U.S. REPORT Galactic, Cornucopia seek cash for overruns

Cost overruns and a shortfall in planned gold production from the Ivanhoe joint venture in Nevada have forced partners Galactic Resources (TSE) and Cornucopia Resources (TSE) to obtain an additional US$5 million in financing. Ray Hughes, vice-president of corporate development, said US$1.2 million was required to cover capital cost overruns for the Ivanhoe project, a heap leach gold mine which poured its first gold on Oct. 17.

Hughes said gold recoveries and grades have been “excellent” but crushing and agglomerating problems delayed gold production which led to working capital shortfalls.

In addition to covering working capital requirements, the joint venture will have to pay the mining contractor, Ledcor Industries, costs associated with agglomerating 100% of the ore.

The mining plan and contract had called for agglomeration of only 30% of the ore. Hughes said the total amount owed to Ledcor had not yet been determined.

The US$5-million loan brings the total project loan for the Ivanhoe mine up to US$12.5 million. Repayment of the recent financing begins on Jan. 31 in equal monthly installments through to Feb. 28, 1992, bringing total monthly principal payments to US$850,000. The interest rate on the loan is fixed at Libor plus 1.625%.

Reserves of the Phase I portion of the Ivanhoe project will be exhausted by October, 1991.

Hughes said economic and engineering evaluations are still being conducted on the Phase II portion of the development and a decision to proceed has not been made. Phase II would extend the mine life to the end of 1995.

Before development of the second phase can begin, final permits must be obtained. Permitting has been held up because of the presence of a number of ancient, native Indian quarrying sites on the property. The joint venture must satisfy the appropriate authorities that the sites are not unique.