Cathedral ups stake in Sterling

TSE-listed Cathedral Gold will increase its ownership in the Sterling gold mine to 90% from 52%.

The company negotiated the purchase of Saga Exploration’s 38% interest for a total cash consideration estimated at US$800,000, along with a 2.5% net smelter return royalty. (The agreement is subject to the requisite approvals.) The mine, near Beatty, Nev., is an underground operation which employs standard heap-leach extraction. Since production began in 1980, 139,000 oz. have been recovered. Output for 1994 was 13,290 oz., compared with 14,034 oz. in the previous year. Geological reserves are estimated at 483,000 tons averaging 0.19 oz. gold per ton.

Cathedral President Michael Jones says his company had been eyeing Saga’s 38% share ever since operations commenced 14 years ago. He added that there is excellent potential for expanding reserves.

Cathedral hopes to boost annual production to 17,000 oz. Other plans include acquiring new mining equipment and adding a third mining shaft (total cost: US$750,000). Jones is convinced that, as operations extend with depth, a high-grade extension to the current orebody will be discovered. Cathedral attributes the 5% reduction in gold production experienced in 1994 (compared with the preceding year) to the 2,000 ft. of development work carried out in an area outside of the known reserves. A surface drilling program is under way in an effort to delineate ore encountered in one of the new 1,000-ft. headings. The company reports the ore there is typical of that already mined, being well oxidized and heap-leachable. Gold recovery at the Sterling mine averages 87%.

The operating cost for 1994, which covered the 2,000 ft. of preliminary development work, averaged US$285 per oz. Cathedral is projecting US$250 per oz. for 1995.

As well as being Cathedral’s largest shareholder (with a 40% interest), Imperial Metals (TSE) holds a direct 10% stake in the Sterling mine. Meanwhile, Cathedral has budgeted US$2 million for exploration this year on its land holdings in the Kaburi district of Guyana. A detailed drilling program is under way on the Hicks zone at the Kaburi-Eldorado property. Cathedral recently acquired an option to earn a 90% interest in the Tallman gold property, which is north of Kaburi-

Eldorado and adjoins the company’s 48,000 acres of prospecting licence applications. Locals are mining a 164-ft. fault structure containing quartz veins and coarse gold.

Terms of the option call for expenditures of US$2.5 million over a 7-year period and payments totalling US$80,000 over four years. Also, Cathedral must grant the Guyana-based vendor, Kaburi Development, an option to buy 40,000 shares of Cathedral, and it must pay a further US$1 million if the property is put into production. Kaburi retains a back-in right for an additional 10% interest.

In the meantime, Cathedral will undertake a large-scale sampling program of the main Tallman pit and along strike.

The company has 13.3 million shares outstanding and working capital of US$4 million.