Geomaque continues to struggle (December 10, 2001)

Winding up operations at the San Francisco mine in Mexico and struggling to elevate production rates at the Vueltas de Rio mine in Honduras, Geomaque Explorations (GEO-T) incurred a net loss of US$1.75 million for the three months ended Sept. 30.

The loss, which translates into US3 per share, compares with a year-ago loss of US$110,000, or nil per share. Geomaque attributes its disappointing performance, in large part, to a $650,000 inventory adjustment related to the phasing-out of San Francisco. Revenue between the two third quarters eroded to US$3.6 million from US$5.7 million, while cash consumed by operations more than doubled to US$784,000.

For the first nine months of the year, the junior’s loss tallies to US$4.6 million (8 per share) on revenue of US$7.1 million, compared with year-earlier earnings of US$853,000 (2 per share) on US$17.5 million.

During the quarter, Vueltas del Rio produced 10,020 oz. gold for a total of 20,232 oz. since production began in March. Cash costs came in at US$251 per oz. Third-quarter production from the San Francisco was 3,054 oz.; for the nine months, 16,420 oz.

The third quarter’s average realized gold price was US$272 per oz., down from US$302 per oz. a year earlier.

Since Vueltas started up, in March, Geomaque has struggled to meet production estimates set out in the feasibility study, forcing the company to defer payments to creditors. A second leach pad is under construction and is expected to be ready for loading early in 2002. Denver-based Resource Capital Fund II recently granted Geomaque an extension until mid-December 2001 to restructure the credit facility that provided the financing for the mine. Final terms of a new term sheet are being negotiated.

Meanwhile, the Marathon property in northern Ontario was recently estimated to have a measured and indicated resource of 21.3 million tonnes grading 1.32 grams palladium and 0.34 gram platinum per tonne plus 0.4% copper. The estimate employs a cutoff grade of 0.8 gram palladium.

Geomaque can earn a half-interest in Marathon from Polymet Mining (POM-V) by spending US$1.8 million by November 2004; so far, it has spent US$714,000.

At the end of September, Geomaque had US$600,000 in cash, or US$1.3 million less than at the end of 2000. The company’s working capital deficiency climbed US$6.2 million to US$6.3 million during that period.