Loma Hierro heads up Holmer’s portfolio

In Cuba, Holmer Gold Mines (HGM-A) is applying its exploration skills not to gold prospects, but to silver.

The Loma Hierro silver deposit in Cuba is being pushed to a production decision by both Holmer and its partner there, state-owned GeoMinera.

Holmer says an independent consultant has confirmed a reserve of 10 million oz. silver at Loma Hierro, which is in the western part of the country.

An environmental impact study has already been completed and several financial institutions, including one based in Cuba, have expressed an interest in financing the project. A projected cash operating cost, based on an independent scoping study, of US$1.85 per oz. has been announced. A capital cost of US$6 million is pegged for the mine, which, based on only the L1 and L2 discovery zones, is expected to produce for more than five years.

Capital payback would occur within 13 months, at US$4.95 per oz.

Prospecting and sampling continue in an effort to evaluate the northern extension of the main discovery zone. An increase in silver reserves there is expected to come from both this extension and the area’s other known peripheral zones.

The San Fernando base metal discovery in central Cuba will be drill-tested in September. Holmer is hoping to outline Noranda-type, massive-sulphide deposits, and thereby add to its existing deposit, which contains 2 million tonnes grading 2.3% copper and 3.5% zinc at less than 150 metres depth. This existing deposit is open to both the east and at depth. A previously indicated gold target on this concession will also be tested by the drilling.

Back in western Cuba, a new belt in the Matahambre West concession — tentatively called the Holmer Gold Belt — is being subjected to extensive exploration. Several crews have carried out soil sampling in a program consisting of 10 lines spaced 1 km apart and running across the belt for 3-4 km. More than 600 samples were gathered, all of which have been sent for assaying. Following the correlation of these sampling results with the known geophysical data, trenching will begin.

The impact of the so-called Helms-Burton Bill, a piece of U.S. legislation designed to discourage foreign investment in Cuba, has had little effect on Holmer. The company denies it is engaged in what the legislation describes as “trafficking” (that is, commercial activities on property owned by U.S.

nationals confiscated by the Cuban government after Jan. 1, 1959).

Company officials are welcoming President Bill Clinton’s recent decision to waive, for at least six months, the right to sue, which was the most contentious provision of the bill.

Holmer is also encouraged by the support shown by the governments of Canada and other countries in protesting the bill and preparing legislation to counteract its effects.

Because of the unique structure of the mining joint-venture in Cuba, Holmer’s philosophy has been to work with GeoMinera to fast-track each project to the exploration stage while, at the same time, spending only a conservative amount on exploration. During the past two years, the company has spent just US$1 million on its Cuban properties but has nonetheless managed to advance a silver deposit to the feasibility stage, along with a base metal discovery and some gold prospects.

The actual cost to Holmer of finding the Loma Hierro silver deposit works out to less than US10 cents per oz. Near-term development of the silver deposit is expected to position Holmer as a low-cost silver producer, at a time when silver prices are relatively low.

Holmer reports that, once operational, the cash flow from the silver mine will allow it to fund its entire Cuban exploration expenditures for the forseeable future.

In Canada, the crew working on the company’s Timmins, Ont., gold property for the past month has completed line-cutting and geophysical work, results of which are being evaluated. Initial returns have confirmed a strong east-west structure, and the correlation of these data with those gathered previously is under way. Drilling will begin shortly in an attempt to extend the known deposit. The potential of the new parallel discovery zone will also be tested.

Meanwhile, Holmer has received approval from the Alberta Stock Exchange to extend its warrant expiry date and reduce the exercise price for 260,000 outstanding common share purchase warrants attached to a 1995 private placement.

The common share purchase warrants were exercisable at a price of $3.50 and scheduled to expire July 15. Holmer has extended the warrants’ expiry date to July 14, 1997, and reduced the exercise price to $1.40.