Belmoral to buy Ketza mine

Toronto-based Belmoral Mines (TSE) expects to increase its gold production in 1989 to more than 100,000 oz by acquiring the troubled Ketza River gold mine in the Yukon Territory. Belmoral says it has agreed in principle to buy Canamax Resources’s (TSE) 50% share of the Yukon- based operation for $5.5 million and to acquire all the outstanding shares of Canamax’s joint venture partner Pacific Trans-Ocean Resources (TSE). The deal is expected to close Jan 1.

The joint venture has spent $27 million so far to develop an operation that has suffered from a major reserve miscalculation and significant dilution factor. It is expected to produce 40,000 oz in 1989 at a cost of $360(C) per oz.

Even though Belmoral President Steven Harapiak considers the mine “a good buy,” his company must find new ore to keep the operation going longer than the 2 years that proven reserves will support. A report by Strathcona Mineral Services indicates that Ketza’s mineable oxide reserves stand at 230,000 to 250,000 tons grading 0.383 oz gold per ton.

That is significantly lower than the 460,000 tons grading 0.45 oz forecast by operator Canamax Resources in its feasibility study. But with a 10,000-acre land position to work with, Harapiak is confident that Belmoral will be able to add to known reserves before they run out in 1992.

“A geological sulphide reserve inventory estimated at 530,000 tons grading 0.312 oz gives us significant exploration potential,” said Harapiak who agreed to buy the property after he was approached several times by Pacific Trans-Ocean (PTX).

Mine Development costs which were $6 million higher than expected, put the Alberta company at the brink of bankruptcy and President Frank Agar has spent the past few months attempting to find someone willing to take on PTX’s $13 million debt load.

“Although the mine is generating a monthly cash operating profit, net cash flow to PTX from known reserves would be insufficent to service the company’s debts,” Agar said.

As part of the proposed agreement, Belmoral will assume at an undisclosed discount the $13 million which Pacific Trans-Ocean owes to Lloyds Bank PLC (under a 20,544 oz gold loan) and Central Capital Management of Toronto.

PTX shareholders will also receive by way of either amalgamation or takeover, 2.5 million Belmoral common shares plus 3.5 million share purchase warrants. Each share purchase warrant would be exercisable over a 2-year period at $2.25 for each Belmoral share.

While Canamax is preparing to swallow an $8 million write-down as a result of the sale, Canamax spokesman John Pearson said it is a good deal for the company under the circumstances. “Based on the book value of the property ($13.6 million) less the value of production ($5 million), we thought they paid a fair price.”

Canamax will use the proceeds to pay down debt and concentrate its efforts in eastern Canada where production is under way at three new gold mines.

“This (the mine) gives us a sensible project and allows us to become a much larger producer,” said Harapiak who expects Belmoral’s gold output to decrease to 46,000 in 1988 from 53,000 oz last year.

“The mill is working well and most of the problems that we can imagine have already been identified,” he said.

If and when Belmoral assumes control of the operation January 1, it will be the second problem situation to be taken on by the Toronto company this year. In a bid to increase its gold output, Belmoral agreed to purchase a 51% interest in Roddy Resources (TSE) operator of a heap leach gold mine in Arizona. Belmoral also operates the Ferderber and Dumont mines in Val d’Or, Que., and has interests in Vedron Ltd. (TSE) and Yorbeau Resources (TSE).

Harapiak said will continue to operate with the cut and fill mining method used by Canamax at Ketza River while looking for financing to bolster Belmoral’s balance sheet.

The investment community reacted with stark indifference to the deal as indicated by the fact that the Belmoral issue sank to a new 52-week low of $1.28 on the Toronto Stock Exchange. file:BITECH NT Bitech Dec 21

Bitech Energy Resources (ASE) has agreed in principle to acquire a 100% interest in Betts Cove Minerals, a private Newfoundland company. The company’s main asset is a 2,140-acre mineral property which adjoins ground held by Bitech near Betts Cove, Nfld.

The private company’s claims protect a 10,000-ft strike extension of the favorable Nugget Pond horizon as well as the former producing Betts Cove copper mine. Bitech can acquire the company by issuing 1.5 million shares.

After the deal is closed, Bitech will control 10 km of the Nugget Pond horizon. Drilling by Bitech on a section of the horizon striking across its claims, has outlined a gold deposit displaying economic grades and widths.

Bitech also plans to examine the former producing Betts Cove mine which produced 130,682 tons of ore grading up to 10% copper per ton. The mine shutdown in 1885.

Exploration of both properties is expected to begin early in the New Year, President James Wade says.