Troubled past is no longer an albatross around Golden Bear’s

The beautiful setting of the Golden Bear mine, at the base of a steep, near-alpine valley, contrasts starkly with the property’s troubled past. The ground was originally staked by Chevron in 1981; and by 1985, an inventory of 1.6 million tonnes grading 10.8 grams gold per tonne had been outlined.

Vancouver-listed North American Metals (NAM) joint-ventured a 50% interest in the property in 1986, and by mid-1987 the company was projecting the capital cost of a 360-tonne-per-day operation at about $36 million. Reserves were projected at about two million tonnes grading 9.25 grams gold, yearly production at two million grams (64,000 oz.), and cash costs at US$4.37 per gram (US$136 per oz.).

Liking these numbers, Homestake Mining (NYSE) launched a bid for NAM in March, 1988. It succeeded in acquiring about 73% of the company for $5 per share, or about $29 million in total.

The original promoters of NAM (Robert Hunter, Robert Dickinson and Jeffrey Franzen) went on to arrange the sale of the Mt. Milligan copper-gold project to Placer Dome (TSE) for $260 million.

The team (sans Jeff Franzen) is now searching for buyers for two more copper-gold projects in British Columbia — including South Kemess, owned by El Condor Resources (VSE) and St. Philips Resources (VSE), and Taseko’s Fish Lake. The group is also proceeding with development, through Pacific Sentinel Gold (VSE), of the Casino copper-gold project in the southern Yukon. Following the takeover of NAM, Homestake proceeded with development of the project. Fortunes went downhill from that point, no doubt leaving those shareholders who did not tender their stock to the offer regretting their decision.

During construction in early 1989, capital cost estimates ballooned to $70 million. This was due to two factors: a doubling of the cost of the 155-km access road, to about $19 million; and a doubling of the capital cost estimates in the original feasibility (which Homestake said underestimated costs significantly).

Ultimately, the capital cost of the project topped $80 million while cash operating costs were double the original estimate of US$4.37 per gram (US$136 per oz.), averaging US$8.71 per gram (US$271 per oz.) in 1990, US$10.06 per gram (US$313 per oz.) in 1991 and US$9.39 per gram (US$292 per oz.) in 1992. Output totaled 598,000 grams (19,242 oz.) in 1990, 1.76 million grams (56,711 oz.) in 1991 and 1.81 million grams (58,224 oz.) in 1992.

Production in 1990 was adversely affected by a shutdown of the roaster for much of the last half of the year. In the second quarter of 1991, the company closed down underground operations and instituted a revised mining plan, focusing solely on the open pit, in an effort to lower costs. Chevron was sufficiently unimpressed with the mine’s performance to opt to sell its 50% interest to NAM for US$1 million in late 1991.

The operation re-instituted underground mining in October, 1992, to supplement open-pit mining. But continuing low gold prices, combined with low grades and bad ground conditions, led the company to suspend underground operations again in February, 1993.

In April, after completing a negative feasibility study on an expansion of the open pit, Homestake washed its hands of the operation, announcing that the mine would be shut down, after depletion of stockpiled ore, in September, 1993.