1989 rebuilding year for Pioneer

The company’s financial difficulties stem from its unprofitable Puffy Lake gold mine in Manitoba where mining and milling operations were recently suspended because of sustained production shortfalls. Pioneer reported a net loss for 1988 of $25.09 million after a $25-million write-down in the carrying value of the 100%-owned mine.

Although the company is studying ways to make the operation profitable, Willis said the mine would not reopen until the company has improved its cash position.

“We would have to look very closely at where the money will come from,” he said, noting that additional capital would be required for new development work.

“We think the chances of starting up again are good, however, we would need a reasonable gold price and we may also have to look at processing ore from other projects in the area,” he said.

Another reason for suspending operations at Puffy Lake was to allow financial resources to be directed to the Premier Gold project near Stewart, B.C., which is now in the start-up phase.

In order to fund its 40% share of the projected $88 million capital costs, Pioneer took out a 52,000-oz gold loan repayable over five years that yielded $28 million. Last year Pioneer also completed the sale of a $12 million convertible debenture to Pegasus Gold Inc. (TSE). If the debenture and warrants are fully exercised, Pegasus would have a 20.3% stake in Pioneer.

The Premier Gold project (which Willis noted was $5 million over budget) is expected to be in commercial production by late summer or early fall. At 2,200 tons per day, the mine is expected to produce 77,000 oz gold and 900,000 oz silver annually for the first four years of full production.

Willis said an underground program is in progress to develop reserves that could be added to the lower grade open pit material to enhance production and extend the current 11-year mine life. Recent results include 27.9 ft of 0.237 oz gold and 1.05 oz silver and 13.1 ft of 0.226 oz gold and 0.15 oz silver.

If Puffy Lake was the bane of 1988, Willis called the 50%-owned Stibnite heap leach gold mine in Idaho “a pleasant surprise.” Geological reserves at the seasonal open pit mine were upgraded to 11.2 million tons grading 0.037 oz gold, while mineable reserves of 2.7 million tons at 0.037 oz gold added four years of mine life. This year, Pioneer and several other mining groups intend to evaluate the potential of the sulphide resource in the entire Stibnite Valley.

Pioneer is also reporting exploration success at its 100%-owned Bonito project in New Mexico. The company’s 1988 program identified reserves suitable for open pit mining in the Blue Front zone that will be upgraded this year to the proven/ probable category.

The company recently acquired two exploration projects in British Columbia where the focus is on finding gold-enriched zones adjacent to existing copper-gold porphyry deposits.

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