Edwards mine hits a dry spell (July 05, 2001)

Low gold prices have claimed another victim in River Gold Mines‘ (RIV-T) Edwards gold mine in north-central Ontario

The company has decided to close the mine and put it on care and maintenance until gold prices are significantly more attractive. The mine’s dwindling reserves were also a factor in the decision.

The company intends to continue further deep exploration on the property when gold prices improve.

During the first quarter of 2001, Edwards’ production was adversely affected by unexpectedly low grades. Costs were driven up by heavy snowfall and higher fuel prices.

As a result, River suffered a loss of $1.9 million (or 6 per share) in the first quarter, compared with a loss of $500,000, (2 per share) in the first quarter of 2000. Revenue between the periods fell to $7.9 million from $9.1 million. Cash flow fell to a deficiency of $300,000, compared with cash flow of $1.1 million a year ago.

The company notes that its cash flow has recently edged into positive territory. River is considering a rights issue to bolster working capital and help fund the sinking of a shaft at the Eagle River mine, 50 km west of Wawa, Ont.

The shaft is slated for completion by the end of September and should be operational in February 2002. It is expected to result in significant savings on the current ramp system.

Production for 2001 remains on target for 87,000 oz. gold. Production for the second quarter tallied over 23,000 oz. gold. This was ahead of the first quarter’s 19,500 oz. gold. Mining at Eagle River has moved back into the 6 zone, where grades are significantly higher than average. Preliminary estimates for 2002 production are 75,000 oz. gold.

River has also announced that it will put the Mishi mine into production upon completion of the permitting process. The wholly owned, 30-claim property is 2 km west of the River Gold mill. It hosts total resources of 1.4 million tonnes grading 4.2 grams of gold per tonne, including an open-pit resource of 772,000 tonnes of 3.3 grams gold to a depth of 56 metres.

The company’s in-house evaluation has outlined an open-pit resource of 450,000 tonnes at a grade of 3.1 grams gold per tonne to a depth of 35 metres with a stripping ratio of 3-to-1.

River sees Mishi as a low-cost, seasonal operation that will provide mill feed in years to come.