Cambior buying 50% stake in Sleeping Giant mine

As part of a growth plan designed to boost its Quebec gold production, cash-rich Cambior Inc (TSE) is picking up a 50% stake in the troubled Sleeping Giant mine of Aurizon Mines (TSE). The mine, which yielded 29,552 oz. of gold in its first full year of operation in 1989, is situated about 80 km north of Amos in northwestern Quebec.

Cambior, which has recently been on the acquisition trail, owns varying interests in seven gold mines, including the new Silidor mine near Rouyn-Noranda, Que. Cambior expects to produce nearly 220,000 oz. of gold this year from all its operations.

The recently signed agreement with Aurizon calls for Cambior to earn a 50% interest in the Sleeping Giant mine by spending $12 million on additional exploration and development over the next three years. About $1 million of that amount must be spent in the first year. The deal is still subject to approval by Cambior’s board of directors and regulatory authorities.

As of Dec. 31, 1989, undiluted ore reserves at the mine totalled 1.05 million tonnes averaging 8.3 grams per tonne (1.16 million tons grading 0.24 oz gold per ton.)

The surface milling facility has been designed to treat 900 tonnes of ore per day, with conventional recovery by the Merrill-Crowe clarification system followed by zinc precipitation.

Aurizon took a $2.04 million loss (9 cents per share) in the first quarter of 1990, with first-quarter gold output at the mine amounting to 6,825 oz., down from 6,954 oz. in the same period last year.

The deal comes on the heels of an announcement by Aurizon earlier this month that it would halt all exploration and development at Sleeping Giant because of the continuing deterioration in the gold price.

Aurizon said it could eventually be forced to suspend all mining and milling operations in August and place the mine on a care and maintenance status “unless there is a dramatic improvement in precious metal prices.”

The price of gold recently fell to below US$350 per oz. in London, prompting some industry observers to suggest further declines may still be in store.

Under terms of the recent agreement, Cambior may also earn a 50% interest in certain claims surrounding the mine site by incurring exploration expenditures of $1.5 million within four years, of which $100,000 must be spent in the first year. Much of the Sleeping Giant property and surrounding claims has yet to be fully explored, and a number of promising targets remain to be tested, the company said.

Shares of Aurizon Mines, of which there are nearly 23 million issued and outstanding, traded recently at a low of 12 cents within a 52-week range of 12 cents-70 cents.