 million, including working capital requirements.

Following the vend-in to International Baron, Azco Vice-President Anthony Harvey said the company would proceed with a US$5 million equity financing to provide funds for detailed engineering and metallurgical work in order to bring the feasibility to a bankable stage.

Harvey said permitting is not expected to be a problem. The company has had two public hearings to date which raised no outright objections to the project. And he added that the U.S. Bureau of Land Management indicated permits could be issued within nine months.

Harvey said the company will likely finance the US$75-million cost through a combination of bank financing and a US$25-million equity issue in mid-1992. Baron currently has about five million shares outstanding and is in the process of completing a private placement of two million units at 33 cents per unit. The units include a share plus a warrant giving the holder the right to purchase an additional share at 34 cents for a period of one year. Following the placement, the company’s capital will be rolled back on the basis of one for six. Azco shareholders will then receive 14 million shares of the new company bringing post-consolidated shares to about 15.5 million. In conjunction with the merger, the company’s name will be changed to Azco Mining.

The transaction is subject to shareholder and regulatory approval.