Persistence Pays for Cusac Gold

One of the first gold bars to be poured at Cusac Gold Mines' Table Mountain mine in northern British Columbia. From left: Mine manager Kevin Fitzpatrick; vice-president, exploration Lesley Hunt; and Cusac CEO David Brett.

One of the first gold bars to be poured at Cusac Gold Mines' Table Mountain mine in northern British Columbia. From left: Mine manager Kevin Fitzpatrick; vice-president, exploration Lesley Hunt; and Cusac CEO David Brett.

When Rory Almasi died suddenly after suffering a brain aneurysm in February 2004, it was a development that no one could have predicted.

The untimely death of the 42-year-old Canaccord Capital stockbroker was a shock not only to his colleagues, but also to officials at Cusac Gold Mines (CQC-T, CUSIF-O), a company that was depending on his financing skills to get its Table Mountain gold mine in British Columbia into production.

Without the $3 million that Almasi had been working to raise, Cusac had to scramble to find alternatives and it took the family-run company two more years to raise enough funds to restart production at its mine.

“We were in financial dire straits,” recalled Cusac CEO David Brett.

This is why Cusac officials were in a mood to celebrate when the first 5-oz. dor bar was poured in December, making Table Mountain the first and only metal mine in B.C. to reach the production stage in 2006.

Almasi wasn’t just a financier. He believed in a strategy that would see cash flow being generated from a small starter mine that would fund gold exploration in the Cassiar mining district, where the company cobbled together a property position spanning 143 sq. km.

Under its deal with Canaccord, the company had hoped to raise the $3 million from the sale of $1,000 8% debentures, which were to be convertible into Cusac common shares at 50 each for a period of 18 months from the date of closing.

Each $1,000 debenture was also comprised of 1,000 warrants, each entitling the holder to buy one share purchase warrant at 60 for up to two years.

When Almasi died and the financing collapsed, Cusac turned to Toronto-based M Partners, which raised $5.75 million for the Table Mountain reopening in June 2006 from the sale of share units, flow-through shares, and convertible debentures.

Of the total amount, almost $900,000 came from the sale of 3.7 million units priced at 24, and consisting of one share and an attached warrant, enabling the holder to buy an additional share for up to one year at 35.

M Partners also raised $1.8 million by selling 6.6 million flow-through units at 27 each. Each flow-through unit consisted of a share and a half warrant, entitling the holder to buy an additional share for one year at 35.

An additional $3 million came from the sale of 813 convertible debentures at $3,750 a unit. The 11% debentures mature in 18 months and are convertible into common shares of Cusac at 30 a share.

The debenture purchasers also received 6,147 warrants with each debenture, convertible into shares until May 31, 2007.

In return for their work, M Partners and Oberon Securities received a cash commission of 7%. They also picked up broker warrants to purchase an amount of shares that is equal to 7% of all units sold, at a price of 24 for a period of 18 months from closing.

Proceeds from the financing equipped Cusac — which traded recently at 24 on the Toronto Stock Exchange — to carry out its immediate production and exploration plans.

Having crossed the startup hurdle, the company’s immediate goal this year is to produce up to 25,000 oz. gold from two high-grade vein systems, one of which has been named after the late stockbroker, Almasi.

Together the Rory and East Bain veins contain 44,000 tonnes of probable reserves, averaging 0.49 oz. gold per ton.


However, the company’s long-term goal is to become a mid-sized gold company by proving up additional reserves in other nearby zones and getting its production up to around 100,000 oz. per year.

In keeping with that strategy, the company will spend about $1.5 million this year to explore targets in the Taurus II zone, which is located about 3 km from the mine portals and is accessible from a road that leads into the site.

It is also eyeing about 1 million oz. of inferred gold resources located in the Taurus zone, northwest of Taurus II and within easy access of the road leading into the Table Mountain mine.

Cusac has a 30% stake in the Taurus zone. The other 70% is held by American Bonanza Gold (BZA-T, ABGFF-O) of Vancouver.

“The property has excellent potential,” said Mike Glover, Cusac’s senior project geologist. But he warned that all of the gold mineralization that would be relatively easy to find in the area may have already been discovered. It means the company will have to dig deeper in future, he said.

Still, company officials are pleased with what they have been able to accomplish so far.

“This is a little bit of a beacon of economic light in the far north of the province,” Brett said.

Tom Schroeter, a senior geologist with B.C.’s geological survey branch, agreed.

“A lot of other companies are expected to be exploring in that region,” he said.

In spite of the obvious challenges, he said Cusac met its targets through sheer persistence.

The gold that Cusac wants to extract is located in the Cassiar Mountain range not far from the former asbestos mine that shut down in 1991.

Cusac is using the old Cassiar mine bunk houses as temporary accommodation for about 30 miners who are working at the site, including mine manager Kevin Fitzpatrick. He has previously been a mine manager at Table Mountain.

The existing mine workings are located on what used to be known as the Erikson mine property, ground that was controlled by Total Energold, before the French company elected to divest itself of its Canadian mining assets in 1989.

As Cusac already held a net profits royalty interest in claims that were adjacent to the Erikson mine, it emerged as the obvious buyer. After completing the acquisition of the Energold assets in 1992, Cusac restarted the mine within a year, producing 60,000 oz. gold from 1993 to 1997, and providing jobs for about 50 people.

But after falling bullion prices forced the mine to close in 1997, the only production has come from a small open pit. Since then, Cusac has largely focused on exploration while waiting for gold prices to rebound enough to allow for the recent reopening.

Achieving that goal in a period when the attention of investors has focused on other B.C. companies like NovaGold Resources (NG-T, ) means decades of persistent exploration and claim staking has paid off for Cusac’s 76-year old chairman, Guilford Brett.

“It has been my life’s work,” said Brett during a recent opening ceremony that included a gold pour in the assay lab watched by attendees. “I have been poking around these hills, looking for a mine since 1955.”

To restart production, the company is using the same methods and 300-ton-per-day mill to process the gold-bearing ore that was in use when the mine closed in 1997.

About 40% of the gold is recovered by gravity methods from a jig concentrate that is refined onsite.

The balance is produced in the form of a sulphide concentrate, which is shipped in 3,000-lb. plastic bags and sent overseas to be refined in Japan. The mill is located below the 1400 portal, which is the main access point for scoop trams that load ore from the Rory and East Bain veins onto trucks and transport it down a winding road for processing.

As Cusac expects to be producing gold for an average cost of US$256 an oz., the company can operate profitably at gold prices as low as US$350 per oz.

Since gold was trading recently at US$637 per oz. on the spot market, Brett sees no reason why the company cannot continue to make a profit.

“If gold maintains at these prices, we are pretty happy,” he said.

Meanwhile, the company said it has reached a series of agreements that set the stage for production to restart.

For example, it has struck an equipment purchase and personnel agreement with mining contractor Camlaren Mine Development and its president, Gerry Hess.

Under the deal, Camlaren invested $540,000 in Cusac’s convertible debenture offering, sold underground equipment to Cusac and provided experienced mining personnel, including Hess, who has been named mine superintendent.< /p>

Cusac has also signed a memorandum of understanding with the Dease River Band Council of Good Hope Lake, B.C., and the Kaska Nation. Under the MOU, the band council and Kaska Nation have agreed to support the company’s mining and exploration activities in a way that respects the Kaska Nation in their traditional territory.


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