Skyline Adopts Measures to Overcome Start-up Problems

Like a good many other new gold producers, Skyline Explorations (TSE) has run into operational problems at its 100%-owned Johnny Mountain mine in the Iskut River area of northwestern British Columbia. Last week the company announced it had effected a number of “strategic changes” to deal with problems on the technical, financial and corporate fronts.

Although Reginald Davis remains as president, Ronald Shon, chairman of the board, has been appointed chief executive officer. Shon is a well-known Vancouver real estate developer and one of Skyline’s early financial backers. Ronald Adie, a director of the company, stepped down as vice-president, finance, to become a financial consultant to the company while Elizabeth J. Harrison, Q.C. was appointed as an additional director and secretary. “There’ s no question things haven’t worked as well as planned,” Shon bluntly told The Northern Miner. “And that’s why the company needs money — and that’s why we need these organizational changes. But I’d like to stress that our start-up problems are nothing out of the ordinary.”

Shon said a committee of the board has been struck to locate and hire a chief operating officer who will be responsible for the day-to- day operations at the mine. Officially opened on Aug 17, 1988, Skyline’s mill is now reported to be processing about 200 tons per day.

“We’ve interviewed a number of candidates already and expect to hire someone in the near future,” Shon said. “This person will run the mine and take full responsibility from an operational point of view.”

An executive committee will also be struck to co-ordinate the affairs and operations of the company. In addition to this, Shon said he would be arranging interim bank financing for the company to meet its current working capital requirements.

“Our cash flow is not as good as we had anticipated because of several months delay in mill start- up and because of our operational problems. So I will be either guaranteeing a further bank loan or putting up the necessary money myself at bank rates,” he said. Although a sum was not disclosed, it is widely believed the company will require at least several million dollars to effect a turnaround.

Shon emphasized the start-up problems were not due to insufficient ore and said he believes, based on expert advice by consultants recently brought up to the property, that the technical problems are of a nature that can be solved within several months.

Andrew Muir, B.Sc., a resource analyst familiar with the project from Vancouver’s Continental Securities, agrees with this assessment and said the start-up problems came as “no surprise.”

Muir said it has been noted that Skyline encountered large variances in its mining widths complicated by the numerous veins found within the deposit. “A situation like that takes a lot of expertise in mining. It also takes a lot of pre- development and this mine was put into production very quickly.

“It’s safe to say the main reason for the start-up problems is a lack of operating expertise and mining experience on Skyline’s management team,” Muir adds. “They are explorationists first and foremost, and since the departure of former chairman Norman Anderson we’ve expected there would be a learning curve leading to start-up problems.”