Despite dropping gold price Nuinsco on track at Cameron

Yes, he admits, a $100(US) per oz jump in the price of gold would solve most of the problems which Nuinsco Resources (TSE) is facing as it attempts to bring the Cameron Lake gold deposit into production.

But at the age of 68, the Nuinsco president is not about to be put off by trifling matters like a falling gold price and a stagnant market that is making it almost impossible for junior mining companies to carry out their plans.

With the help of mining consultant Malcolm Slack and Nuinsco affiliate Deak International Resources, Hume is planning to have Cameron Lake up and running by the first quarter of 1990.

If the rows of empty seats at Nuinsco’s recent annual meeting told him that investors couldn’t care less, Hume remains undaunted.

“We do have a viable mining operation and we should do everything possible to get it into production,” said Hume who was recently told otherwise by Nuinsco’s former joint venture partner Echo Bay Mines (TSE). Modest producer

Situated in northwestern Ontario’s Lake of the Woods area about 50 km southeast of Kenora, Cameron Lake is likely to be a modest producer — too small for Echo Bay which walked away after outlining 788,000 tons grading 0.194 oz in mineable reserves. But still large enough to be viable at a gold price of $360(US) per oz.

Assuming that Nuinsco can complete a 1,000-ton-per-day milling facility by next January, the project could be capable of producing about 37,000 oz in 1990 at a cost of $238(US) per oz, Hume says.

According to a preliminary feasibility report, production should rise to 52,000 oz in each of 1991 and 1992 before the joint venture starts to draw on reserves not yet placed in the proven, probable categories.

Those projections are based on the 54,000 ft of surface and underground drilling which commenced after Echo Bay sold its 53.8% stake in Nuinsco to Deak International last November.

The Edmonton-based mining company concluded that Cameron Lake wasn’t viable at a gold price of less than $550(US) per oz.

Taking into account a cut-off grade of 0.08 oz gold per ton, proven/probable reserves to a depth of 1,000 ft now stand at 1.1 million tons of grade 0.18 oz. Dilution factor

An additional 2.05 million tons grading 0.16 oz of possible reserve between 1,000 and 2,000 ft brings total reserves to over 3.1 million tons grading 0.168 oz.

But whether Nuinsco can turn its plans into reality depends very much on the company’s ability to raise the $23.8 million needed to build a mill and bring the project into production. Nuinsco shares were trading recently at 60 cents on The Toronto Stock Exchange and that combined with an employee stock option plan tabled at the company’s annual meeting could mean considerable dilution for Nuinsco in any financing agreement.

“It’s a tough one but I wouldn’t want to say it isn’t do-able,” said one Toronto mining analyst. “This is a relatively brutal market environment for junior gold exploration companies and a lot of them have had trouble during the mine start up phase.”

But according to Jim Smith, a former vice-president mining with Canamax Resources (TSE) who was brought in to review the project, extracting gold at Cameron Lake should be the least of Nuinsco’s worries. “You’d like a little more grade in the thing but down the 1,000 ft level, reserves are very well defined with about 350 holes,” said Smith. “The deposit is very mineable and if the gold price gets better, we should be all right,” he said. Additional deposits

About 90% of the Cameron Lake reserves are contained in two main zones the E1 and No 1 which average 24 ft and 16 ft wide respectively. Those widths are suitable for sub-level retreat mining methods, according to Smith who estimates that current reserves are sufficient to support a mining operation for three years.

After that, Nuinsco must begin to draw on deeper Cameron Lake reserves and/or a number of satellite deposits which lie within a 10-mile radius of the project. One is the Dogpaw Lake joint venture involving Canadian Arrow Mines (TSE) where previous drilling identified a number of gold mineralized fracture zones in a large gabbro body. Another is a small open pit on Canadian Arrow ground containing 18,000 tons of grade 0.26 oz.

About six miles further east, Nuinsco holds 7,600 acres at Rowan Lake where geology is thought to be similar to that at Cameron Lake. While the Rowan Lake claims remain relatively unexplored, they are known to contain modest reserves in two occurrences — the Monte Cristo and Victor — at the centre of the property. Mill feed

If exploration on surrounding claims proves unsuccessful, hopes for additional mill feed lie in the results of surface and underground exploration at Cameron Lake.

According to Nuinsco, the Cameron main zone remains open down dip below 2,600 ft over most of its strike length. Its dimensions at the 2,000-ft level are greater than 1,500 ft along strike.

“Widely spaced deep drill holes indicate that the shear zone and alteration intensity are maintained at depth and that mineralization intersected by many of these holes have average widths and only slightly lower grade,” according to a Nuinsco report.

“We are looking at this from an area perspective,” said chief geologist David Melling who is confident that Cameron Lake reserves can be expanded.

“It appears that the success of the project is contingent on Nuinsco’s ability to persuade others that they have a viable operation,” added geologist Charlie Blackburn, a Kenora area resident. Having been on site when the first hole was drilled in 1981, Blackburn regards Cameron Lake as one of the few properties in the Kenora area with mine-making potential. Gold market “Its a financial, not a geological problem that Nuinsco is having and

the state of the gold market isn’t helping,” he said.

Nuinsco Chairman Malcolm Slack was recently looking at ways to obtain the necessary financing to build a mill. “As long as we get construction started by August, we should be in good shape,” he said. A decline has already been driven to a depth of 800 ft and a 14-mile all-weather road connects the property to local infrastructure.

Deak International has been given an in-house feasibility study but it won’t be presented to the Deak loans committee until an independent review of the project is completed. The results of the study are expected to be available by the end of this month.

Ever the optimist, Hume refuses to speculate on what the price of gold will be if and when Nuinsco is ready to pour the first gold at Cameron Lake.

“I’m determined to put this sucker into production, I can tell you that,” he said.

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