Geomaque continues to struggle (November 27, 2001)

Winding up operations at the San Francisco mine in Mexico and struggling to bring production rates at the Vueltas de Rio mine in Honduras up to those predicted by a feasibility study, 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). The loss is attributed, in large part to a $650,000 inventory adjustment related to the wind-down of operations at the San Francisco mine. Revenue between the two periods eroded to US$3.6 million from US$5.7 million. 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-ago earnings of US$853,000 (2 per share) on US$17.5 million.

During the quarter, Vueltas del Rio produced 10,020 oz. of 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 leach-only San Francisco mine was 3,054 oz., and 16,420 oz. for the nine-month period. Geomaque expects leach pad rising at San Francisco to continue into the first quarter of 2002. The third quarter’s average realized gold price was US$272 per oz., down from US$302 per oz. a year earlier.

Since gearing up in March, Geomaque has struggled to meet production estimates set out in Vueltas’s feasibility study, forcing the company to defer payments to a number of creditors. A second leach pad is currently 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.

On Canadian soil, an October resource estimate at the Marathon palladium property in northern Ontario pegs measured and indicated resource at 21.3 million tonnes grading 1.32 grams palladium, 0.34 gram platinum per tonne plus 0.4% copper. The estimate employs a 0.8-gram-palladium cut-off grade. The company can earn a half-interest in Marathon from Polymet Mining (POM-V) by spending a total of US$1.8 on the property by November 2004. So far it has spent US$714,000.

At the end of September, Geomaque had US$600,000 in cash, 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 the same period.