Canamax closes in on gold production target

A mere five months after its Bell Creek project went into production, Canamax Resources has made two announcements which could bring the Toronto gold mining company closer to realizing its plan to produce 100,000 ounces of gold from five mines by l991.

At a recent annual meeting, Canamax President John Hansuld told shareholders that his company’s Kremzar gold property near Wawa, Ont. should be producing by September l988. Investment to production is estimated to be $20.3 million. Annual production is forecast at 32,000 ounces at an operating cost of $295 per ounce.

“The initial production rate will be 500 tons a day with the mining plan and mill design engineered to provide for ready expansion to a minimum of 800 tons per day.”

Should production on the property begin on schedule, it will be Canamax’s second producing gold mine. Canamax’s Bell Creek project near Timmins, Ont. became the company’s first gold producer when ore shipments to a custom mill began, in January l987. A 50% joint venture with Pamorex Ltd., The mine is expected to produce 18,000 ounces in l987 and rise to an annual rate of 25,000 ounces in l988.

The Kremzar production decision was made at a morning board meeting in which Canamax directors agreed to purchase a 34.56% interest in the Matheson gold project from Procan Exploration Company.

The Matheson project encompasses an extensive land position of 280 claims straddling the Destor- Porcupine fault east of Matheson, Ont. It includes two gold deposits — the Mattawasage deposit located adjacent to and on the geological extension of the Holt-McDermott mine of Barrick Resources in Holloway Twp., and the 42 East deposit located in central Holloway Twp. 3.5 km to the northeast.

On completion of the purchase, Canamax will own 100% of the project properties and Procan will retain a 5% net profits royalty from production.

A $2.6 million underground exploration and bulk sampling program is currently being initiated on the 42 East deposit where drill indicated reserves are estimated at 576,000 tons grade 0.216 oz gold per ton. In addition, a $1.1 million surface drilling program is being concentrated on both deposits as well as other gold targets indicated by previous drilling.

These announcements were just the latest in a series of developments which could make Canamax Canada’s 16th largest gold producer by l991. “Stay tuned, we’re only just beginning,” said Mr. Hansuld who watched as his company’s shares reached record highs recently. Powered by the same gold fever that rocked the Toronto Stock Ex change’s gold index up 70% since Jan. 1, Canamax shares topped the $12 barrier, having risen 166% from their 52-week low of $4.50.

Canamax reported cash and short term deposits of $12.6 million on Dec. 31, l986 compared with $10.2 million for the same period last year. Although Canamax is considered primarily as a gold producer, a 51% stake in the Manitoba Potash Corp.,which holds the rights to a high-grade deposit near Russell, Man., could be the firm’s biggest asset.

Canamax sold a 49% interest in the project to the Manitoba government last year for $5 million. While the world’s annual production of postash exceeds consumption by 28 million tonnes, the closure of potash mines in Saskatchewan and the Soviet Union due to flooding could make the project a counter-cyclical investment with potential for the early 1990s.

Depending on the outcome of a feasibility study the government of India has signed a letter of intent to purchase 500,000 tonnes of potash annually and Hansuld claims that the governments of China and Korea have also shown interest.

However, since the project will cost approximately $500 million to develop, Mr Hansuld expects Canamax to dilute its interest to around 15% eventually.