The Graduating Class 1987 GOLD REPORT MACLELLAN

SherrGold Inc.’s MacLellan mine, Snear Lynn Lake, Man., is the hands- down winner of the “Most Fiesty Mine of 1986” award. And for good reasons. Not only w as the decision to put the gold deposit into production met with skepticism back in the summer of 1985; the subsequent development stage was tripped up by construction delays and higher-than- anticipated costs which made the budget boil ove r by some 25%. Yet, despite the headaches, the project was completed on schedule with its first bar of dore bullion poured late last summer.

Since then (for the last three months of 1986), SherrGold poured gold regularly at the rate of 2,500 to 3,000 oz per month, says President Ga rry Hughes.

The MacLellan is expected to ease into full production early this year. The goal is to handle 26,000 tonnes per month, which should be achieved by March, Hugh es explains. Production this year is targeted at 65,000 oz of gold and about 90, 000 oz of silver. Operating costs are budgeted in the $50-plus(US)-per-ton range or about $200 per oz of gold produced, he says.

Those figures aren’t bad at all and they put the MacLellan well within the bounds of Canadian mid-sized gold producers. But getting to that stage wasn’t easy.

Back when the mine was still on the drawing board, a $34-million budget was to transform the plans into reality. But a 3-month delay in shaft- preparation and the increased costs of refurbishing the Lynn Lake mill facilities, which had be en mothballed for the past decade, caused the project to go over budget at $43 m illion.

Sherritt Gordon, which spun off the MacLellan deposit into SherrGold, went to the public for most of the financing. The company raised $22 million by selli ng 40% of its issued shares and also provided $5 million in unsecured credit. Th e federal government kicked in $4 million while the provincial government contri buted a $2-million loan. A $10-million term bank loan was also arranged, guarant eed by Sherritt.

The MacLellan has an estimated life of 5-6 years. Reserves in the Main zone ar e 1.6 million tons grading 0.209 oz gold per ton to the 1,600-ft level. Half of that has been confirmed with 50-ft drilling from the 800-ft level.

Nevertheless geological reserves are 3.4 million tons grading 0.157 oz gold per ton — enough to keep the mine operating for 10 years at its mill’s 1,000-ton- per-day capacity. The deposit is essentially open to depth. Plans for 1987 inclu de exploratory drilling from the 1,200-ft level into the East Main zone. A ramp is also planned from the 1,200-1,600-ft level where drilling will be done to exp lore the Main zone at depth. To the west, about one million tons of 0.106 oz gol d per ton have been outlined by diamond drilling from surface on the Dot Lake pr operty. Here SherrGold has an agreement with Novamin Resources for more explorat ion and possible development.

Mining at the MacLellan is on a 7-day week basis, using a mechanized, cut- and- fill mining method with sand backfill. The steeply dipping orebody is being mine d in two stoping blocks at the 1,200- and 800-ft levels. The plan is to connect the two levels by a ramp which will allow movement of major equipment for mainte nance purposes.

Underground access is by a 3-compartment shaft which comes to the 1,200-ft level. Below that, a fourth compartment is added for sinking. The shaft is below th e 1,500-ft level.

Rockbreakers, instead of a crusher, reduce the size of rocks underground before being hoisted in two 3-ton capacity skips, seven days a week, two shifts a day. About 350,000 tons of ore are slated for hoisting this year. The ore i s then trucked five miles southwest to the old Farley mine site, where the for mer base m etals mill has been refurbished for the gold operation.

The mill uses conventional technology for gold milling and carbon-in- pulp recovery. The rod mill, four ball mills, a jaw crusher and a conveyance system were recommissioned after being used in the Lynn Lake base metals operation. New equipment includes a vibrator feeder, leach tanks, thickener, disc filters and carb on-in- pulp circuit and refinery. A jig will be added this quarter.

Dore bullion — 40% gold and 60% silver — is the end-product. And there’s not hing quite like it for transforming skepticism into well-earned praise.