Sunshine writes down investment in mine

Disappointing drill results have forced Sunshine Mining & Refining (SSC-N) to write down a major portion of its investment in the Sunshine mine in northern Idaho.

Against its third-quarter earnings, the company wrote down US$50.4 million. Sunshine reported a third-quarter loss of US$54.5 million (or 21 cents per share), compared with a year-ago loss of US$3.3 million (1 cents per share).

For the first nine months of the year, the company recorded a loss of US$61 million (24 cents per share), compared with a loss of US$16.2 million (6 cents per share) in the same period last year.

Drilling through the first quarter of next year will be aimed at outlining high-grade mineralization outside of known reserve blocks at the 101 vein. Already, drilling and drifting have established reserves grading 28.6 oz. silver per ton on the 4600 level. Should the drilling be successful, Sunshine says, production from the 101 vein could supplement production from the West Chance zone by late 1999 and bring down overall cash costs. The West Chance structure is expected to account for just over 4 million oz. silver production at a cash cost of US$4.90 per oz.

Also, Sunshine is targeting the eastern portion of the mine for future production with an access ramp off the 3700 level. Operators hope to outline a deep extension of the prolific Chester vein below the 5000 level. The vein is known to have contained grades of up to 100 oz. silver per ton.

Silver production in the third quarter at the Sunshine mine totalled 1.4 million oz., slightly better than the 1.2 million oz. produced a year ago. Cash costs, however, were higher, at US$4.41 per oz. — a consequence of lower byproduct credits for lead, copper and antimony.

For the first nine months of the year, total silver production was up 44% to 4.2 million oz. Overall cash costs fell 8% to US$4.49 per oz.

Meanwhile in northern Argentina, Sunshine is nearing completion of the final feasibility study at the Pirquitas project. The study, which is due by year-end, is expected to show robust economics, says Sunshine’s chairman, John Simko. Cash costs are expected to fall in the range of US$2.65 per oz. silver, net of tin credits. Proven and probable reserves still stand at 96 million oz., with capital costs estimated at US$100 million.

Meanwhile, Sunshine has picked up two new exploration properties.

At the Amador Canyon project in central Nevada, surface outcrop and dump values indicate that silver mineralization may be pervasive in several horizons. Sunshine hopes to outline a large-tonnage, bulk-minable target.

The second acquisition, Gonzolito, is 775 miles south of Buenos Aires, Argentina. From 1953 to 1980, the property was mined for lead, zinc and silver. Mineralization occurs along two sulphide-bearing zones thought to be formed in a sedimentary exhalative environment. Exploration will test the limits of this mineralization, as well as other targets identified by geophysics.