Gold output tumbles at Galactic project

The production shortfall at Galactic Resources’ Summitville gold project in Colorado is having significant impact on the company’s share price. Galactic recently reported that November production was 7,500 oz, bringing total “gold equivalent production” since June 5 to 49,000 oz.

At this rate, gold output will be less than half of the 120,000 oz the company forecast for its first year of operation. And the shortfall has been reflected in Galactic’s share price which has tumbled from a year’s high of $16.25 to about the $7 level. But the problems apparently have not affected the company’s ability to raise money and on that score Chairman Robert Friedland has few equals.

In September, the company announced completion of a $13.8- million private placement with “a major Canadian financial institution.” Altogether, 1.5 million common shares were issued at $9.25 each plus a warrant to purchase an additional 1.2 million shares at $11.63 each. An earlier placement, which netted Galactic’s treasury $1.3 million, involved an 8% subordinated convertible debenture.

Galactic raised the money to finance its participation in the Ridgeway mining project which falls under a joint venture agreement with Amselco Minerals. Located in South Carolina, the project has 51 million tons of reserves grading 0.039 oz gold per ton. The deal with Amselco which by industry standards is rich, to say the least, will allow Galactic to earn a 49% minority interest through a series of payments totalling $8 million(US).

Coupled with those payments is a commitment by Galactic to finance the next $5.5 million of feasibility work after which all costs will be split on a pro rata basis. In the event Amselco decides to participate, Galactic must shell out another $2 million six months after the decision is made. 1986 season over

Mining has terminated at Summitville for the 1986 season but the company says leaching will continue through the first quarter of 1987 without interruption. Last month the company said it was making a comprehensive reassessment and review of its Summitville mining plan which suggested to many that some serious problems existed at the mine site. A number of key personnel was also said to have left including President Edward Roper, which Galactic steadfastly denies. The company appears anxious to put that rumor to rest once and for all.

Commenting on the revision of the company’s mining plan, Mr Friedland claimed in a recent news release that “an annual review of each season’s operations is a routine activity, particularly at the end of a start-up year.” The new mining plan will “incorporate the fruits of the first season’s practical experience in full-scale operations in order to maximize productivity and efficiency,” he said, adding that the review should be completed by spring.

The company says sufficient working places have been developed for an early start to mining operations next year.