Rea Gold completes due diligence on Bissett mine

Rea Gold Mines (TSE), which will purchase the former producer from Cassiar at a re-negotiated price, said Wright Engineers and J.S. Redpath Mining Consultants calculated capital and operating costs for project development to be $18.8 million and $78.53 per ton respectively.

The company said the updated study resulted in an increase of 38% on capital and 18% on operating costs as compared to the Kilborn study commissioned by Cassiar in 1987. The major capital increases were in shaft sinking, hoisting, pre- production development, hiring and sustaining costs, while higher costs for underground mining represented most of the increased operating costs.

As part of its due diligence, Rea Gold commissioned Dolmage Campbell & Assoc. to review Kilborn’s reserve estimate of 1,320,000 tons of 0.233 oz gold found below the 26th level. Mineable ore reserves are now determined to be 1.2 million tons grading 0.222 oz gold, although Dolmage Campbell has accepted Kilborn’s reserves above the 26th level at 301,000 tons grading 0.192 oz gold.

“Exploration potential for new ore of both the vein and stockwork types below the 33rd level is judged to be excellent,” noted Larry Reaugh, president of Rea Gold.

After the studies were completed, the two companies renegotiated the purchase of the gold property for 2,307,000 Rea Gold shares valued at $7,844,000 at the price of $3.40 per share.

Rea Gold also negotiated terms for a call to be arranged with a Cassiar Mining subsidiary on $4 million to be secured by a convertible debenture with a 5-year term. The debenture is convertible at any time before repayment into common shares at $4 per share.

A detailed feasibility study on the Bissett property has started under the direction of Frederick Sveinson, Eng., recently appointed vice-president and chief operating officer of Rea Gold.

The Bissett mine, formerly known as the San Antonio, produced 1,360,000 oz gold from 4.9 million tons of ore from 1932 to 1968.

The existing 500-ton-per-day mill on the property was built in 1982.

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