Golden Bear project gets $31 million boost

Project operator and 50%-owner North American Metals Corp. (VSE) recently arranged a $31 million forward sale of gold to its parent company, Homestake Mining (NYSE) of California. The loan will be used to bring Golden Bear into production.

Homestake has a 73% interest in North American Metals, while Chevron Minerals owns 50% of the mine project.

Not long after Homestake acquired its controlling interest in North American Metals, it learned that capital and operating costs, including road access, would be significantly higher than originally anticipated.

Late in 1988, the project was put on hold until a re-evaluation was completed. This spring the partners announced a decision to complete construction of the 360- tonne-per-day mine and mill even though capitals costs were projected to reach $70 million, about twice the figure originally estimated.

Jack Thompson, president of North American Metals, said progress to date at Golden Bear is “encouraging” with more than 140 personnel on site. Underground development, aerial tram and plant construction are all reported to be on schedule.

The mining operation is expected to turn out about 63,500 oz of gold per year from ores averaging 0.543 oz gold per ton. The plant will use dry grinding, fluidized bed roasting and carbon-in-pulp leaching to recover more than 90% of the gold contained in the high grade, but refractory ores.

Current proven reserves are adequate for five years of operation and the property is considered to have good potential to host new reserves.

Although the financing transaction with Homestake still requires regulatory approval, it will involve the forward sale of about 83,000 oz gold.

Delivery will be in quarterly installments representing less than 25% of any period’s production in order to leave room for fluctuations in gold price, costs and other factors.

The price used will be the current price of gold adjusted 3.5% per annum. Other terms in the forward sale include provisions for early repayment at a discount.

“All in all, it is a very favorable transaction that will provide the funds necessary to bring the project into production without the burden of high financing costs,” Thompson said. A portion of the funds will be used to repay an existing short-term loan and for working capital.

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