Assays confirm significance of Westmin drilling

While one exciting drill hole does not an orebody make, it was enough to take the sting off disappointing 1991 first-quarter financial results released by Westmin Resources (TSE) at its annual meeting held here in early May.

A recent hole drilled in a previously untested gap area at Westmin’s Myra Falls mine project near Campbell River, B.C., encountered 39.3 metres (128.9 ft.) of massive sulphide mineralization of which 33.1 metres (108.5 ft.) returned an average assay grade of 3.6 grams (0.105 oz.) gold per tonne, 365 grams (10.6 oz.) silver, 4.5% copper, 0.5% lead and 18.5% zinc.

These grades are impressive and well above the average of reserves currently being mined at the H-W and Lynx underground mines which together comprise the Myra Falls base metal operation (T.N.M., May 13/91). “It’s probably the best intersection we’ve ever seen on this property,” Chairman Paul Marshall told shareholders.

Charles Stafford, Myra Falls manager, said the discovery “opens up a whole new ball game” in that it is believed to be in upper H-W mine stratigraphy. In the past, he said, the better ore lenses were typically encountered (and explored for) at the bottom of the H-W horizon.

The discovery hole, drilled from Lynx underground workings, is 400 metres east of the Ridge zone mineralization and 1,300 metres west of the H-W deposit. A 1989 hole in the Ridge zone returned 14 metres grading 0.3 grams gold, 20.7 grams silver, 1.8% copper and 7.8% zinc.

And the elevation of the new zone is above that of the H-W mine workings, which means it could be developed without expensive shaft sinking. Stafford said more drilling will test the discovery area as part of an ongoing reconnaissance exploration program aimed at getting a first pass look at the entire property potential.

Westmin’s share price got a boost to over the $4 level after the discovery was announced, which reversed a 52-week downward trend where the company’s shares bottomed at $1.44 from a high of $7.50.

The share price slump reflects the disappointing performance of Westmin’s Premier gold mine project near Stewart, B.C., and some operating problems at the Myra Falls operation. These and other factors led to a loss of $5.18 million in the 1991 first quarter (after provision for preferred dividends), compared with net income of $1.9 million in the comparable 1990 period.

And last year’s $1.8-million operating loss combined with a $79-million writedown of mining properties brought about a net loss of $80.8 million for 1990.

“We took a licking in 1990,” Paul Marshall told shareholders. “And we can look forward to additional pain this year.”

The company’s performance didn’t sit well with one minority shareholder who took the floor at the annual meeting to criticize Westmin management and the 1989 sale of Westmin’s oil and gas assets to a subsidiary of Norcen Energy. Over half the payment was in the form of convertible debentures which were exchanged in 1990 for Noranda preferred shares.

The end result of the transaction is that in addition to its income from operations, Westmin now holds 70% of the common shares and $250 million of 9% senior preferred shares in Westmin Investments. This subsidiary company in turn holds $350 million of Noranda preferred shares and pays dividends to Westmin at the rate of $22.5 million per year.

The minority shareholder alleged that this transaction was for the benefit (tax and otherwise) of the Brascade/Brascan group which controls Noranda, Westmin and Norcen, “with total disregard for the rights of minority shareholders.”

But Marshall defended the transaction in view of Westmin’s tenuous financial status at the time, and said the decision to sell the oil and gas assets was made only after unsuccessful efforts to sell the mining division.

Westmin’s new President Walter Segsworth informed shareholders of a number of recent and ongoing initiatives aimed at improving the company’s financial and operating performance.