Inmet Mining sells Troilus gold mine — Homestake, Prime pick up property for US$110 million

In what appears to be another move to dispose of poorly performing assets, Inmet Mining (IMN-T) has sold its Troilus gold mine in north-central Quebec.

The buyers are the Homestake Canada unit of Homestake Mining (HM-N), which receives 51% of the project for US$56 million, and affiliated Prime Resources (PRU-T), which will pick up the rest for US$54 million. Inmet will be taking a $17-million loss on the sale but will use part of the cash to pay down an existing gold loan.

Troilus, 175 km north of Chibougamau, went into production late in 1996. The mine performed adequately (third-quarter estimates put its cash cost at US$224 per oz.), but gold grades had fallen short of expected levels, and capital costs during development had run substantially over budget. Over the first three quarters of 1997, it had produced just over 100,000 oz. gold.

Inmet, which is putting together cash for its share of development costs at the Antamina copper-zinc project in Peru, has been selling off “non-core” assets for much of this year. The Bougrine lead-zinc mine in Tunisia was sold to Breakwater Resources (BWR-T), and Inmet subsidiary Copper Range has sold its Michigan copper refinery to BHP Copper.

Troilus, whose reserves at the beginning of 1997 were quoted at 49.6 million tonnes grading 1.38 grams gold per tonne, adds 7% to Homestake Mining’s reserve base and 21% to Prime’s. Projected mine life is 12 years at annual production of 130,000 oz. gold and 4,400 tonnes of copper.

The companies are estimating an average cash cost of US$244 per oz. after copper and silver credits. The Troilus sale is conditional on final documentation, though the parties expect the deal to close before the end of 1997.