Test program completed on City’s Cinola deposit

Bench-scale metallurgical test work on various ore types from City Resources’ Cinola gold deposit in the Queen Charlotte Islands yielded a recovery rate greater than 90, says the company. The test program was completed by Bacon, Donaldson and Associates of Vancouver.

Further testing is planned at Hazen Research in the U.S. where a continuous pilot plant operation will be established to confirm the results and generate design data for metallurgical and environmental engineering purposes.

At the annual meeting, John Bailey, president, said the cutoff grade for the Cinola deposit had been lowered to 0.035 oz gold per ton thereby increasing the mining reserve to 28 million tons averaging 0.061 oz gold. The decision to lower the cutoff from 0.05 oz was prompted mostly by the favorable metallurgical test results and higher gold prices.

Mr Bailey said that Wright Engineers would have the final feasibility study completed by September. Production is anticipated in the first half of 1989 at two million tons per year initially from head grades averaging 0.1 oz. This would yield 150,000 to 200,000 oz gold per annum at a cash cost of $200(US) per oz. The $75-$100-million project will be funded with a gold loan, he added.

Shareholders approved the allotment of five million common shares at $6 each for a 50% interest in a group of eight mineral properties in Papua New Guinea. The Wild Dog prospect is the most advanced of the group with reserves of 1.25 million oz gold at a grade of 0.2 oz.

Five diamond drills are testing the half-mile central portion of the deposit where a multiple quartz vein structure has been outlined along one mile of strike. Pre- feasibility development studies will be directed towards an open pit mining operation with a target production rate of 60,000 oz gold per year in late 1988, he pointed out.

Approval was given for the distribution of bonus warrants to shareholders which are exercisable at $7 per share until July 31, 1989. In early June, City announced it had reached an agreement with T.C. Coombs & Co. of London for a share placement with institutional investors of 1.5 million special warrants at a price of $10 per warrant. Each of the warrant holders will be entitled to one common share of City and one warrant having the same terms as the bonus warrants. The closing date for this issue is July 8.

Mr Bailey said that City Resources (Asia) would probably exercise its right shortly to purchase 2.5 million shares of the company at $3.27 per share. This would add some $8.2 million to City Resources’ (Canada) treasury, he noted.