GOLD AND PRECIOUS METAlS — Western Quebec Mines set to explore Wesdome property — Two-year program to include drifting and drilling beneath Lac de Montigny

After spending the last year consolidating its holdings in the Val d’Or camp and raising a total of $16.5 million, Western Quebec Mines (WGM-T) is about to embark on a 2-year exploration campaign at its Wesdome gold project northwest of this city.

While the Wesdome project is now taking centre stage for the Val d’Or-based junior, previously the company has been better known for its 41% ownership of affiliate River Gold Mines (RIV-T). River Gold is active in the Wawa camp of northern Ontario, site of its Eagle River gold mine and the Edwards gold mine it operates under an agreement with VenCan Gold (VCG-M).

Western Quebec (WQM) and River Gold have many officers and directors in common, and insiders control about 40% of WQM’s stock.

The Wesdome property comprises 51 claims totalling 858 ha situated beneath the northwestern quadrant of Lac de Montigny and directly north of McWatters Mining’s (MCW-T) Kiena gold mine.

While work at Wesdome dates back to the 1930s, the project was more recently a joint venture between WQM (30%) and Placer Dome (PDG-T) (70%). Placer and WQM spent a total of $8 million exploring the property during the 1970s and 1980s, including a major geophysical survey and about 95,000 metres of drilling in 378 holes drilled to depths exceeding 300 metres.

WQM held a right of first refusal on Wesdome and, when Placer decided to shed its Val d’Or assets last year, WQM purchased the major’s share for $1.1 million and a 1% net-smelter-return royalty.

For another $500,000, WQM also bought Placer’s 65% interest in the nearby Shawkey gold property, thus assembling six contiguous wholly owned properties on the southeastern shore of Lac De Montigny: Shawkey, Shawkey South, Mine cole, Joubi, Dubuisson West and Dubuisson East. The first three properties are on the northern extension of mineralization seen at Agnico-Eagle Mines’ high-tonnage, low-grade underground Goldex gold deposit.

Last November’s acquisition of a full interest in the Wesdome and Shawkey projects came on the heels of WQM’s $12-million public offering of senior secured notes (at 8.25%) and 1.2 million share purchase warrants exercisable at $4.50 each for two years.

The net proceeds were to be put to various uses: repayment of outstanding debt and promissory notes; exploration of the Joubi, Dubuisson East and West, and Mine cole properties; possible investment in River Gold; acquisition of other properties; and general corporate purposes.

At Wesdome, the centre of the property is dominated by a 1.3-km-wide granodioritic intrusion, named the Snowshoe stock, which is surrounded by strongly deformed mafic-to-ultramafic volcanic rocks and diorites of the Dubuisson formation.

The Snowshoe is crosscut and surrounded by granodioritic and tonalitic dykes and sills, with gold-bearing quartz veins cutting both the volcanic rocks and the intrusives.

Placer estimated Wesdome’s resource at 2.79 million tonnes grading 4.35 grams gold per tonne within four of 12 mineralized structures designated as the A, B, D, E, E1, E3, F, L, M, Callahan shear, South shear and Potter Island zones. Most of the mineralized zones are found immediately northeast of the stock (series A through F) and along the western portion of the property, where there are many dykes and sills (Callahan and Potter).

The structures to the northeast are fractures or shear zones containing pyrite and gold-bearing quartz veins. Each consists of either a single vein or a group of sub-parallel veins ranging in width from a few metres to tens of metres. These structures strike southeasterly, dip to the southwest and are open at depth. The subvertical mineralized structures display pronounced shearing, while the moderately dipping ones are less sheared.

As part of its exploration efforts, Placer sunk an exploration shaft from an island in Lac de Montigny and drove drifts into and across the A zone, which was found to extend for 900 metres in length and 530 metres downdip and average 2 metres in width. Individual veins within the A zone range from 15 to 80 cm thick, and the 1- to 3-metre-wide altered wallrocks contain 5% to 10% quartz-carbonate veinlets. The highest gold values occur in areas of abundant quartz veining, pervasive wallrock bleaching and abundant pyrite.

Gold tellurides occur as inclusions in pyrite or along chalcopyrite and galena grain boundaries.

In preparation for a 2-year underground exploration program at Wesdome, WQM entered into a financing with Triax Resource Ltd. Partnership in late December 1997, with Triax buying 1 million flow-through special warrants at $4.50 each, for net proceeds of $4.5 million. The special warrants are exercisable, at no extra cost, into 1 million flow-through shares and 500,000 warrants, each of which is exercisable into one share at $5 until Sept. 30, 1998.

Engineering studies are under way to determine the best way to reach structures at the 300-metre level; specifically, whether a shaft or ramp should be excavated and whether a small island should be built in Lac De Montigny to serve as a base of operations.

The E3 zone, on the northeastern flank of the Snowshoe, will be one of WQM’s prime targets, with future work to include drifting and detailed underground diamond drilling. The E3 zone is estimated to hold a resource of 717,200 tonnes grading 4.82 grams gold.

Said WQM Chairman Murray Pollitt, “We want to define a 50,000- to 100,000-oz. block [in the E3 zone] to start off with — that’s the tradition in this area.”

Added WQM President Conrad Hach, “If we ever get underground and start mining, we could be there for a hell of a long time.”

Should Wesdome ever become a mine, one development option would be to access the ore zones through Kiena’s workings. While it is still too early to be making such arrangements, Pollitt said that the option is “still on the table.”

WQM is already a small gold producer through its 100%-owned underground Joubi mine, which has been in operation since 1990. Last year, the mine produced just under 6,000 oz. gold, all from the Dubuisson East zone.

For the fiscal year ended Dec. 31, 1997, WQM recorded a net loss of $1.2 million (or 7cents per share) on total revenue of $3.3 million. This compares with a net loss of $323,000 (2cents per share) on total revenue of $3.5 million during 1996.

WQM has been consolidating its ownership structure by offering to buy all 7.6 million outstanding shares of privately held Valmag in exchange for 4.9 million WQM shares. Valmag currently owns 4.8 million WQM shares (a 28.1% stake) and interests in the Shawkey, Shawkey South and Mine cole properties.

Pollitt directly owns 19.5% of Valmag’s shares and has a 47.6% stake in privately held Incursus, which has a 32.2% interest in Valmag.