Cusac/Gulf Titanium generating cash flow from small Montana mine

Adopting a pay-as-you-go strategy toward mine development, 50/50 partners Gulf Titanium (VSE) and Cusac Industries (TSE) are generating a positive cash flow from limited production at their joint-ventured Cruse/ Belmont gold project near Marysville, Mont.

During the mine start-up phase, direct shipping ore delivered to the Asarco smelter in Helena proided the project with about $500,000 of cash flow. The companies said the grade of ore recovered in the western portion of the Bald Mountain vein was significantly higher than the average projected grade of 0.64 oz gold per ton.

Guilford Brett, managing director of Gulf Titanium and president of Cusac, said the associated companies are now negotiating a custom milling arrangement with a small mill facility south of Helena in order to increase production to 100 tons per day. Under this arrangement, the joint venture expects to produce a minimum of 1,500 oz of gold per month.

A crew under the direction of Martin Sadd, project manager and Giles Walker, project geologist, is preparing the small, underground mine for increased production which should begin in late February or early March, 1989.

The 200-ton-per-day modular mill originally scheduled for installation in the fall of 1988 wasn’t completed because anticipated bank financing was not finalized. The companies fully expect to pursue the construction of their own mill in 1989, however, with the expectation that the custom milling contract will alleviate or reduce the need for debt financing. (Cusac recently won a $2.7-million judgment as a result of a contractual dispute with the operator of a British Columbia gold project. If the judgment is upheld, Brett said some of the funds may be used for mill construction at this project.)

As of early October, the project had total reserves (proved, probable, drill-indicated, inferred), including 5,167 tons of broken ore in stopes, of 84,347 tons at 0.64 oz gold and 1.9 oz silver. Production prior to October was 2,334 tons averaging an estimated 0.52 oz gold and 1.59 oz silver.