Jilbey shareholders approve West African wedding

Shareholders of Jilbey Gold Exploration (JLB-V) have voted 99.3% in favour of merging with High River Gold Mines (HRG-T). In all, votes representing around 72.8% of Jilbey’s nearly 35.9 million outstanding shares were cast.

High River is offering 0.75 of a share for every Jilbey share. The exchange rate values Jilbey shares at $1.02 apiece — a 29% premium to Jilbey’s closing price of 79 on June 17, the business day prior to the announcement of the deal. High River already holds a 29% stake in Jilbey (T.N.M., Jun 27-Jul 3/05).

Key to the deal is the Bissa project in Burkina Faso, where Jilbey stands to earn at 70% stake by completing a feasibility study. The ground is optioned from GEP Mines, a private company in Bur-kina Faso.

Bissa is home to measured and indicated resources totalling 1.4 million tonnes grading 3.33 grams gold, based on a cutoff of 0.5 gram gold. An additional 106,000 tonnes grading 2.89 grams are classified as inferred resources.

Results from the latest batch of 12 infill drill holes from Bissa deposit extension include the following:

  • Hole 4 14 metres (from 65 below surface) grading 2.55 grams gold per tonne;
  • Hole 5 5.5 metres (from 86.5 m) of 1.63 grams gold;
  • Hole 12 29 metres (from surface) running 2.7 grams gold;
  • Hole 14 4 metres (from 76 m) of 4.42 grams;
  • Hole 17 16 metres (from 66 m) of 17.58 grams; and
  • Hole 18 16.4 metres (from 62.6 m) of 3.6 grams and 9.2 metres (from 137 m) of 3.77 grams.

Four holes on the Bissa SW zone yielded:

  • Hole 3 4 metres (from 36 m) of 2.54 grams gold;
  • Hole 7 1.5 metres (from 43 m) of 14.93 grams;
  • Hole 8 16 metres (from 60 m) of 4.17; and
  • Hole 9 20 metres (from 6 m) of 2.44 grams gold, 8 metres (from 31 m) of 5.51 grams, and 2.2 metres (from 74.6 m) containing 8.81 grams gold per tonne.

The drilling was aimed at establishing a resource for the areas. Assays results for 8 holes are pending.

Meanwhile 13,044 metres worth of rotary-air-blast drilling (in 327 holes) to test a geochemical anomaly about 15 km to the southwest of the Bissa Hill deposit are highlighted by: 3.7 grams gold over 4 metres, 7.26 grams over 2 metres, and 2.37 grams over 2 metres.

Jilbey says the results confirm the presence of gold mineralization over a strike extent of around 2 km. Follow-up reverse-circulation drilling is planned for September, following the rainy season.

An updated resource estimate for Bissa is expected by year-end.

Turning back to High River, the company posted a second-quarter net loss of $539,000 (nil per share), compared with year-ago net earnings of $1.5 million (a penny a share). The drop off is attributed to higher operating costs at the company’s Russian gold operations.

Revenue between the two periods fell by $6.1 million to $19.9 million as sales volume slipped by 22% to 37,616 oz. mainly as a result of the suspension of the New Britannia mine in September 2004. Meanwhile, realized prices climbed by US$22 per oz. to US$425 per oz.

Attributable production during the quarter increased to 31,525 oz. at a total cash cost of US$257 per oz., up from 28,650 oz. at US$256 a year earlier. An increased interest (to 84.1%) in Russian subsidiary OJSC Buryatzoloto, which operates the Zun-Holba and Irokinda underground mines in southern Siberia, offset the ounces lost due to the suspension of New Britannia. The New Britannia closing also helped reduce mine operating costs by $4.1 million to $13.7 million.

High River expects to produce 125,000 oz. of gold in 2005, and more than 300,000 oz. by 2007 following the successful start-up of the Taparko-Bouroum and the Berezitovy projects in 2006.

At Taparko-Bouroum in Burkina Faso, High River was recently issued an exploitation permit for the Bouroum deposit. Negotiations for US$36 million worth of project financing are well advanced, with first drawdown anticipated in September.

The company previously announced that capital costs for the project are not expected to climb by more than 10%, or to US57 million; operating costs are also expected to rise by 20%, resulting in an estimated total cash cost of US$245 per oz.

Construction is underway, and by the end of June the company had spent some US$17.2 million on the development. The first production slated for the second quarter of 2006.

At Berezitovy in Russia, preparations continued for the permanent camp and mill facilities, with concrete work to start in the third quarter. The project’s power line and 1,600-KW diesel generator station for backup power have been completed. Around 85% of the mobile and construction equipment has been purchased, with some already on site.

Half of the major parts of the mill are scheduled to arrive in August and September, with the remaining half scheduled to leave the port of Everett, near Seattle at the same time.

An updated feasibility study of Berezitovy will be submitted to the Russian federal authorities at the end of August. The revised study includes modifications to the mill, tailings storage facilities, and camp.

Work is also ongoing on an environmental assessment report, which combined with technical due diligence by the European Bank for Reconstruction and Development will allow for a US$32 million project loan to finalized.

In the first quarter of 2005, the Company reported an approximate 10% increase in its budgeted capital expenditures, from US $59 million to US $65 million, including VAT.

By the end of June, around US$35.6 million had be spent on development and construction; the company previously boosted its capital budget by 10% to US$65 million, including value-added tax. Operating cost estimates have also been increased by 19% to US$14.93 per tonne of ore processed, for a total cash cost of US$228 per oz. owing to higher costs for consumables and wages.

Reserves at Berezitovy stand at 13.9 million tonnes grading 2.3 grams gold and 11.7 grams silver. The operation is expected to churn out 100,000 oz. gold per year over nine years at a total cash cost of US$192 per oz. Commissioning is slated for the third quarter of 2006; the first gold pour is expected in the first half of 2006.

At the end of June, High River had $6.5 million in working capital, including $3.7 million in cash, down significantly from the $42.7 million, including $40.7 million in cash it had at the end of 2004.

The merger is slated to wrap up by September.


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