Reserves at the Vueltas del Rio mine in Honduras have been more than halved, following an independent review.
The reduction reflects higher mining and processing costs, as well as estimated recoveries that are lower than those assumed in the original feasibility study. Also, drill-hole intercepts in the sulphide portion of the original pit are believed to have been overstated.
In response, Geomaque is designing a smaller optimal pit and revising its mining plan. The smaller pit comes with an improved waste-to-ore ratio of 2.09-to-3.4, which will help offset the reduced reserves.
Measured and indicated resources at the end of 2001 were 23.6 million tonnes grading 0.75 gram gold, about 15% less than the original resource, taking into account the deduction of 800,000 tonnes mined during the year.
A 1,300-metre program of reverse-circulation drilling, slated for late April, will attempt to increase oxide reserves.
Since Vueltas started up in March of 2001, Geomaque has struggled to meet the production estimates set out in the feasibility study (60,000 oz. at a cost below US$200 per oz.). Leach pad 1 has suffered from poor stacking and operational procedures, though it produced 31,632 oz. gold to the end of March 2002. The company continues to recover as much gold as possible from the circuit.
Mining and stacking of ore on the second pad began in early February, leaching got under way in mid-March, and gold production was expected to have commenced by presstime. By July, loading of the pad will be gradually increased to 90,000 tonnes per month from the current monthly rate of 50,000 tonnes.
Exploration in the vicinity of Vueltas del Rio will focus on Zapotel, a satellite gold deposit, and the Rio Blanco gold property.
Late last year, Geomaque reached an debt-restructuring agreement with Resource Capital Fund II, to which it owed US$2.9 million. Interest will effectively be paid out of cash flow from Vueltas del Rio. Principal on the loan is being repaid in seven quarterly instalments starting at the end of September 2002. Resource Capital also receives 40% of net cash flow from Vueltas del Rio until it has recovered a net 40% internal rate of return on its US$2.9 million in advances to Geomaque. After that, it retains a 10% net cash-flow royalty.
A US$1.7-million debt to Sococo de Costa Rica, the contract miner, is being paid off in 10 quarterly instalments, starting at the same time as payments begin to be made to Resource Capital. Sococo, equipment distributor Butler Machinery, and investment house Haywood Securities all accepted shares as payment of debt in October, and will be large shareholders in the restructured company.
In late February 2002, Geomaque completed a private placement of 39.7 million shares at a nickel apiece, in co-operation with Resource Capital and two other institutional investors. Gross proceeds total nearly $2 million. Including 720,000 shares issued to RCF as a fee in connection with the company’s restructuring, Geomaque now has more than 116.6 million issued and outstanding shares. Resource Capital owns 20 million.
Coincident with the restructuring, John Hick has become the new president and chief executive officer; he also leads a new board of directors.
In Mexico, decommissioning of the heap is under way at the San Francisco mine. With no further cyanide being added to the heap, minimal gold will be recovered over the next several months. Results of a study that considered reprocessing some or all of the heap are expected by the end of the second quarter.
In mid-afternoon trading on April 2, Geomaque shares were off 3, or 25%, at 9.
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