MINING MARKETS & INVESTMENT NEWS — QUERY — Golden Eagle a rare bird in gold mining

Has your paper ever done an article on Golden Eagle International? It supposedly has found 6 million oz. gold minimum, 157 million oz. potentially.

Is this find true, or another Bre-X? You’d figure that major companies would jump on this find.

.BG.C.

Certainly you’re right about the eagerness of major companies to jump on large gold finds. But there has been an atmosphere of caution out there since the Bre-X fiasco, and Golden Eagle International (MINE-O) is a play in which caution could not possibly be misplaced.

The company’s principal asset is mining rights on placer-mining concessions in the Tipuani Valley in west-central Bolivia. The underlying ownership of the concessions rests with the United Cangalli Gold Mining Cooperative, a syndicate of local miners. The Tipuani placers have been worked since Spanish colonial times, and were held by Swiss-based Aramayo Mines until they were nationalized in 1952. The limited information we have on Aramayo does not show significant gold production from Tipuani, and it may be that the placers were worked for tin instead.

The resource estimate you refer to in your enquiry was released by the company on May 22, showing 157 million oz. in inferred resources, 78.7 million oz. in indicated resources and 6.4 million oz. as a proven reserve.

“Proven reserve” is accepted parlance for a minable body from which the metal can be extracted at a profit, something you can only know once a feasibility study has been done. But Golden Eagle’s corporate disclosures over the last year mention nothing about a feasibility study.

The release does not show a grade or tonnage, just a bulk quantity of gold.

It is very difficult to gauge the possibility of a successful mining venture when only the gross contained ounces have been published. (The Montreal Exchange recently showed that it understood the importance of this, when it stipulated that listed companies must always report tonnage and grade in news releases.)

The company has been planning to put the full resource-calculation report on its web site, but had not done so at presstime. We did, however, look at an earlier report, prepared by the same consultant in January 1997. The consulting engineer, Guido Paravicini, estimated the average grade of the Tipuani placers at 14 grams per cubic metre and the volume at 134 million cubic metres, for an indicated resource of 60.7 million oz. gold. He further estimated the inferred resource at 246.6 million cubic metres, containing 111.4 million oz. gold.

That resource estimate was based on 107 samples, mainly from trenches, road cuts, pits and old workings. The grades of the samples were calculated not from direct assays of the material (which would have given grades in grams per tonne or ounces per ton) but from assays of panned concentrates, which were then recalculated as grades in grams per cubic metre. Though it is not unknown to report grades in grams per cubic metre in placer estimates, the sampling technique is unconventional and the documentation of the technique in the report is sketchy.

We would hasten to add that there does not appear to be any analytical mumbo-jumbo in Golden Eagle’s estimates; it does not claim, for example, to have a proprietary analytical process that independent laboratories cannot duplicate. That (at least) sets it apart from the “desert dirt” pedlars.

In all, we found the size of the resource hard to credit and one of the reports that defined it less than convincing. Your caution about this company is well advised.