Citadel stays cautious after Surluga gold pour

The 137-oz bar was produced from a surface stockpile which Citadel is using to test a refurbished 500 ton-per-day mill. President Eric Hoffman wasn’t prepared to predict how many more bars will be produced at Surluga this year. Until the mill is given a clean bill of health, and ore from the Surluga, Jubilee and Jubilee South zones is processed, Citadel will continue to take a low-key approach to developing the property.

If it is brought to a commercial production phase this year, the mine should be capable of producing between 20,000 oz and 40,000 oz at a cost of around $250(US) per oz, according to consulting geologist Joe Church.

But Hoffman declined to speculate on what Citadel’s output will eventually be. “We don’t want to have the unhappy surprises that other new gold producers have had,” Hoffman told The Northern Miner at Citadel’s recent annual meeting in Toronto.

The great unknowns at the Surluga project, which is predicated on a series of lenses within the large Jubilee shear zone, are the grade and dilution factor, according to Hoffman.

While the shear zone dips at a 35 degrees angle, and remains largely unexplored below 800 ft, the nugget-like nature of gold mineralization means that Citadel must mine the deposit before grades and the amount of dilution can be determined. “At this point everything is a guess,” said Hoffman, adding that recoveries of between 83% and 90% were achieved during the test phase.

The mill test was held up for about five months while the company waited to receive the necessary environmental permits. Development plans have also been hampered by the shortage of skilled miners in the Wawa area.

But with six levels already developed and proven and probable reserves standing at 358,500 tons grading 0.215 oz gold per ton (plus an additional 146,914 tons of grade 0.25 oz possible ore), Citadel is firmly committed to bringing the former mine back into production.

Last year, after Citadel was bought from Canhorn Mining (TSE) by a group of investors, including Apotex Inc. President Bernard Sherman, $16 million was spent to refurbish the mill and conduct a series of surface and underground exploration programs.

They included a 16,000-ft surface drill program on the new Jubilee South ore zone which hosts drill-indicated reserves of 211,370 tons grading 0.175 oz.

Intersected vertically from 200 ft to 800 ft, the Jubilee South contains an additional 106,470 tons of grade 0.159 oz ore in inferred reserves.

Drifting and diamond drilling from the fourth level located two overlapping, parallel shear zones. Assays include 28 ft of grade 0.20 oz gold, 23 ft of grade 0.31 oz and 3 ft of 0.58 oz.

More recently, the Jubilee South (average width 52 ft) was drilled from an extension of the fifth level drift which is rapidly being advanced toward the zone.

In a bid to solve its staffing problem, Citadel has built four houses and will complete six more on land it acquired in the Wawa area. The company currently has 110 employees on its payroll.

“Where we go from here is a function of our need for more houses,” said Hoffman.

The company also completed work on a tailings disposal system suitable for a 15-year mine life.

Meanwhile, with 13.8 million shares issued, Citadel reported a year-end cash position of $4.9 million on Sept 30, 1988. As reported (N.M., April 3/89) Citadel recently got the go ahead for a $5.5 million private placement designed to fund the test mining program.

“There is a good possibility that we will need more money,” said Hoffman, who is trying to determine how the funds will be raised.

The company’s deficit increased on Sept 30 to $3.95 million from $3.02 million at the same time in 1987.

The shares were trading recently on the Toronto Stock Exchange at $1.55 in a 52-week range of $2.99 and $1.45.

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