Canamax moves will save $2.5 million

And while President Wayne Lenton said speculation regarding a merger of Canamax and Canada Tungsten Mining (TSE) was unfounded, he didn’t rule out the possibility of rolling Canada Tungsten’s gold assets into Canamax.

Canamax plans to move its executive offices to Vancouver at the end of July. As a result, most of the company’s 18-member head office staff in Toronto has been laid off. In Vancouver, Canamax will share office space and facilities with Canada Tungsten and Amax of Canada. Amax of Canada is wholly owned by Amax Inc. of Colorado while Canamax is 49.7% owned by Amax Gold, an 87%-owned subsidiary of Amax Inc. Lenton is also president of Canada Tungsten which is 56.4% owned by Amax Inc.

Canada Tungsten also holds a 47% interest in Minerex Resources (VSE) which has a 50% interest in and operates a heap leach gold mine in Nevada expected to produce about 24,000 oz gold in 1989. Canada Tungsten also has a seasonal placer gold mine in the Yukon Territory which produced 4,393 oz of gold in 1988 at an operating cost of $205(US) per oz.

Lenton says Canamax will realize a saving of about $1 million by cutting back on exploration staff and another $1.5 million from reductions in head office staff and rent.

The staff reductions and move come as part of the company’s efforts to cut costs as it makes the transition from a gold exploration company to an operating company.

“We’re reducing our overhead costs and reducing our exploration emphasis,” Lenton told a group of mining analysts and investors at a recent meeting in Toronto.

Despite the difficulties the company has faced, Canamax expects to produce more than 90,000 oz gold this year and 95,000 oz in 1990 at its three wholly-owned mines — the Bell Creek and Kremzar mines in Ontario and the Ketza River mine in the Yukon Territory. In 1988 it produced about 32,000 oz.

Average cash costs are expected to be about $311(US) per oz in 1989. To the end of May the company produced 35,800 oz of gold at a cash operating cost of $336(US) per oz.

Although the company’s emphasis is being directed toward reducing operating costs, it has also budgeted $7 million for exploration in 1989. It will maintain exploration offices in Vancouver and Timmins and maintain an exploration staff of eight geologists plus support staff.

About $3.5 million of the exploration budget will be spent on the Lochalsh project about two kilometres south of the Kremzar mine near Wawa, Ont. Work has already started on collaring a portal on the property.

Drill-indicated reserves stand at 1.3 million tons grading about 0.19 oz gold per ton across an average width of three metres. The reserves lie above the 200-m level.

If viable, the Lochalsh property, which is 100% owned by Canamax, would supply mill feed for Kremzar. Kremzar is currently milling about 500 tons per day.

Another $500,000 to $1 million will be spent on the Ketza River project. Lenton said the company’s recent decision to buy the remaining 50% interest in Ketza at an effective cost of $4.8 million was based on the known oxide reserves, sufficient to maintain operations until the end of 1990. However, there is potential to mine smaller satellite deposits and extend the life of the mine.

Earlier this year the company had expected to sell its interest in Ketza, but in early April that deal fell through. As a result, a lawsuit has been launched by Canamax against Belmoral Mines. Belmoral has filed a countersuit.

By the end of 1989 Canamax expects it will have about 21 million shares outstanding, including those involved in a recently announced unit offering. Part of that issue, expected to close by mid- July, will be a secondary offering of the 850,000 common shares allotted to Lloyds Bank in connection with Canamax’s acquisition of the remaining 50% interest in Ketza River.

Lenton says he expects Canamax to have cut its debt from $36.1 million at th e end of 1988 to $18 million by the end of 1989 and projects earnings of 5-8 cents per share in 1989.

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