VenCan seeks remedy in Edwards dispute

Operator River Gold Mines (riv-t) says the Edwards mine, northeast of Wawa, Ont., sustained a loss last year. The mine’s owner, VenCan Gold (VCG-M), believes the operation generated a profit of at least $1.4 million for the same period and wants payment of 50% of that total.

Both parties agree that Edwards produced 30,414 oz. gold from 62,963 tonnes milled in 1997, for an average grade of 15.03 grams per tonne (0.44 oz.) and revenue of $13.3 million. But VenCan is disputing River Gold’s accounting of costs and revenues, which show a loss under the terms of their 1996 sublease agreement.

VenCan has delivered a formal notice to River Gold seeking the “proper amount” of the net profits royalties for the period May 1-Dec. 31, 1997. If the amount is not paid by Sept. 24, VenCan says it will proceed to arbitration and perhaps terminate the sublease. River Gold’s 10-year agreement with VenCan allowed it to develop and operate the mine for a 50% share of profits.

River Gold continues to refute VenCan’s allegations and says it has not received “any representation from VenCan’s audits — let alone anything of substance” regarding the presentation of accounts.

In a separate development, River Gold recently bought the Mishi property, also near Wawa, from owners MacMillan Gold (MMG-T) and Mishibishu Gold (MGO-V). River Gold paid $1.4 million for the Mishi property and agreed to pay “other consideration” if more than 700,000 tonnes are mined and milled. This consideration would be $1 per tonne if ore is mined from an open pit, and $2 per tonne if mined from underground.

MacMillan, Mishibishu and previous operators have outlined a resource of about 750,000 tonnes grading 3.3 grams gold amenable to open-pit mining, within a total resource of 1.4 million tonnes grading 4.26 grams.

Mishibishu Gold’s 60% share of proceeds from the sale is $840,000. The junior still holds 300 claims and two mining leases in the Wawa region. MacMillan says its 40% share of proceeds boosted its cash reserves to more than $1.9 million.

The Mishi property is 2 km from River Gold’s mill, which operates at about 750 tonnes per day. It currently processes ore from the Edwards mine and from River Gold’s wholly owned Eagle River mine, situated nearby. However, the acquisition of the Mishi property and the discovery of additional zones at Eagle River have prompted River Gold to commission a study of a modest mill expansion.