Lawsuit still hovers Lac’s drilling delivers at Doyon

The results are in on the second hole of the deep drilling program at the Doyon mine and they carry important tonnage implications for this northwestern Quebec gold mine.

Joint venture partners Lac Minerals and Cambior Inc. started the program last fall to confirm the downward extension of the high grade West ore zone and the Main orebody.

Proven and probable reserves in the West zone (both underground and open pit) total 1.5 million tons with an average grade of 0.26 oz gold per ton, while the Main orebody hosts proven and probable reserves (underground and open pit) of nearly 10 million tons with an average grade of 0.15 oz.

The first hole of the deep drill program intersected two ore zones about 150 ft apart and 1,835 ft below surface, about 1,000 ft below the known ore zones. Assays from this hole returned 0.42 oz over a true width of 20 ft and 0.34 oz over a true width of 23 ft in the Main zone and West zone, respectively.

The second hole, with results just in, intersected 0.33 oz over a true width of 44 ft at a vertical depth of 1,411 ft. And about 650 ft lower at a vertical depth of 2,064 ft, 0.22 oz was intersected over a true width of 23 ft.

This second hole was drilled 460 ft east of the first hole. There is a third hole currently being drilled 460 ft to the west of hole No 1 with assays expected at the end of March or early April.

Lac’s senior vice-president and general counsel, Ian Hamilton, tells The Northern Miner it is still too early to speculate what the full implications of these results are for the mine, which produced just over 212,000 oz of gold last year. The holes are far apart and the data are still being compiled, he explains.

What can be said, however, is that these results are another in a string of favorable developments for the company over the past year, helping to divert attention from the courtroom wrangle with International Corona Resources over the ownership of the Hemlo Page- Williams mine.

It has been about a year since Mr Justice Richard Holland handed down his bombshell decision ordering Lac to hand over the richest of the three gold mines in the Hemlo camp to Corona. This past fall, Lac appealed the decision before a panel of five judges at the Ontario Court of Appeal. At the time of writing, a decision is still pending.

The past year will certainly not go down in company history as one of the easiest, but it was one of the busiest, with the company emerging not only with a healthy bottom line but with a tidy 10% increase in gold production. And the company’s achievements must not be overshadowed by the uncertainties of the lawsuit, stresses President Peter Allen. Among the year’s highlights are:

* The discovery of a new zone near the eastern boundary of its Bousquet property in northwestern Quebec. Initial ore reserves on the new zone stand at 7.8 million tons of 0.187 oz. A feasibility study under way on the new zone is expected to be completed the first half of this year.

* The commissioning of the $37-million Macassa No 3 shaft. Located in Kirkland Lake, the shaft is the deepest single lift shaft in the continent.

* The start of underground production and the announcement of doubling the capacity of the on-site mill at the Doyon mine.

* A production decision on the Stillwater platinum/palladium project in Montana with joint venture partners Stillwater Mining Co., Chevron Corp. and Manville Corp. Production on the project, which will be the sole producing platinum-palladium property outside South Africa and the Soviet Union, is slated to start in April.

* The Page-Williams mine began full commercial production and is ahead of schedule on development of the mine. With and without Hemlo

Financially, the company came out slightly ahead at year-end. Earnings for the year ended Dec 31 were $6.6 million or 23 cents per share on revenues of $138.1 million, excluding the Page-Williams operation. Last year’s earnings were $6.1 million or 23 cents per share on revenues of $142.4 million, before extraordinary items.

But once the Page-Williams operations are included, earnings skyrocket to $19.1 million or 68 cents per share on revenues of of $250.2 million.

Cash flow from operations without Page-Williams amounted to $33.1 million or $1.17 per share. Including Page-Williams, cash flow rises to $79.4 million or $2.81 per share. Fourth quarter

Looking specifically at the fourth quarter, earnings, excluding the Page-Williams, amount to $124,000 on revenues of $28.4 million with cash flow from operations coming in at $48.6 million.

Including the Page-Williams’ fourth quarter earnings were $294,000, or 1 cents per share on revenues of $61.4 million

In 1985, the company posted a fourth quarter loss of $5.7 million before extraordinary items and $5.2 million after extraordinary items. Gold production

Gold production for the year was up 10% to 280,749 oz, excluding the Williams claims, but including the Hemlo fractions. Including the Williams claims, gold production jumps to 479,264 oz.

Looking at the company’s other operations, Lac enjoyed a 25% boost in its share of production at the Doyon with 106,409 oz netted. Production was up 15% at the Macassa mine to 62,750 oz compared with 54,390 oz in 1985.

The Bousquet produced 33% less this year at 65,745 oz down from 99,057 oz in 1985. Difficult ground conditions accounted for this decrease, but now with new production techniques the mine is forecasting output at 80,000 oz for this year.

The Lake Shore mine had a lower output of 10,626 oz versus 16,067 oz in 1985. The East-Malartic mine produced only 572 oz this year, down from 1,638 oz in 1985.

In 1986 the company sold 484,617 oz of gold forward with an average gold price realized per oz of $489. In 1985, the company sold 263,039 oz of gold forward at an average price realized per oz of $485.

This year the company is targeting gold production at 530,000 oz, of which its other operations including the fractions are expected to produce 300,000 oz.