Madsen commissions mine

Madsen Gold (MGF-T) has reached the commissioning stage at its namesake mine southwest of Red Lake, Ont.

The operation is producing at the projected daily rate of 500 tons, and the average grade stands at 0.15 oz. gold per ton (5.14 grams gold per tonne), though the company says this will increase to 0.234 oz. gold (8.02 grams) once the mill circuit is completed.

Proven and probable reserves are estimated at 1.2 million tons grading 0.276 oz. gold (9.46 grams), which is deemed sufficient for six and a half years of production.

Cash costs for the first and second years are pegged at $US255 and US$230 per oz., respectively. The estimates are based on a Canadian dollar worth US73 cents and on production of 40,000 oz. in the first year and 50,000 oz. in the second.

The total production costs for the first and second years are estimated at US$300 and US$275 per oz., respectively.

Four drills are currently operating underground, and two more will be added soon.

In the McVeigh zone, near the shaft area, two holes recently drilled between the fourth (650-ft.) and fifth (800-ft.) levels returned grades of 0.190 oz.

gold (6.51 grams) over 62 ft. of horizontal width.

Drifting over a 58-ft. strike length in the new North Tuff zone has uncovered an average mineralized width of 6.5 ft. with muck samples averaging 0.7 oz.

gold (24 grams).

In conjunction with its production financing facility of C$5 million and a standby facility of C$1 million, Madsen has sold forward and bought put options covering 85% of its first year’s production, receiving US$362 per oz.

for 10,000 oz. gold and US$377.60 for 24,000 oz. gold.

Madsen has also hedged an additional 48,000 oz. gold to cover its second and third year of debt servicing.