Viceroy extending life of Castle Mountain mine

By developing a long-term mining plan, Viceroy Resource (TSE) hopes to add eight years to the life of the Castle Mountain gold mine in southeastern California.

The Vancouver-based company owns 75% of the open-pit, heap-leach operation, which, since startup in April of 1992, has yielded more than 425,000 oz. The remainder is held by MK Gold (NASDAQ), which is carrying out mining on a contract basis.

The new plan calls for mining of low-grade ore from the Oro Belle, Hart Tunnel and Jumbo deposits. Viceroy intends to mine the ore itself, despite MK’s claim that it has a “life of mine” contract.

Viceroy’s vice-president of corporate relations, Gordon Fitzpatrick, says the Lesley Ann pit, the focus of current mining, contains enough reserves for about two more years of mining.

Mining permits for Hart Tunnel and Jumbo are expected by the second quarter of 1996, if not sooner; permits are already in hand for Oro Belle.

Oro Belle and Hart Tunnel were last estimated to host a combined proven reserve of 14.3 million tons grading 0.031 oz. gold per ton, whereas Jumbo contained 4.7 million tons grading 0.038 oz. However, drilling in the past year added 2 million tons to Oro Belle and a further 3 million tons to Jumbo.

In addition, the South Extension area hosts a possible reserve of about 7.1 million tons averaging 0.034 oz., and this is expected to add a further two years to Castle Mountain’s mine life.

Production for the year ended March 31, 1995, amounted to 168,190 oz. at a cash cost of US$162 per oz,, compared with 150,907 oz. at US$207 per oz. in fiscal 1993. The company earned $11.6 million or 50 cents per share on sales of $70.8 million, with a cash flow of $35 million. Higher depreciation and depletion at Castle Mountain, combined with exploration costs incurred by associated companies, had an impact on earnings.

In related news, New York-based Leucadia National, a publicly traded insurance holding company, acquired a 46% interest in MK Gold through the purchase of 9 million common shares held by Morrison Knudsen for US$22.5 million cash.