Rayrock Yellowknife wraps up takeover of Minera Rayrock

Rayrock Yellowknife Resources (RAY-T) has succeeded in its bid to take over affiliate Minera Rayrock (MRN-T).

Rayrock, a Toronto-based gold and copper producer, had held a 37.5% interest (19.1 million shares) in Minera. It is now set to acquire all remaining shares at 30 cents each; in total, this amounts to 36.4 million subordinate voting shares and 10.1 million multiple voting shares.

Financially, Rayrock is well-positioned for the takeover. The company recently reported 1997 earnings of US$8.4 million (or 46 cents per share) on revenue of US$55.4 million, compared with a loss of $12.5 million (68 cents per share) on US$66.3 million in 1996.

Rayrock operates three gold mines in Nevada: Dee (wholly owned), Marigold (66.7% owned) and Daisy (35% owned); gold sales from these operations in 1997 amounted to 39,439 oz., 73,640 oz. and 30,524 oz., respectively.

Rayrock expects to close the Dee pit in 1998, but leaching is expected to continue for about three years. Dee’s future lies in its underground potential, the company states. Rayrock will allow Barrick Gold (ABX-T) to earn a 60% interest in the operation by spending up to US$5 million to explore for deeper mineralization.

At Marigold, Rayrock has formulated a mining plan that reflects a low gold price in 1998. Under this plan, the mine is expected to crank out 63,000 oz.

gold.

At Daisy, mining is continuing in the Secret Pass oxide deposit and is about to begin in the Mother Lode deposit.

Minera’s production and revenue are entirely derived from the Ivan copper mine, near Antofagasta in northern Chile. Cathode copper production at Ivan reached 23.7 million lbs. in 1997, compared with 22 million lbs. in the previous year. Cash costs increased to 68 cents from 63 cents per lb. copper.

Production for the current year is projected to climb 4% to 24.7 million lbs. Cash cost is expected to fall by 13 cents to US55 cents per lb. copper.

The Ivan orebody consists of four known zones: Ivan, Zar, Emperatriz and Catalina. The Ivan zone consists mainly of high-grade copper sulphides, whereas the others contain oxide ores. Both types of ore are heap-leachable with sulphuric acid. Mixed sulphide/oxide ore is recovered with the aid of bio-oxidation.

Reserves stand at 4.4 million tons grading 2.2% copper, equivalent to 96,976 tons of copper. These calculations are based on a copper price of US$90 per lb. and recovery rates of 65-75% for mixed oxide-sulphide ore and 75-85% for oxide material.

Minera posted a loss for 1997 of US$5.6 million (or 11 cents per share), compared with a loss of US$15.4 million (30 cents per share) in the previous year. Much of the 1996 loss can be attributed to a US$14.1-million writeoff of the Bellavista gold project in Costa Rica.

As previously reported (T.N.M., April 13-19/98), David Crombie, who served as a director of both companies for more than 20 years, resigned for undisclosed reasons following the announcement of the Minera takeover. A replacement has yet to be named.