Richmont releases Wasamac drill results

Vancouver – With one operating mine, one soon to reach commercial production, and two active exploration projects all in the Abitibi region of Quebec, Richmont Mines (RIC-T, RIC-X) has staked a big part of its future on the district.

To better understand what that future holds, the company started a 35,000-metre drill program on its Wasamac property and an 8,200-metre definition drill program on its Monique property earlier this year.

At Wasamac, Richmont has been drilling to expand on the initial resource released in February, in which it established 5.1 million measured and indicated tonnes grading 2.51 grams gold per tonne plus an inferred resource of 11.5 million tonnes averaging 2.72 grams gold. The resource is spread over the Main zone, which sits below historic mine workings, and zones 1 through 3 to the east.

Drilled below the Main zone resource, hole 11-61 hit a true width of 65.7 metres carrying 2.16 grams gold from 544 metres downhole, and hole 11-66A cut a true width of 68.4 metres averaging 2.66 grams gold from 507 downhole.

At zone 2, which sits roughly a kilometre east of the Main zone, drill results from just west of the resource included hole 11-65 that hit a true width of 46.6 metres averaging 3.45 grams gold from 738 metres downhole and hole 11-68A that cut a true width of 13.7 metres grading 3.38 grams gold from 735 metres downhole. Drilling on the upper portion of the zone 2 resource returned slightly lower grades than what was previously defined in the resource bloc.

The company has already completed 9,900 metres of the 35,000-metre program. Richmont has two active drill rigs on the property, while it reports that a third is idle because its contractor has encountered a shortage of skilled labour. The 7.6-sq.-km Wasamac project sits 15 km west of Richmont’s headquarters in Rouyn-Noranda and less than 10 km east of the company’s Francoeur mine.

Richmont recently reached an option deal with Globex Mining (GMX-T) to earn 100% of a 2.1-sq.-km property adjacent to the east of Wasamac. Previous owners have already tested the potential for gold to about 200 metres with no significant results, but Richmont wants to drill deeper to find mineralized zones similar to the ones at Wasamac. To fully earn the property, Richmont will have to pay $3 million in cash, spend $3 million in exploration and issue 500,000 shares to Globex, which will keep a 3% net smelter return royalty on the property.

At Monique, drilling was designed to evaluate the possibility of a small open pit operation, with 47 holes drilling on the previously identified G and J zones. Results from the G zone included 12.9 metres carrying 6.76 grams gold, 10 metres averaging 8.07 grams gold, 17.1 metres grading 4.25 grams gold and 11.1 metres returning 6.2 grams gold, all at true widths and occurring between 60 and 175 metres depth.

The drill program also served to fulfill Richmont’s spending obligation on Monique to secure full ownership of the property. The company is now progressing with geotechnical work and a 3,500-metre condemnation drill program.

Though news out of Richmont has centered on exploration, it is also working to optimize its existing mines and get its Francoeur mine up and running smoothly. The company would like to reduce costs, which last year ran at $832 per oz. for the 68,000 oz. gold it produced last year.

And while the company has a strong presence in Quebec, the bulk of its production came from its Island Gold Mine northeast of Wawa, Ontario where it expects to produce 45,000 to 50,000 oz in 2011. Last year the company also drilled 7,500 metres on its Cripple Creek property southwest of Timmins.

For 2011 the company is targeting total production of 80,000 to 85,000 oz. gold thanks to the addition of the Francouer mine, and then as much as 100,000 oz. in 2012 if production goes well at the new mine.  

The company has only 31 million shares outstanding despite having been around since the early 1980s, and has close to $50 million in cash on hand. The company is actively looking for strategic acquisitions to boost annual production closer to 200,000 oz. gold.

Richmont’s share price was trading at a little over $4 in early February before starting a steep climb, hitting a 52-week trading high of $9.75 in late April. The company, however, was hit hard by market contractions in early May and closed at $7.23, down 52¢ on the day the latest Wasamac results were released.