Western Goldfields retains $15 million for acquisitions

In September, 1986, Western Goldfields poured the first gold from its 60%-owned Hog Ranch heap leach mine in Nevada. Now the company has reported earnings of 30 cents per share (28 cents fully diluted) for the first half of 1987, has $15-million sitting in the bank gathering interest and plans to start mining a second deposit on the Nevada property in 1988. Western reported net income of $2,040,000 for the first six months of 1987 on revenue of $8,395,000. That included an extraordinary gain of $652,000 due to tax recovery. There are no comparative figures for the first half of 1986 because the company had no mining operations until the second half of 1986.

The company reported a $111,000 loss in the first quarter primarily because of a general slowdown in operations and gold recovery during the winter months, according to vice-president Gene Webb. The mine is more than 6,000 ft above sea level and Mr Webb says 3-4 ft of ice formed on the leach pads during the winter. Although operations were never suspended, that slowed things down.

During the first half of 1987 the company also raised $18,020,000 through a private placement of convertible preferred shares to Alexanders Laing and Cruickshank of London and First Marathon Securities of Toronto. It used $2.8 million of that to pay off all of its long-term debt and plans to use the remaining $15.2 million on acquisitions.

Mining to date has been conducted primarily at the Krista pit and exploration drilling to define mineable ore reserves south of the Krista pit is continuing. A mining feasibility study for the Bell Springs deposit four miles southwest of the Krista pit is also in the works. The company says it plans to submit an operating plan for the Bell Springs deposit to regulatory authorities in October and, pending approval, start development in 1988.

Mr Webb says the mine is producing 5,000 oz per month now and should meet its target of producing 50,000 oz during 1987. Operating costs are about $9.30 per ton and, with a 75% recovery rate, should result in getting costs per oz produced to under $200(US) this month. Reserves have been upgraded to 6,788,000 tons grading 0.054 oz gold per ton for a contained gold figure of about 369,000 oz.

In March Western increased its interest in the mine to 65% by purchasing a 5% interest from a group of West German investment funds known as Geomex, managed by Imperial Metals Corp.. That cut back the Geomex interest to 25% from 30%. A British merchant banker, Samuel Montagu & Co. of London, holds a 10% interest.