Production decision nearing for Chesbar

Exploration work by Chesbar Resources is progressing well on the Chester Twp. property in northern Ontario, so well in fact that a decision may be made this summer on going into gold production.

Chesbar is earning a 60% interest in the property, comprising 60 claims (2,400 acres), owned by Murgold Resources and located approximately 70 miles southwest of Timmins, just off the main highway to Sudbury.

“We’ll make a mine production decision probably by this summer,” Chesbar President J. T. Flanagan told a group of investors who made a tour recently of the property. He added that the mine could be fully operable in approximately eight months.

Eight separate gold-bearing veins are known to be present on the property. Underground ramp work to date has exposed the No 3 vein structure.

“The immediate objective of this work is to prove up mineable reserves of at least 500,000 tons at an average grade of 0.3 oz gold per ton,” Mr Flanagan said. “This is a reasonable objective, since this zone has been traced out for a length of over 2,800 ft, and is still open at both ends and at depth.”

A 656-ton bulk sample taken out in 1981 averaged 0.34 oz, he said. Ramp program

The initial ramp program to approximately 185 ft below surface has been completed and contractors are now bidding on the next phase, which will take the ramp down to 330 ft.

“The hole seems to be improving with depth,” Mr Flanagan said. “It never was explored to any great depth.”

Among the latest results is an assay indicating 0.42 oz over 8.5 ft where, according to site geologist Todd Hamilton, the vein “seems to be splitting into a wider zone.”

Mr Hamilton described the findings to date as an “erratic high- grade deposit, but not that erratic.”

Intensive work on the other vein structures, and at greater depths on the No 3 vein, are expected to increase reserves to two million tons or more, Mr Flanagan said. Ultimately Chesbar hopes to mine to the 1,000-ft level, he said.

Assuming the objective of proven reserves of 500,000 tons at an average grade of 0.30 oz is reached, Chesbar is planning installation of a 300-ton-per-day modular mill. Estimated capital cost of the mine and mill is $5 million. 300 tons per day

Operating costs are estimated to be $55 per ton of ore, based on a milling rate of 300 tons per day, seven days a week. Gold recovery is expected to be 90% or better, with the mine producing 81 oz per day or 29,565 oz per year.

The operating cost per ounce of gold produced (at current exchange rates) is estimated to be $147.60(US).

At $400 per oz, gross revenues are estimated to be $16.3 million and the net annual revenue $10.3 million.

Under its agreement with Murgold, Chesbar`s share of both capital and operating costs and revenues will be 60%. To earn its interest, Chesbar must spend $2 million on the 60 claims, and pay Murgold $200,000 by the end of 1989 in either shares or cash.

Chesbar, incorporated in Quebec in 1956, trades on the Montreal Exchange and has applied for listing on the Toronto Stock Exchange. Two of its senior officers and directors, Mr Flanagan and John McAdam (Chesbar’s vice-president), have each been active in the Canadian mining business for more than 35 years.

They are the founders and senior officers of Muscocho Explorations, a Quebec company which operates two gold mines at Montauban, Que., and expects to have two more gold mines in operation this year in Ontario.

Other Chesbar directors are John B. Yates and Peter Schreter. The company’s secretary-treasurer is John R. Macklem. Property well situated

The Chester Twp. property is located near the small town of Gogama and about an hour’s drive from Timmins. According to Mr Flanagan, the property is well situated for mining operations, with roads, hydro-electric power, supplies and a skilled workforce readily available.

Some small-scale mining was undertaken in the past in the Gogama area but nothing major, Mr Flanagan said.

Chesbar is involved in a number of other projects. The company has an option to earn a 60% interest in 45 claims on the westward extension of the main Harker-Holloway belt, five miles from the Holt McDermott gold deposit currently being prepared for production at 1,500 tons per day by American Barrick Resources. The Harker- Holloway property is located east of Matheson, Ont.

The company also has an option to earn a 60% interest in 134 claims on the Ontario side of the Casa- Berardi gold belt, within an area containing several major gold deposits.

Chesbar can earn a 50% interest in 51 claims on the “Group 14” property near Chibougamau, Que., where a gold-bearing shear zone has been traced out for 2,100 ft by trenching and diamond drilling. Gold assays have indicated up to 4.15 oz per ton across 8 ft on surface and up to 2.5 ft of 1.08 oz per ton in drill core.

And, the company has a 100% interest in 91 claims in two groups on the McCorkill and Rinfret gold- copper properties near Chibougamau. Diamond drilling is planned for this year on the properties.