Galactic considers Taiwanese bid for Summitville mine

“We are considering the offer because it is (Summitville) only carried on our books for $5 million,” Robert Friedland, president of Galactic, told a group of mining analysts in Toronto. “We’re also considering a stock dividend of Summitville to Galactic’s shareholders,” Friedland added. The options, if acted on, would spell the end of Galactic’s involvement with the mine — an involvement which Friedland feels has unjustly hurt Galactic.

Since beginning production, the mine has never come close to achieving its production target of 120,000 oz of gold per year. Next year, Summitville is expected to produce about 30,000 oz. “The project was hampered by high mining costs and a capital cost of $57 million(US).” That last figure was “a ludicrous capital cost,” Friedland admitted.

“But Galactic is not just Summitville,” he added. The company’s newest mine, the Ridgeway, is doing everything that Summitville could never do. Ridgeway is exceeding operating parameters and is cash flowing in excess of $3 million per month. Owned 48% by Galactic and 52% by RTZ Corp., Ridgeway has produced 127,933 oz of gold by Sept 30. Operating costs were $140(US) per oz.

“Ridgeway is the third lowest cost gold mine in the U.S.,” Friedland said. The mine works as a result of low labor costs, a low work ratio in the mill and a low stripping ratio in the open pit. The bottom line is a low mining and milling cost of $5.56 per ton.

With the start-up of Ridgeway, Galactic is back into the black after taking a big $40 million(US) writedown in 1988. For the first nine months of this year, the company earned $1.8 million(US) or 5 cents per share on gold production to Galactic’s account of 88,312 oz.

Future growth is expected to come from the company’s interests in the Ivanhoe and Bodie projects. At Ivanhoe on the Carlin trend in Nevada, a 4,000-ton-per-day heap leach facility is being considered in 1990. Costing $12-18 million, depending if a CIP circuit is added, the mine is expected to produce 40,000-50,000 oz of gold per year. Galactic and Cornucopia Resources (TSE) share the property equally.

At Bodie, Galactic is looking for a joint venture partner to buy a 51% interest. Friedland says that several major companies have examined the data with one company envisaging a 150,000-oz-per-year operation.

Work by Homestake Mining and Galactic has outlined oxide reserves of 34 million tons grading 0.047 oz gold per ton. Galactic got the property from Homestake in 1988 as part of a financing deal which left Homestake with a 10.9% interest in the company. Homestake is Galactic’s largest shareholder.

Other significant shareholders include the powerful Caisse de Depot et Placement du Quebec with 7.6% and the Merrill Lynch Asset Management Fund holding 4.8%. Friedland holds 4.8%.

With a planned start-up at Bodie sometime in 1992, Galactic forecasts gold production in that year of 201,000 oz at a cash cost of $225 per oz. By then, Summitville, if sold or spun off, will be little more than a bad memory and the company will have become a true multi- mine operation.

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