Granges now seeking new PGM acquisition

With production expected from at least three mines in 1987 and a huge working capital of $40 million available, Granges Exploration is looking for at least one other precious metals acquisition. According to Douglas McRae, chief financial officer, the acquisition must represent a good source of cash flow for the company which is on the verge of becoming a major Canadian gold producer.

The $17-million Tartan Lake project near Flin Flon, Man., should be fully operational this spring and indeed could produce its first dore bullion in March, says President Mike Muzylowski. In its first full year of operation gold output should total about 50,000 oz from mill feed averaging around 0.3 oz. Half of that production will go to Abermin Corp., its joint venture partner in the project.

Two gold heap leach projects in Nevada held through an associated company, Hycroft Resources, will contribute another 75,000 oz per year when they are at full production. Granges recently purchased the fully operational Lewis mine near its Hycroft project from Standard Slag for $6 million. That property is being vended into Hycroft for shares and Granges will own at least 51% of Hycroft, possibly climbing to 58% at a later date.

The Lewis mine is producing and Granges recently completed its second gold pour at the property. It will be a 1.2-million-ton-per-year operation following some modifications to existing equipment including the installation of a tertiary crusher. Four drills are operating at the mine to block out additional reserves.

Engineering has been completed for Hycroft’s Crofoot project which is adjacent to the Lewis mine property. Permitting is under way and the production rate will probably be about two million tons per year. All material will be crushed and agglomerated because of fines in the ore. Mining will be done on a contract basis and a mobile conveyor system will be used to load leach pads, three of which will be constructed initially. Mr. McRae estimates it will cost about $11 million(US) to achieve production, adding that it will probably be debt- financed in Europe.

Meanwhile, at Tartan Lake a crosscut has been driven into the south zone from the 90-m level and mine crews are drifting through it at present. None of this material has been included in ore reserves for the moment. A second level is being established at the 125-m interval to access main zone reserves which were the basis for the production decision.

Development ore from this area will be stockpiled for mill tuneup which could begin sometime in March. The company will be using a mechanized cut-and-fill mining method similar to the nearby Trout Lake mine in which Granges has a 19.8% interest. Over the years, that mine has been expanded incrementally and that same philosophy will be used at Tartan Lake in the event additional reserves are blocked out.

About 15,000 ft of drilling has been completed from the underground workings which confirmed the grade indicated by the surface program, says Mr Muzylowski. He predicts there could be a 10% increase in reserves resulting from the in-fill drilling program.

At least 30 holes are planned from surface to test several promising gold showings, some of which occurred on the shoreline of the lake that Granges will be using for tailings disposal. Gold mineralization is controlled by a strong shear structure which he says will require at least another three years of drilling. Strong gold values have been found at Alberts Lake, about eight miles away, which he feels could be part of that same structure.

The underground program, which is classified as exploration, is being funded by flow-through but the mill and surface facilities are classified as a capital expense.

Initial mill capacity will be about 250 tons per day, rising to 500 tons 2-3 months after production commences and sufficient underground working places are available. A second ball mill will have to be added for the higher rate and foundation work has already been completed for its installation. The flotation circuit will also have to be enlarged somewhat. The mill building was put up in only two days and a modular construction approach has been adopted for plant construction.

The plant includes conventional flotation and a cyanide leach circuit with zinc precipitation to the dore bullion stage. A gravity section is being installed because of free gold in the ore. Mr Muzylowski predicts that by mid-summer the plant will be operating at the higher rate.

Operating costs are expected to be approximately $175(C) per oz and he reports about 5,000 oz of production was sold forward last year at prices ranging from $457 to $462(US) per oz. If the gold price rises again, he confirms they might sell additional production forward.