Struggling junior gets a break– High grade lifts St Andrew

Management and 105 employees at St Andrew Goldfields (TSE) have seen their fair share of setbacks since the Stock Twp. gold mine was brought into production in July, 1989.

But after finding some unexpectedly high-grade values while driving a ramp from the 6th level out toward the West zone, exploration crews are hoping to secure a long-term future for the 500-ton-per-day carbon-in-pulp operation. Success would rank as a substantial achievement for chief geologist Otto Zavesiczky and President Herbert Gasser because the company has been fighting not only against low gold prices, but also a severe shortage of cash. As The Northern Miner recently witnessed during a recent tour of the mine and mill, Stock Twp. is literally running on cash flow generated by the 21,961 oz. produced last year at an operating cost of $389.08 per oz. (A joint venture with Goldpost Resources (TSE) also yielded an extra 12,647 oz. in 1991.)

With heavy debts and no funds to do deep drilling below the N2 zone, which has sustained the operation for the past couple of years, management elected last November to drive a ramp to the West zone on the 7th level. Located about 1,450 ft. west of the mine shaft and at a depth of about 1,000 ft. below surface, the West zone is an extension of the N2 zone and is estimated to contain about 100,000 tons of grade 0.135 oz. gold per ton. “Our original intention was to come down to the 7th level from the N2 zone, drift out toward the West zone and mine it as a low-grade area,” said Zavesiczky. “But when we went in with the crosscut, the grades we found were much better than expected.”

According to Zavesiczky, results from 72 random samples collected from what is now known as the 710 stope (in the West zone) averaged 1.816 oz. uncut and 0.478 oz. at a cutoff grade of one ounce per ton.

When some of those results were announced at St Andrew’s recent annual meeting in Toronto, initial excitement caused the shares to rally from around 40 cents to a new high of $1.10. Shares of Quebec Sturgeon River Mines (TSE), which owns 57% of St Andrew, and affiliate Coniagas Mines (TSE) also reached new highs.

Gasser believes much of the trading activity was sparked by investors in Europe who participated in a 25-million Swiss Franc convertible bond issued in 1988 to finance construction of the carbon-in-pulp mill.

While the bonds were originally convertible into common shares at $4.73 a share, St Andrew has since restructured its agreement with bondholders to allow them to convert to newly created preferred shares at a rate of CHF 5,000 bond for 2,940 preferred shares. The preferreds are convertible into common shares on a 1-for-1 basis.

By the end of 1991, the offer had resulted in the conversion of CHF 12.4 million bonds for 7.3 million preferred shares, and St Andrew had been able to reduce its debt to $10.2 million from $20.8 million.

“You can feel that things are starting to look up,” said Yaan Aaviku, general mine superintendent, who is now considering a number of alternatives including development down to the 10th level.

Other crew members were noticeably optimistic because weak gold prices and a severe shortage of funding have prevented the junior from doing the exploration work needed to establish minable reserves beyond the present level of 235,645 tons grading 0.169 oz. gold per ton (not including new material in the West zone).

Serious illness has also forced directors Warren Armstrong and David Vaughan to leave the day-to-day running of the company to Gasser, a former executive with the Swiss Bank Corp. (Canada), since he was named president last year. Shortly after Gasser assumed the new role, the Ontario Environment Ministry laid charges against St Andrew following a spill caused by high water levels in its tailings pond and a quick spring thaw. To top it all, the company suspended operations for two months last year and laid off 40% of the workforce as a cost-saving measure.

Renewed optimism is based partly on the fact that Stock Twp. is predicated on the Destor Porcupine fault which has given rise to 50 other producers in the Timmins camp. Grades at many of those mines tended to improve at depth. The high-grade samples found in the 710 stope were taken from a quartz-rich area along the contact of sericitic volcanics and green carbonates. The zone being mined is 20-25 ft. wide and 215 ft. long.

While drift crews are still advancing in the zone, the immediate plan is to drill from a parallel heading to the west of the 710 stope to determine the attitude and vertical extent of the new ore zone above and below the stope. “We will drive in a drift 50 ft. to the north of the 710 and establish drill stations every 100 ft.,” said Zavesiczky.

Meanwhile, by running material from the West zone through the mill, St Andrew increased its head grades to 0.237 oz. in May from 0.164 oz. last year, says mill superintendent Peter Massi. “We have been advised to do what we can to optimize our recovery rates and prepare for higher grades.” Massi has introduced a 3-ton oxygen tank into the mill circuit to treat the coarse material mined from the West zone. When The Northern Miner visited the project, recoveries were averaging above 96% compared with 92.83% in 1991.