Partners eye Campbell lookalike

Last year’s discovery of a large, gold-bearing carbonate alteration halo northwest of the historic Madsen mine in northwestern Ontario has prompted Placer Dome (PDG-T) to triple its exploration budget.

In late 2000, Claude Resources (CRJ-T) dealt Placer an option to earn a 55% interest in the 42-sq.-km property, which is in the heart of the famous Red Lake gold camp. The deal calls for $8.2 million in expenditures by 2005 and the tabling of a bankable feasibility study by 2007, though Placer can back out, without penalty, after spending $1.2 million (the amount spent in 2002).

As part of the deal, Placer purchased 1 million Claude treasury shares at 75 apiece and is entitled to acquire an additional 5% in the project by covering all development costs should it be advanced to production. In any event, Claude’s stake in Madsen cannot be reduced to less than 40%.

During 2002, Placer sunk 17 reconnaissance holes, collaring them 2-4 km northwest of the mine, in three areas. The sites were chosen on the basis of historical results and those obtained in a 2001 scout program.

All the holes hit their mark; the best results came from hole 9, which cut six mineralized intervals between 0.24 and 0.61 metre in length and carrying as much as 48.08 grams per tonne. The intervals began 278.84 metres down-hole and ended at 313.66 metres.

Balmer assemblage

Of the remaining holes, three yielded two mineralized intervals. Gold values varied from 4.29 (the lowest reported for all holes) to 14.5 grams over 0.33 (the narrowest of the entire bunch) to 1.22 metres. The shallowest interval began 23.96 metres down-hole, and the deepest ended 359.76 metres down-hole.

Mineralization is characterized by visible gold, pyrite and pyrrhotite in folded and broken quartz-iron-carbonate-tourmaline veins and lessor carbonate veinlets and colloform quartz veins. The host metabasalts are part of the Balmer assemblage and rest on a structural contact with a large komatiite unit.

According to Claude, the mineralization, alteration pattern and stratigraphy are similar to those seen at Placer’s Campbell mine and Goldcorp‘s (G-T) neighbouring Red Lake mine. Campbell is the camp’s most productive and oldest mine, whereas Red Lake has become its richest in terms of grade.

The Madsen mine itself began life in 1938 and went on to crank out 2.4 million oz. before running out of steam in 1976. About 7.6 million tonnes of ore were mined on 24 levels, worked down to 1.2 km below surface.

Most of the mined material was refractory, though a zone of carbonate-quartz veining was mined briefly in the 1970s from the lower-most levels of the mine. Dubbed No. 8, the zone sits in the same metabasalts as those hosting the new zone and thus served as a beacon to Placer when sighting its initial holes.

Two rigs are being employed in the current campaign, one for infill and stepout detail, and the other for reconnaissance duty. Surface and geophysical results suggest the favourable structure continues for 10 km along strike.

Quarterly profit

In related news, Claude has posted net income of $1.7 million (or 4 per share) for the three months ended Dec. 31, compared with a net loss of $284,000 (1 per share) in the fourth quarter of 2001. Revenue jumped 45%, from $5.8 million to $8.3 million. Cash flow, excluding working capital changes, also jumped, to $3.3 million from $798,000.

Claude attributes the turnaround to a 19% increase in gold sales, having sold 15,000 oz., versus 12,500 oz. a year earlier. The company also realized higher prices for its output, averaging US$322 per oz. in the recent period, compared with US$277 per oz. in the fourth quarter of 2001.

Claude pulls its gold from the Seabee mine in northern Saskatchewan, where total operating costs have fallen to all-time lows. Unit costs averaged US$187 per oz. in the recent quarter, down from US$216 per oz. a year earlier.

In all of 2002, Claude lost $1.5 million on revenue of $23.2 million, compared with net losses of $2.2 million on $22.6 million in 2001.

Cash flow rang in at $3.8 million last year, up $400,000 from the previous year.

Seabee cranked out 41,500 oz. in 2002, or 7,000 oz. less than 2001. The shortfall reflects the milling of lower-grading ore from the now-mined-out D zone in the first three months of the year.

Claude realized an average of US$312 per oz. for its 2002 production, or 15% more than for its 2001 production. However, total cash costs at the mine also rose, by 11%, to US$246 per oz.

Revenue from the oil, liquid and gas properties also fell as production slipped. Partially offsetting the shortfall were higher oil prices.

At the end of 2002, Claude had $9 million in working capital and no long-term debt.