Royal Oak buys Nfld. gold property

By acquiring a gold property near its Hope Brook operations in Newfoundland, Royal Oak Mines (RYO-T) has secured a supply of mill feed that will take it into the next century.

Royal Oak purchased the Cape Ray property from American Gem (GEM-T) for $500,000; it has also acquired, for $425,000, the net smelter return royalty held by Homestake Mining (HM-N).

The Cape Ray property is 12 miles northeast of Port aux Basques in southwestern Newfoundland. Material from the deposit will be trucked 12 miles by gravel road to the coastal community of Isle aux Morts, where a supply boat will take it to Hope Brook’s port facility.

A feasibility study in 1989 indicates that the Cape Ray property contains diluted minable reserves of 501,619 tons grading 0.294 oz. gold per ton. In contrast, the Hope Brook mine has minable reserves of 2.4 million tons averaging just 0.088 oz. gold per ton.

Graham Eacott, Royal Oak’s vice-president of investor relations, explained that Cape Ray will extend production at the Hope Brook mill until 2000 or 2001. The supply of mill feed from the Hope Brook deposit will last for two or three years, after which time it will be replaced by the higher-grade material from Cape Ray.

In addition to the existing reserve, the 46.3-sq.-mile Cape Ray property hosts several known mineralized zones, including Windowglass Hill, Gulch, Sleeper and Big Pond. Previous drilling on the Big Pond zone returned an intersection of 7.7 ft. grading 0.62 oz. gold, and the mineralization is open along strike and at depth.

Underground work in the 1980s included a decline, facilitating development on the 90-ft. and 200-ft. levels of the zones. Immediately following completion of the purchase of Cape Ray and receipt of necessary permits, Royal Oak plans to begin rehabilitating the access road and dewatering the decline. The company will spend $1.5 million on development and $850,000 on a summer exploration program at Cape Ray to find additional reserves.