Study estimates 18% return at Holloway project

A feasibility study recently completed on the Lightning gold zone near Matheson, Ont., indicates that the deposit would generate a 17.9% rate of return on a stand-alone basis.

The study is based on a US$375 gold price, a capital cost of $80 million, and a mining rate of 1,654 tons per day. Operating costs for the mine, which could be ready for production by the end of 1994, are estimated to be US$180 per oz.

In conjunction with the study, Hemlo Gold Mines (TSE) has also boosted its preliminary reserve estimate for the zone to 5.5 million tons grading 0.27 oz. gold per ton.

Earlier this year, Hemlo recommended that production at the Eagle River project near Wawa, Ont., be postponed until gold prices improve and/or costs are reduced. Eagle River, a 2-million-ton orebody, is also expected to provide an 18% rate of return at US$375 gold.

Hemlo intends to proceed with an underground program on the Lightning zone to prove up reserves before making a production decision. But the work will not begin until the major works out an acceptable deal with the various property owners to create a single mine property.

The Lightning zone straddles the Holloway property, a joint venture between Hemlo (60%) and Freewest Resources (TSE), and adjacent claims held by Teddy Bear Valley Mines (CDN). Of the total reserve, about 2.4 million tons grading 0.23 oz., lie on Teddy Bear property.

Hemlo produced a separate study for Teddy Bear’s portion of the zone so that a joint venture consisting of Hemlo (51%), Freewest (34%) and Newmont Mining (NYSE) can become vested with a 60% interest in the property. The study concluded that Teddy Bear’s portion of the reserves could not be mined economically as a separate deposit.

Teddy Bear is currently examining the study to determine whether it fulfils the terms of the original agreement with Newmont. The Lightning zone remains open at depth.