Madsen arranges $3.5-m funding

Additional financing may help the Madsen gold mine in Red Lake, Ont., to reach full production this fall, several months behind schedule.

Madsen Gold (MGF-T) has arranged a private offering of 1 million flow-through shares at $2.25 per share, and also placed a block of shares privately with a royalty company.

Under the terms of the additional financing, Metal Royalties Corporation of Canada, a unit of McCarvill, will buy 210,000 shares of Madsen at $2 per share, and a net smelter return royalty (NSR) of 1.35% for $828,000. The NSR decreases to 0.5% once the initial investment has been paid back.

The mine had been expected to reach full production in August. The delay is attributed to slower-than-expected development of underground workings.

Consequently, mill throughput has been lower than planned. As development advances, however, daily throughput is expected to rise to 450 tonnes, as originally planned.

Mill recovery, hampered by a large amount of lower-grade development ore, has hovered near 90%. When mill feed has been closer to the expected run-of-mine grade, recovery has approached 95%.

Madsen still expects cash costs to amount to US$260 per oz., with total costs (after depreciation and cost of capital) projected at US$300 per oz. These are expected to fall to US$230 and US$275 per oz., respectively, in subsequent years.

Exploration continues on the mine’s 2 and 4 levels, 100 and 190 metres below surface, respectively. Mineralization in the North Tuff horizon is being drilled from stations on both levels. To date, the best intersection encountered on the 4 level was 3 metres grading 122 grams gold per tonne (3.56 oz. per ton). An additional resource is being drilled off on the 2 level.

The next exploration target is the ultramafic-hosted No. 8 zone, which was discovered and partially developed in the mid-1970s. The zone is open in both vertical directions. Open extensions along the Austin Tuff horizon — the main mineralized structure — will also be explored.

Proven and probable reserves are about 1.1 million tonnes grading 9.3 grams gold per tonne (1.2 million tons at 0.27 oz. per ton), sufficient for a mine life of seven years. Should exploration increase the size of the reserve, the mill will be modified to process 600 tonnes per day. For about $5 million, the mill could be expanded to handle 900 tonnes per day.