Granges set to close Tartan Lake

Muzylowski, along with former chief financial officer Douglas McCrae, stepped down in favor of a 4-year consulting arrangement with Granges. Details of the consulting arrangement were not disclosed.

The management change came just months after M.I.M. acquired a 33% stake in Granges by way of a $50 million private placement.

At the time, the cash infusion was expected to enable Granges to complete the final stages of its protracted transition from an exploration company to an operating company. For M.I.M., the investment was to provide an active entry vehicle into the North American mining scene.

At a recent press conference, Kaiser made it clear he is firmly committed to both objectives. He has already resigned his position with M.I.M. in order to concentrate all his efforts on Granges’ evolution from an exploration company to a significant North American mining group.

By doing so, he will also be furthering M.I.M.’s diversification both geographically and financially into North America. The company already has a minor but substantial equity holding in Cominco Ltd.

“After looking at many other companies we felt Granges was the right size and had all the starting points we needed,” Kaiser said. “Proximity to North American markets and the free trade agreement makes Canada a great place to be.”

Although Kaiser said Granges would keep its entrepreneurial spirit, he also stressed the need for slow, careful and “conservative” management.

“It’s nitty-gritty time for Granges,” he said, obviously suggesting that the company will pay closer attention to improving its performance in operations, administration and to improving its bottom line. But he also stated that Granges had benefited from the involvement of Muzylowski and McCrae over the years.

Like most new producers, Granges was hard hit by the October, 1987, market crash and by subsequent slump in gold prices. The company is not the first cash- strapped, second-tier producer to find itself tucked firmly under the corporate wing of a major shareholder and financial savior. Mining analysts predict it’s not likely to be the last.

Granges has interests in five operating mines in North America, and a net profits royalty interest in a sixth. It also has about 80 exploration projects covering 900,000 acres in various stages of evaluation.

Known and respected for its successes in exploration, Granges’ track record in operations and financial administration has been something of a mixed bag.

After taking $17.1 million in write-downs on producing and non- producing mineral properties last year, the company reported net earnings of $655,000 in the 1989 first quarter and a net loss of $1.07 million in its most recent quarter ended June 30, 1989.

The main item in Granges’ 1988 writedowns was $10 million for the Tartan Lake gold mine in Manitoba which, according to Kaiser, is still not generating an operating profit.

To complicate matters further, Granges’ partner Abermin Corp. has initiated legal action against Granges and others seeking recession of the joint venture agreement plus the return of $17.5 million. Granges has filed a defence and counterclaim.

Kaiser told The Northern Miner the fate of the mine is now under “board consideration” and may likely be closed.

Granges also has a net profits interest in the Puffy Lake gold mine in Manitoba which is operated by Pioneer Metals. Operations at the mine were suspended earlier this year and are not expected to resume under current gold prices.

Despite some start-up delays and minor problems, the Lewis and Crofoot gold mines in Nevada are producing well (about 9,000 oz per month) and cost-efficiently after an ore co-mingling agreement was reached early this year.

Kaiser said he was “very proud” of the efficient open pit, heap leach operations in which Granges has an interest through its subsidiary Hycroft Resources. Kaiser also said he intends to test a theory that the real mine target might be a substantial sulphide reserve underneath the oxidized cap being mined.

Granges also has a seasonal placer gold mine in the Yukon but its cash flow cornerstone has always been its interest in the Trout Lake polymetallic mine in Manitoba originally discovered by Muzylowski. Earlier this year, Granges increased its stake in Trout Lake from 19.83% to 29%. But this acquisit ion of an additional interest is the focus of an unresolved lawsuit.

Kaiser stressed that base metals, particularly copper and tin, will figure prominently in the future plans of Granges. But he declined to give any indication as to where the company will focus its efforts outside of the Flin Flon camp of Manitoba where Granges already has a significant presence. Kaiser did hint, however, that the company is interested in British Columbia’s copper potential.

“Copper is our bread and butter and one of the reasons we are here,” he said.

Kaiser said “vigorous and target- oriented” exploration will continue to be an important facet of the company’s agenda for growth, but he also emphasized that Granges will be looking to make acquisitions, both on its own and with the financial resources of M.I.M.

“We have no illusions about quick success in this area,” he said. “We are a company that starts slowly, carefully and conservatively.”

And as if to prove the point, Kaiser said M.I.M. has no immediate plans to increase substantially its current stake in Granges.

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