‘Credibility problem’ still looms for Carolin

The history of Carolin Mines, an industry “soap opera” if there ever was one, has taken yet another turn. A new management group has now assumed control but the old guard has left them with a big credibility problem.

Shortly before his departure, President Orval Gillespie announced assay results from tailings at the Carolin mine site (N.M., Feb 2/87). Although they were “randomly gathered samples,” the results nevertheless stretched the bounds of credibility just one more time.

The test work was done by an American firm, Intergold U.S.A., which came up with 1.0 oz gold and 0.5 oz platinum per ton in the tailings. The gold content alone was more than 10 times the head grade achieved by Carolin in its brief operating history.

New management at Carolin has supplied operating statistics on the mine to The Northern Miner which incidentally were compiled for regulatory authorities in the U.S. rather than in Canada. This country’s disclosure policies are somewhat more lenient so previous management rarely made such information available to the general public here.

Those operating statistics show head grades of 0.096 oz gold for the period June 1, 1984, to May 31, 1985. The recovery rate over that period was 45.2% which indicates there was 0.053 oz gold left in the tailings. In the 1983 fiscal year the company milled 293,451 tons of ore with a head grade of 0.088 oz gold and a 50% recovery rate. Throughput jumped the following year to 419,017 tons at a 0.099 oz head grade and 60.8% recovery rate.

Sources familiar with the Carolin mine tailings were polled by The Northern Miner and they almost uniformly agreed that the maximum recoverable gold content was about 0.03 oz. Dr Gordon Bacon, from Bacon Donaldson & Associates, a Vancouver consulting firm, states flatly that there is “no validity” whatsoever to the recent assay results published by Carolin.

Carolin’s new vice-chairman, Michael Berns, tried to shed some light on the situation in a recent interview. A lawyer by training, he admits to having “no technical background” in mining, but adds his law firm has acted in a legal capacity for Carolin. While visiting Vancouver last summer, he said Mr Gillespie suggested to him that there was more gold and also some platinum in mine tailings than was previously indicated.

Mr Gillespie put him in touch with Martin Fife who is president of Intergold U.S.A. which Mr Berns describes as a research firm specializing in “complex” ores. To the best of his knowledge its staff members are “mathematicians, chemists and process engineers.” Apparently Mr Fife is a director of the multi-billion-dollar Dreyfus Fund, and someone who has “impeccable business credentials.”

Test samples were collected by Carolin in late 1986 and shipped to Intergold for analysis. The 200 lb of samples were collected on a random basis and there was no pre- concentration in the test work, he claims. Then how does one explain the high gold results and also the platinum values where none were known to exist before? Mr Berns says it has been suggested to him that perhaps some of the gold was tied up with platinum and it didn’t appear in earlier results. Mr Bacon disputes this, pointing out that it goes against the law of physics and just about every other law for that matter.

Carolin is planning to test a 40-ton bulk sample and results should be out within the month. This sample material was taken from the top 14 ft of the tailings area by Golder Associates and submitted to Intergold for testing. Mr Berns confirms that an independent metallurgical consultant will be appointed to confirm Intergold’s test results.

Carolin is financing the construction by Intergold of a test plant to process the sample material. There could be one or two plants and they will be built in Nevada where Intergold operates through an answering service. He feels “there is no credibility problem with Intergold” and when pressed said it was possible that a large Canadian firm might eventually be called in as a referee. He adds that Intergold has “taken steps to protect its process” which he implied was quite revolutionary.

Mr Bern’s group bought control of Carolin by purchasing secured convertible debt from the National Bank of Canada and subordinated (unsecured) debt from State Farm Mutual Automobile Insurance Co. of Illinois. Carolin owed the National Bank $13.1 million which was secured by company assets but State Farm’s $13.4 million was unsecured. Carolin’s new management has converted National’s debenture and they purchased the two debt entities for $3.5 million.

Mr Berns says that Windjammer Power and Gas and Aquarius Resources were sued by the National on Carolin’s behalf and they forfeited their interests. Under threat of legal action Ocelot Industries turned its interest into the bank which the Berns group has acquired and plans to put into Carolin for $1. Columbia Northland will receive one million Carolin shares for its 17.55% interest, subject to regulatory and shareholder approval, he adds. By acquiring these companies’ interests, Carolin now has a 100% interest in the property.