Startup problems at Oracle Ridge

Problems with the installation of the ball mill are continuing to delay startup at the Oracle Ridge project near Tucson, Ariz. Oracle Ridge is a partnership between South Atlantic Ventures (VSE) with a 70% interest and Continental Catalina which holds the balance. The companies are developing an underground copper-silver mine with estimated reserves of 4 million tons grading 2.33% copper and 0.67 oz. silver per ton.

South Atlantic has taken over installing the ball mill from the contractor after persistent difficulties were encountered in aligning the mill’s bearings.

The mill was dismantled and sent to Tucson for detailed analysis and is now bein reinstalled Th compan expect t star u th mil i late February.

As a result of the delay, the joint venture is seeking an additional US$1.1 million from Societe Generale, the French bank which lent the companies US$5 million last year.

Lutz Klingmann, president of South Atlantic, said the funds are required to pay for diesel generatorsand underground mining equipment purchased ahead of schedule in 1990.

Klingmann said the original plan was to lease the gen-sets and use a contract miner. Although mining operations initially used a contractor, Klingmann said it was apparent the company’s mining equipment was not sufficient and the contract was cancelled. South Atlantic subsequently began in-house mining using some of the contractor’s equipment and workforce, plus additional purchased equipment.

Mining operations have continued while the mill is constructed with ore stockpiled on surface. Klingmann estimates the stockpiled material contains 100,000-120,000 tons, or about five months’ supply. He also said mining operations are now temporarily suspended although the development of a high-grade stope is proceeding.

At full capacity, the mine is expected to produce about 11.3 million lb. copper, 151,000 oz. silver, and 2,200 oz. gold annually. Estimated cost of production after precious metal credits is US65 cents per lb. copper, not including financing charges.

If the French bank extends its loa facilit b furthe US$1. million Sout Atlanti an Continental Catalina will be required to come up with an additional US$750,000 in equity. Klingmann said the company was not actively searching for its US$525,000 share, since it may be able to raise the money through the exercise of warrants for 1.5 million shares at 50 cents. The warrants are part of a private placement made in early 1990.

South Atlantic has about 9.7 million shares outstanding and recently traded at the 48 cents level.