Japanese backers revive plan to open Goldstream

Production financing for the Goldstream copper- zinc mine near Revelstoke, B.C., is finally within reach of partners Bethlehem Resources (TSE) and Goldnev Resources (VSE). Two Japanese companies, Nippon Mining and Sumitomo, will provide up to $7 million to reactivate the mine.

Bethlehem, the operator, expects to begin rehabilitation work at the mine as soon as the financing agreement closes. The company anticipates the mine can be in production within four months of signing a final agreement. Within six months, the mine should begin shipping concentrates.

The estimated capital cost to bring the mine back on line is $4.53 million, the majority of which will be used for mine development. The balance of the funds will be used for working capital purposes as required.

Henry Ewanchuck, president of Bethlehem, said the mill was very well mothballed and will require some reassembly. The only major work on the mill will be the replacement of a pressure filter which was sold after the mine shut down.

Bethlehem and Goldnev bought the mine from Noranda (TSE) in the summer of 1989 for $5.75 million and have been seeking financing since.

In 1984, after spending $70 million on its development, Noranda operated the mine for short time but was forced to shut it down due to low metal prices and poor zinc recoveries.

Reserves at the time of the closure were 4.3 million tonnes grading 3.69% copper, 2.63% zinc, and 17.5 grams silver per tonne.

A new reserve calculation increased the cutoff grade to 3% copper from 2% resulting in a drop in proven reserves to 1.86 million tonnes grading 4.81% copper and 3.06% zinc.

At a planned production rate of 1,100 tonnes per day, the mine is projected to produce about 15.8 million kg of copper and 3.2 million kg of zinc.

At a copper price of US$2.43 per kg (US$1.10 per lb.), Ewanchuck said the loan would be paid back in a year and a half.

Under the financing agreement, Nippon Mining will purchase all the mine’s copper concentrate for a 6-year period. The agreement also makes provisions for advance payment for the concentrate allowing for a reduction in the mine’s working capital requirements.

Nippon also has the right to convert up to 25% of Goldnev’s portion of the loan on an annual basis into Goldnev stock at a 70% discount to the average market price over the 30-day period prior to conversion. The conversion price is subject to a minimum of 86 cents per share.

Nippon also has a conversion right on Bethlehem stock on the same terms but at a minimum price of 37 cents per share.