Galactic Res. struggles to shake “one-mine” image

During that period, Galactic’s detractors have been legion. But there is mounting evidence that the tide is finally turning for the company.

Following the successful start-up of production at the company’s 48%-owned Ridgeway gold mine in South Carolina, Friedland is trying to shake off the image that Galactic is a one-mine company.

The mine usually associated with the company, and the one which has caused it so much trouble, is Summitville. Perched 12,000 ft high in the mountains of Colorado, Summitville has produced only half the gold predicted in its original feasibility study. Although 0000,0600 it has never lost money, Summitville’s failure to perform to expectations took its toll on both Galactic’s and Friedland’s credibility.

“We got a big black eye for it,” Friedland explained to The Northern Miner. “Summitville should not produce any more surprises. If there are surprises, they’ll be pleasant.” Following a $40-million writedown of assets last year, and the renegotiation of a more attractive mining contract, Summitville generated earnings of $581,000(US) during the first quarter this year.

Although Summitville’s forecasted 66,000 oz of gold this year will contribute to the company’s bottomline, it is Ridgeway that is making analysts look at Galactic once again.

Operated by BP Minerals, which owns 52%, the 15,000-ton-per-day mine is exceeding expectations (N.M., May 1, 1989). During the first quarter of operations, the mine produced 43,216 oz of gold. In March, Ridgeway yielded 18,045 oz alone. The 1989 budget calls for 160,000 oz production, which now appears conservative. Cash costs, including general and administrative expenses, averaged $163(US) per oz compared to the budget cost of $216 per oz.

“Amselco (BP) did a good job putting it into production. It’s also been a savior for Galactic,” Michael Pickens, a mining analyst with Yorkton Securities said. Another analyst, who refused to be identified, agreed, saying that Ridgeway appears to be the turning point for Galactic. However, he felt that “the company must still overcome a real credibility problem.”

Ridgeway and other projects being readied for production prompt Friedland to state that “we’re not Summitville. It represents a tiny proportion of our reserves,” less than 5%. Also, within two years, Summitville will produce less than 15% of Galactic’s annual production. This year the company expects to produce about 150, 0 oz of gold — a figure which will increase if Ridgeway continues to match the results achieved in March.

Importantly, about a third of Ridgeway’s output has been sold forward three years at a price of $465 per oz. “Our forward sales kick-in in the third and fourth quarters of this year. These sales will have a very significant impact on our earnings,” Friedland adds.

The company’s third mine will likely be the Ivanhoe in the Carlin area of Nevada. Shared equally with Cornucopia Resources (TSE), the Hollister deposit on the Ivanhoe property hosts oxide reserves of 18.4 million tons grading 0.035 oz gold per ton. With production set to begin next year, the mine is expected to produce 58,400 oz of gold in its first year, increasing to 105,600 oz in the second year and then averaging 80,000 oz per year during the next four years.

“With 200,000 oz per year by 1990 (from three mines), we will be a true multi-mine company,” Friedland says. What especially excites Friedland about Ivanhoe is its size. Comprising 150 square miles of land, this “elephant hunting safari park,” as Friedland likes to describe it, is on a trend northwest of the main Carlin mines and deposits owned by Newmont Mining and Amarican Barrick Resources.

Arguments about Ivanhoe’s geological pedigree have been put to rest, Friedland says. “Our work has proven that this geology is stratigraphically similar to that found in the Carlin deposits.” In addition to the oxide reserves, drilling has identified a 13-ft wide flat-lying sulphide zone hosting a possible two million tons of reserves grading 0.25 oz gold per ton diluted. Although wide open, such a deposit would require conventional milling to process.

Apart from the operational advances made by the company, Friedland says the biggest change at Galactic has been in its shareholders. Galactic’s two largest shareholders include Homestake Mining Co. with 14% and the Caisse Depot du Quebec, a Quebec pension fund also holding 14%. Both Homestake and the Caisse made private placement purchases of Galactic shares at a premium to the market price, Friedland notes.

Combined with the 7.4% held by the Merrill Lynch Natural Resource Trust Fund and Friedland’s personal holdings, “about 40% of the company is held by the four largest shareholders,” he explained.

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