Geomaque hangs tough at Vueltas del Rio

Although a year behind schedule, Geomaque Exploration (GEO-T) expects to achieve design capacity at its Vueltas del Rio mine by the first quarter of 2002.

Situated in Honduras, Vueltas del Rio is one of two heap-leach gold mines operated by Geomaque. The other, San Francisco in Mexico, is currently on leach-only mode, with about 6,000 ounces left on the pad.

Reserves at the Honduran mine are pegged at 5.1 million tonnes grading 2.51 grams gold per tonne. The orebody is expected to sustain an annual production rate of 60,000 ounces, at an average cash cost of US$169 per oz.

Although commercial production began on June 30, the existing leach pad has proven too small to handle the volumes placed on it. Accordingly, a planned expansion of the pad has been accelerated to rectify the problem.

“We’re not losing any gold, but the ore is not leaching as quickly as it should becuase we are not giving it enough time,” explains Geomaque president John Paterson. “So, we are only loading the pad at half the rate we were in July.”

Column tests recovered 74% of the gold after 180 days under leach, though most was released in a third of that time. Essentially, the problem with the pad is that another level of ore was being added before the primary leach finished with the previous one.

The pad expansion is scheduled for completion in the coming weeks.

Paterson says the mine basically broke even in the second quarter, when 8,418 ounces were produced. Improvements are expected in the third and fourth quarters, with about 12,000 ounces expected to be produced in the current period.

On the corporate front, Geomaque has trimmed its office staff and initiated rescheduling negotiations for US$3.5 million owed to Resource Capital Fund II. Two installment fees of US$825,000 are attached to the loan, with the principal due on September 30, 2002.

“We had the fee covered, but we weren’t saving up enough for the balance owing,” says Paterson, adding that this is what triggered the renegotation process.

The installment fees are payable in cash or shares at the lender’s option, but a 67% drop in Geomaque’s shares since the facility was provided makes the latter option less appealing. Nevertheless, Paterson says the companies are making progress, noting that Resource Capital returned US$300,000 of the first installment to cover the pad expansion.

The closing date for the negotiations is October 18.

Geomaque is being equal vigilant in cleaning up other items on its balance sheet, having ended the second quarter with a negative working capital of US$4.8 million. Among the possibilities are the sale of equipment from San Francisco (the crusher alone is valued at US$1.5 million) and a merger with another mining company.

Given the current market, Paterson excludes the possibility of printing new shares to raise funds. At presstime, Geomaque’s shares were valued at 10 apiece, well below their 52-week high of 50.