LATIN AMERICA — Black Hawk cutting costs at El Limon

An amalgamation with Triton Mining, executed earlier this year, has provided Black Hawk Mining (BHK-T) with a gold mining operation in Nicaragua and various exploration projects in Latin America, including an 80%-owned gold-silver project in southern Argentina.

Before the merger, Black Hawk’s sole operation was the Keystone gold mine in Manitoba’s Lynn Lake district. The open-pit operation turned out 32,655 oz. gold during the first six months of this year at a cash operating cost of US$200 per oz. In the same period of 1997, Keystone produced 33,029 oz. at a cash cost of US$175 per oz. Ore is processed through a conventional, carbon-in-pulp mill with a capacity of 1,300 tonnes per day.

El Limon, by contrast, is a higher-cost producer, with both open-pit and underground reserves. Since taking control of Triton, Black Hawk has focused on cutting costs in order to maximize returns from the asset, while continuing exploration programs aimed at proving up more reserves.

The company appears to have been making progress, particularly in July, when 6,079 oz. gold was produced from El Limon at a cash cost of US$187 per oz.

In the 1998 first half, El Limon produced 24,884 oz. gold at a cash cost of US$272 per oz. This compares with 22,301 oz. at a cash cost of US$273 per oz. a year earlier.

Cash costs in the latest quarter were US$266 per oz., with 12,565 oz. gold produced, compared with US$295 per oz. and production of 10,510 oz. in the second quarter of 1997.

The attention given to cost-cutting is reflected in Black Hawk’s financial performance. In the 1998 first half, the company posted net earnings of slightly more than US$1 million on revenue of US$12.5 million, compared with a net profit of US$2.3 million on revenue of US$11.3 million in the corresponding period of 1997.

During the latest quarter, earnings were a modest US$7,600 on revenue of US$7.1 million, compared with a profit of US$1.3 million on revenue of US$6.1 million a year earlier.

On the exploration front, Black Hawk is carrying out programs at the 12,000-ha Limon concession and surrounding 323,300-ha La India-Limon concession, both of which are in northwestern Nicaragua.

Work to date has resulted in the discovery of two new veins, Talavera Sur and FW11, at the Limon mine. Nine drill intersections from Talavera Sur outlined a continuous, high-grade zone averaging 3.9 metres true width, with gold grades ranging from 6 to 35 grams per tonne.

Four holes have tested the FW11 vein. The best results from this work were 6.96 grams gold over a true width of 1.2 metres and 5.8 grams over a true width of 2.9 metres.

Both discoveries are parallel to, and about 100 metres and 150 metres south of, the active mine workings. Ongoing drilling is testing these veins and other nearby exploration targets.

Black Hawk is also carrying out an evaluation program of the India gold district. The work includes geological prospecting and rock sampling.

Field studies of the Cerro Quemado district are planned for the 1998 second half.

Farther afield, in Argentina, Black Hawk holds 80% of Manantial Espejo, a gold-silver project with resources and reserves roughly equal to 1.5 million contained ounces. Black Hawk is engaged in discussions with an established company that has focused on acquiring silver resources. This party has expressed interest in participating in the evaluation and development of the project.

Black Hawk is expected to produce 120,000 oz. gold this year from its mines in North and South America, at an average cash cost of US$225 per oz. Dundee Bancorp holds a 30% voting interest in Black Hawk and has two representatives, Ned Goodman and Garth MacRae, on the company’s board.