Acquisition boosts Pegasus reserves

Spokane-based Pegasus Gold (AMEX) has boosted its reserves by 49% since March, 1995. The proven and probable figure climbed by 2.6 million oz. to a total of 7.8 million oz.

Contributing to the increase was the company’s acquisition of the remaining minority interest in Zapopan N.L., its Australian subsidiary which operates the Mt. Todd gold mine in the Northern Territory. The feasibility study for construction of the milling circuit is expected later in the year.

Meanwhile, at the Florida Canyon mine near Winnemucca, Nev., exploration and infill drilling have almost doubled reserves. Tight drill spacing of about 100 ft. has allowed mineralized material to be upgraded to the proven and probable category. The figure stands at 72.4 million tons grading 0.019 oz. gold per ton, representing an increase of 606,000 oz.

In an attempt to reduce costs, the company has decided to release the contractor and conduct its own mining operations at Florida Canyon. A capital expenditure of US$34.2 million has been set aside for purchase of the mining fleet.

Further enhancing Pegasus’ reserve picture is the decision to proceed with production at the Pullalli gold project in Chile. The open-pit project occupies 37,000 acres along the coast, 100 miles north of Santiago. Development will cost an estimated US$50 million.

The Pullalli contains 10 million tons grading 0.046 oz. gold per ton, and should produce 90,000 oz. per year at a cash operating cost of US$220 per oz. Mining is to begin in late 1996.

With attention focused on the above-mentioned projects, Pegasus has decided to sell its 25% interest in the Kazgold joint venture with Goldbelt Resources (VSE). The project involves processing gold tailings from the Leninogorsky mine in northeastern Kazakhstan.

The company reported a net loss of US$1.2 million (or 3 cents per share) for the second quarter, compared with a loss of US$57.1 million (or US$1.56 per share) for the same quarter last year.

Pegasus produced 132,200 oz. gold during the quarter, compared with 129,300 oz. in the comparable period in 1994. Cash operating costs were reduced by 9% to US$236 during the recent quarter.