U.S. REPORT Green Springs project of USMX operating above design

The Green Springs gold mine of USMX Corp. (NASDAQ) in Nevada is operating “above design levels,” Michael Mehrtens, president, confirms in the company’s latest interim report. The mine also generated a positive cash flow during the third quarter but he says “exploration and development costs continue to be priority expenditures in order to build shareholder values through discoveries of mineable gold properties.”

For the three months ended Sept 30, the company reported a net loss of $252,000(US) or 2 per share, compared to a loss of $365,000 or 3 the previous year. Third quarter revenues of $1.8 million were sevenfold higher and attributable to gold sales of 3,522 oz and minimum royalty payments from the Montana Tunnels property. At present, these royalties are about $60,000 per month.

The nine month loss of $595,000 or 4 compares with a net loss of $971,000 or 8 for the same period in 1987. Revenues increased to $2.4 million from $470,000 the year before. As of Sept 30, the company had a working capital of $4.9 million and an approximate $5 million line of credit from Elders Resources Finance.

Gold production at Green Springs in the third quarter amounted to 6,263 oz following plant start-up on July 16. Initial recoveries are estimated at 70%; the mine was expected to yield about 12,000 oz gold in 1988, rising to 24,000 oz this year. Additional mineralization has been discovered on the property and engineering studies are under way to determine how much of it is mineable.

Mill throughput at Montana Tunnels, which is operated by Pegasus Gold, a major shareholder in USMX., averaged 12,855 tons per operating day in the third quarter. Gold production for the period was 19,200 oz, compared to 18,700 oz in the second quarter. Nine month production was 53,900 oz gold, 739,100 oz silver, 6,536 tons of lead and 14,715 tons of zinc.

USMX will receive 50% of net profits from Montana Tunnels after Pegasus has recovered its capital and related costs; a study completed last February concluded that payback would occur in the last half of 1991. But Pegasus has since concluded it will occur later because of lower gold prices, higher interest rates, increased capital, and start-up problems.

USMX has implemented a gold marketing program to cover capital expenditures and operating costs for the next few years. At present, 18,000 oz of gold or 75% of its 1989 estimated production from Green Springs has been sold forward at an average price of $466 per oz. For 1990, 16,000 oz have been sold an at average price of $479.

“By establishing these commitments, USMX has protected cash flow from the Green Springs mine, while keeping a sizeable portion of future production open to higher metals prices,” Mehrtens says.

On the exploration front, he says that the Alligator Ridge joint venture has identified approximately one million tons of gold- bearing mineralization grading 0.05 oz gold at the Casino and Winrock properties in East Central Nevada. Exploration drilling continues to define additional mineralization on these properties, he adds. USMX is operator for the joint venture.

At Kinsley Mountain in Nevada, mineable reserves now stand at 2.6 million tons grading 0.046 oz gold. Cominco American Resources, the company’s joint venture partner in the project, is conducting a feasibility study on the property. If favorable, a production decision is possible in early 1989, he predicts.