U.S.REPORT Galactic reports more writedowns

Writedowns totalling US$39.7 million pushed Galactic Resources (TSE) into a US$36.7-million loss for the year ended Dec. 31. The writedowns included charges against the company’s Summitville mine, its 50% owned Ivanhoe project, various non- producing properties and other mining-related investments.

Earlier this year, Galactic announced it would not likely proceed with the final year of operations at its Summitville heap leach gold mine in Colorado. The company cited high operating costs as the primary reason for the closure. The associated writedown for Summitville amounted to US$12 million.

According to the year-end results, the mine produced 29,333 oz. gold for an operating cash flow deficit of US$5.3 million.

President Peter Guest said the company is now working on a comprehensive closure and reclamation plan for the mine. He did not have an estimate of the closure costs but did note the company has a US$2.3-million bond with the state of Colorado.

After re-evaluating future gold production estimates and costs at its 50% owned Ivanhoe project in Nevada, Galactic wrote down its value by US$12.8 million.

Galactic’s partner in the open pit heap leach mine is Cornucopia Resources (TSE). The two companies had planned to complete a merger by the end of 1990, resulting in Cornucopia shareholders receiving half a share of Galactic for each share held. As a result of the material changes to the companies, a new fairness opinion is being completed and Guest says he is confident the merger will proceed.

Galactic plans to proceed with the development of the second phase of the Ivanhoe mine which will extend the mine life into 1994. Guest noted the mine life is not limited to 1994 as there are a number of other potential reserve areas on the property.

The second phase, which will include the development of the Velvet and the Butte zones, is expected to cost in the order of US$7 million including pre-stripping costs.

Guest said the company is going ahead with an environmental impact study. Galactic hopes to receive operating permits in time to begin production before reserves in the USX zone are depleted.

Bad weather during January and February pushed the depletion date of the USX to mid-1992, according to Guest.

Gold production at Ivanhoe began in October, 1990, netting the company 2,987 oz. for a cash operating loss of US$1.5 million.

Galactic’s 1990 financial results were helped by its 48% owned Ridgeway mine which provided US$12.1 million in operating income to the company. The mine is in South Carolina, and is operated by majority owner, RTZ Corp.

Galactic’s share of gold production from the Ridgeway mine was 82,548 oz. in 1990. Galactic Resources (TSE) 3 months ended Dec. 31 1990 1989 Revenue $13,480 $11,465 Net earnings (loss) (40,363) 709 per share (0.94) 0.02 12 months ended Dec. 31 1990 1989 Revenue $46,476 $47,164 Net earnings (loss) (36,679) 2,543 per share (0.85) 0.07