Wharf deal frees up Golden Reward reserves

A settlement agreement allowing Wharf Resources (TSE) to purchase a 60% interest in the Golden Reward mine from MinVen Resources (TSE) will free up several million tons of reserves for further development, The Northern Miner learned on a recent visit to the heap leach operation.

“The deal is going to keep these mines (Golden Reward and Wharf’s nearby open pits) operating for several more years,” Karl Emanuel, Golden Reward’s chief geologist, told members of the Canadian Institute of Mining, Metallurgy and Petroleum’s Toronto branch as they gathered at the mine in May. Golden Reward, which reached commercial production in July, 1991, has a permitted life of about seven years. But since Wharf owns most of the mineral rights between the mine and its own Annie Creek and Foley Ridge pits to the west, MinVen and partner United Coin Mines (TSE) have never been able to exploit the reserve base next to Golden Reward. Prohibitive trucking distances made it uneconomical for Wharf to do so.

“What the deal will do immediately is untie 4.2 million tons that we will be able to mine by leaning the pit back into Wharf’s property,” said MinVen’s Martin Quick, who was recently appointed to the new position of vice-president of South Dakota operations. Another 22-40 million tons grading 0.035 oz. per ton may also lie in the preliminary reserve category, Emanuel added. Even though the undeveloped deposit abuts a ski hill, securing mining permits should not pose a problem, Quick said.

Wharf has been eyeing the Golden Reward opportunity for some time. The Toronto-based company holds an 11% interest in United Coin, which in turn owns 46% of Golden Reward. United Coin has been in serious financial trouble lately and since April, 1991, has failed to meet all its cash call obligations related to the Golden Reward joint venture.

A recent proposal that would have given MinVen full mine ownership in return for acquiring United Coin’s debts provoked objections from Wharf, which, as United’s largest unsecured creditor, is owed $10 million.

Instead, to save United Coin from bankruptcy and to prevent the mine from defaulting on its gold loan, the three companies have agreed to a financial restructuring. Expected to be completed in September, the restructuring would see MinVen acquire a 100% interest in Golden Reward. The Denver-based producer would then sell Wharf a 60% interest in the mine for US$21.3 million, payable by the assumption of Golden Reward’s liabilities and the balance in cash.

Wharf has also agreed to lend MinVen US$2 million for three years, secured by MinVen’s 40% interest in Golden Reward.

As a result of the acquisition, Wharf expects its annual production to increase to 130,000 oz. in 1993 and 140,000 in the following years from 93,569 in 1991.

“Our main motivation is to unitize the (Golden Reward and Wharf) properties to make them more efficient,” said John Cook, vice-president of operations for Wharf. “There are quite a lot of savings to be made on administration and management costs.”

Golden Reward is expected to produce 62,000 oz. gold this year after churning out 40,590 oz. at an average cash production cost of US$269 per oz. in 1991, its first year of commercial production. Proven and probable reserves, permitted for mining (and not including the adjacent reserve base), stand at 10 million tons grading 0.042 oz. gold. Unpermitted reserves stand at 4.2 million tons grading 0.038 oz.

Wharf’s nearby Annie Creek and Foley Ridge operations, which entered production in 1983, produced a record 93,569 oz. in 1991 at an average cash production cost of $209 per oz. Permitted proven, probable and possible reserves are 30.8 million tons grading at an average of 0.034 oz. per ton.