Pacific Trans-Ocean officials in post-Ketza limbo

The Ketza River mine was operated in a joint venture by Canamax Resources (TSE) and Pacific Trans- Ocean (PTX) before cost over-runs and a major reserve miscalculation rendered PTX unable to service a $13 million debt load.

Before Belmoral agreed to acquire Canamax’s 50% interest plus all of PTX’s outstanding shares, Ketza oxide reserves were known to have decreased substantially to 250,000 tons grading 0.350 oz gold per ton. That compares to the 460,000 tons grading 0.45 oz announced in Canamax’s feasibility study.

The revision is due to a reduction of the specific gravity of in situ oxides, modified ore boundaries, reduced mining recovery and lower than expected ore grades delivered to the mill, according to PTX.

“The most significant factor contributing to the decrease in reserves was a reduction in specific gravity of ore in place to 2.3 tonnes per cu m from 3.1 tonnes.

Specific gravity is the ratio of a mass of a body of rock to the mass of an equal volume of water at a specific temperature and is used by mining companies to calculate ore reserves.

Although the mine is generating a monthly cash operating profit, PTX has known for some time that it would be unable to service its 20,544 oz gold loan from Lloyds and a $3 million interim convertible loan from Central Capital Management of Toronto.

The company had been looking around for someone willing to assume responsibility for its debts for a number of months before Belmoral stepped in. Under a proposed agreement, Belmoral will acquire all of PTX’s outstanding shares in exchange for 2.5 million shares and 3.5 million warrants to buy Belmoral common shares at $2.25 per share for two years.

“How Belmoral proceeds from now on is entirely up to them,” said Elmer Stewart, PTX’s vice- president minerals. “It is business as usual until we hear differently.”

Although Stewart is convinced that Belmoral can turn the operation around, he says it won’t be easy. “Because of the weather in that part of the country you have to fast track development,” said Stewart. “We built the tailings dam under the wettest conditions seen in the area for over 100 years,” he said. “If you don’t beat the weather, it will beat you.”

Due to reduced specific gravity level at Ketza, Belmoral is under pressure to find new ore to keep the operation going longer than the 2 years that current reserves will support. The operation is expected to churn out about 40,000 oz this year. But according to PTX, hope may lie in the exploration potential at the 10,000-acre Ketza property where some 550,000 tons of geological sulphide reserves grading 0.22 oz occur in the Peel zone.

An additional 87,000 tons of sulphide mineralization grading 0.42 oz was recently outlined in the Lab zone. A possible mineable oxide reserve of 26,000 tons grading 0.45 oz has been established on the Break zone. Belmoral has declined to be specific on its future plans for either PTX or Ketza until the due diligence process is complete. However, Strathcona has already suggested that the mill could be converted to handle both sulphide and oxide material.

In retrospect Stewart says that while the October, 1987 stock market downturn left it with no other alternative, PTX should not have taken on so much debt in order to finance its participation in the joint venture. “But mining is a risky business and you take your chances.”

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