Discovery West ponders Colomac Lake decision

A spokesperson for Johnsby Mines says the company has not decided yet whether it will put up 40% of the financing required to bring the Johnsby Colomac Lake gold property to production.

A joint venture partner at the Colomac property with Neptune Resources, Johnsby is held 50-50 by Toronto companies Discovery West Corp. and Hydra Explorations.

With possible production estimated at 170,000 oz annually for 4 1/2 years, Discovery West and Hydra have 90 days to decide if they will provide 40% of $83-million in estimated costs to retain a 40% working interest.

The dilemma comes with the completion of a feasibility study by Neptune Resources at the N.W.T. property for a possible low-cost open pit, large scale vat leach operation.

As reported (N.M., Dec 14/87), while attempting to earn a 60% interest in the property by spending $4.5 million, Neptune completed a 28,000-ft diamond drill program and and conducted a vat leach test on 1,500 tons of ore grading 0.09 oz gold per ton.

If Johnsby decides against putting up 40% of costs, it can opt for a sliding scale royalty based on the price of gold.

Meanwhile, Discovery West has reported earnings for the 9-month period ended Sept 30 of $501,000 (2 cents per share) compared with restated earnings of $665,000 (3 cents per share) during the same period in 1986.

The company reported a cash position of $7.4 million on Sept 30, up from $3.7 million in the first nine months of 1986.

Discovery is the product of the March 1 merger of Discovery Mines, Yellowknife Bear Resources and Midcon Oil and Gas.

Discovery is also involved with Rea Gold in a couple of joint venture gold projects in northwestern Ontario. With drilling planned for later this year, geophysical surveys, trenching and sampling programs are targeting several alteration zones with associated mineralization.

The company’s oil and gas revenues for the nine months ended Sept 30 remained steady at $5.1 million compared to $5.2 million in the same period last year.

Among its oil and gas interests, Discovery West has holdings ranging from 2. 5% to 5% in 76,000 acres in the Kakwa-Chicken area of western Alberta where the company says significant oil discoveries have been made.

In the northern part of this area, Discovery says 11 producing or cased wells have been drilled and five locations remain in the current phase of drilling.

Discovery shares were trading recently on the Toronto Stock Exchange at $1.20 in a 52-week range of $2.70 and $1.00.