Grade, location in Habsburg’s favor at Dome Mountain

With the signing of an option deal earlier this year, Habsburg Resources (VSE) hopes to have its Dome Mountain gold-silver property in production by September.

The option agreement gives Timmins Nickel (TSE) the right to earn a 60% interest by funding all of the capital and development expenses required to bring the Dome Mountain property into production at a minimum rate of 250 tons per day.

The property is about 23 miles southeast of Smithers, B.C., and is accessible year-round by road.

Previous work, dating back to 1988, outlined a minable reserve of 325,000 tons grading 0.36 oz. gold and 2.35 oz. silver per ton.

Development of the property was delayed for a number of years by ownership squabbles coupled with poor market conditions.

Habsburg, previously known as Teeshin Resources, cleared the way to further development after it bought out a one-third interest held by Canadian United Minerals and a 15% net profits interest held by Total Energold.

Subsequent to the purchase, Habsburg changed its name and rolled its stock back on the basis of one new share for each eight old shares. There are now about 4.3 million shares outstanding.

The stated minable reserve is in the Boulder zone, a shear structure containing a number of parallel and overlapping quartz veins dipping about 50 degrees to the south and plunging to the east.

Drilling in 1990 extended the zone a further 500 ft. to the east. Preliminary estimates indicate an additional 100,000 tons of reserves were added by the drilling at an undiluted grade of 0.56 oz. gold per ton. The zone remains open to the east and to depth.

Under the agreement with Timmins Nickel, Habsburg will retain a 20% interest in the property until a total of 325,000 tons of ore have been mined and milled after which Habsburg’s interest will increase to

40%. Habsburg is not required to provide for operation costs until production has reached a minimum of 250 tons per day for 30 consecutive days.

Development work is expected to begin this month and includes driving a second adit to the Boulder zone. Previous development of the property includes a 1,100-ft. adit which intersects the ore zone about 200 ft. below surface. About 1,500 ft. of drifting was done on the Boulder zone and two raises were driven to surface. The new adit will intersect the Boulder zone about 450 ft. below the upper adit.

Mining operations will use a combination of shrinkage and open stoping with an average mining width of about eight feet.

Ore will be trucked to the Equity Silver mill in Huston, B.C., about 43 miles from the Dome Mountain property.

Habsburg completed a cash flow estimate for the project based on gold at US$360 per oz., silver at US$3.50 per oz., a recovered grade of 0.36 oz. gold per ton and an exchange ratio of 0.86.

Based on mining and milling 108,000 tons in 1992 at an operating cost of about $89 per ton (including general and administrative costs, trucking and royalties), the operation would produce an operating profit of about $6.1 million. Habsburg’s share at its initial 20% rate would be about $1.2 million.

The company expects to be in production by September with total production of about 32,000 tons by the end of the year.