U.S.REPORT Cash infusion boosts Plexus’ outlook

At first glance, the balance sheet of Plexus Resources (TSE) as of March 31, 1990, would give most investors an itchy trigger finger. At that time, working capital was a negative US$4.7 million while long term debt sat at US$16 million. The company’s June 30 report, however, will show a considerably different picture.

The sale of 300,000 shares of the company’s 633,334-share investment in Crown Butte Resources (VSE) at $8, as well a capital infusion of $16.5 million from the recently closed private placement with Total Energold (TSE), have radically changed the company’s financial position.

Following the placement, Plexus has about US$10.5 million in long term debt, US$8 million of which is in the form of a gold loan. The loan, at US$420 per oz., carries an interest rate of about 3.2%.

In addition to the gold loan, the company has a flooring program which guarantees a gold price of US$390 per oz. for 48,100 oz. of the precious metal. The program is spread over a 5-year period with about 45% of the total expiring during the next 12 months.

The transaction with Total includes the sale of 6 million common shares at $3 each, plus warrants allowing Total to purchase an additional 2.15 million shares at $3 per share. Payment will comprise $16.5 million in cash, plus all of the issued and outstanding shares of Sovereign Explorations, a unit of Total Energold.

As a result of the transaction, Total owns 51% of the 11.78 million issued and outstanding common shares of Plexus Resources.

Plexus incurred the majority of its debt in financing the Denton- Rawhide project in west-central Nevada. The company owns a 24.01% working interest as well as a 2.45% net smelter return royalty in the heap leach gold project.

The mine is a joint venture with Kennecott, which owns 51% of the project, while Kiewit Mining Group holds the balance.

With reserves of 29.4 million tons grading 0.040 oz. gold per ton and 0.368 oz. silver per ton, the mine is expected to produce 81,000 oz. of gold and 377,000 oz. of silver per year. The first gold-silver pour occurred April 27 of this year.

Art Ditto, president of Plexus, declined to give a specific cash cost per ounce of gold produced, but did say it is under US$250.

The Denton-Rawhide is not the company’s only project. Plexus has a 50% interest in the Western World copper-gold-silver property 50 miles north of Sacramento, Calif. The project has reserves of 1.45 million tons grading 2.62% copper, 0.034 oz. gold, and 0.42 oz. silver minable by open pit with a stripping ratio of 3.4:1.

Capital cost of the project is estimated at US$7.4 million with a pay back of less than two years given a copper price of US$1 per pound. Mining at a rate of 250,000 tons per year would give the project a life of six years.

Although there do not appear to be any environmental problems with the proposed mining plan, the process has been held up by Yuba Cty., which would prefer to see the property developed as a residential/ rural area.

The property, 1,403 acres in size, is owned by the joint venture. Purchased in 1988 for US$1.1 million, the land is currently estimated to be worth more than US$2 million.

Ditto noted a land developer may be brought into the joint venture at some point, particularly if a mining permit is issued. This would allow the group to incorporate future real estate development into the mining plan. He also expects the company will receive final permits for the project.

Plexus’s 100%-owned Bornite project 48 miles east of Salem, Oreg., will undergo detailed definition drilling this year and the company will begin the permitting process in anticipation of bringing the deposit into production.

Preliminary reserves of 3 million tons grading 2.5% copper, 0.023 oz. gold and 0.71 oz. silver at a 1% copper cutoff grade are estimated.

Reserves occur in a near-circular breccia pipe extending from surface to a depth of 800 ft.

The company anticipates a minimum mine life of seven years utilizing underground mining techniques, and the processing of 1,200 tons of ore per day using conventional milling techniques. Initial metallurgical tests indicate copper recoveries will be as high as 95%.

In addition to its mining interests, Plexus has varying interests in 83 gas wells, 10 oil wells and an Oklahoma gas gathering system and gas plant. In the nine months ended March 30, oil and gas revenue amounted to US$240,580 while production costs totaled US$83,627.