Positive feasibility received for Keystone gold project

Feasibility work on the Keystone gold project near Lynn Lake, Man., concludes that developing the BT deposit and reopening the Lynn mill is economic at current gold prices.

Feasibility was overseen by Cazador Explorations (VSE) and a final audit is under way by consultants Strathcona Mineral Services.

Cazador can earn up to half of the Keystone project from DCC Equities by spending $10 million.

The project includes the 1,500-tonne-per-day carbon-in-pulp Lynn mill and MacLellan mine, as well as the Fox mine and mill and a number of exploration properties.

The agreement included securing ownership of the remaining 49% interest in the BT deposit from Trans America Industries (VSE).

Cazador reached an agreement with Trans America late last year, issuing the company 400,000 shares and agreeing to make a payment of $500,000 before March 31 plus a further $500,000 payment by June 30, 1993.

John Chapman, president of Cazador, said the company expects to conclude an agreement with Trans America to extend the first payment into a final payment of $1 million at the end of June.

Chapman said the extension will give the company more leeway to fund a $160,000 in-fill drilling program on BT as well as continue upgrading the road between BT and the Lynn mill, about 17.5 km to the northwest. The upgrading will cost between $350,000 and $400,000.

The feasibility study calls for open-pit mining the BT deposit, which contains an estimated 1.23 million tonnes grading 2.85 grams gold per tonne. The BT material will be trucked to the Lynn mill and processed at about 525,000 tonnes per year.

At an estimated 92% recovery, the operation would produce about 1.3 million grams (42,000 oz.) at roughly $21.18 per tonne (US$203 per oz.). Initial capital cost for developing the project is estimated at $8.2 million and Cazador is negotiating with a number of parties to secure funds. Based on a 100% equity financing, a gold price of US$335 per oz., an exchange rate of 1.25 and a 5% discount, the net value of Cazador’s interest is about $2.2 million.

Over the 30-month mining period for BT, an additional 590,000 tonnes of low-grade material averaging 1.4 grams gold will be stockpiled, and could be milled if the gold price remains firm or increases.

Cazador also sees potential for expanding reserves downdip and along strike from BT.

Chapman said the company is negotiating with the owners of the nearby Farley Lake deposit. Farley is owned by Manitoba Mineral Resources with Golden Band Resources (VSE) holding a right to earn 44.83% in the property from Mingold Resources.

Minable open pit reserves at Farley were last estimated at 1.18 million tonnes grading 4.2 grams.

Depending on the timing of the required financing, the company hopes to start stripping in June, Chapman said.