Viceroy eyes Bounty horizon Down Under

Mid-tier gold producer Viceroy Resources (VOY-T) has struck a deal to explore a highly prospective gold-bearing horizon on properties immediately south of its Bounty mine in Western Australia.

Under an agreement with Finnish-based Outokumpu, Viceroy can earn a 100% interest in whatever precious metals can be mined from a 270-sq.-km land package, as well as 75% interest in whatever other commodities can be mined. In return, the Vancouver-based company has agreed to spend US$5.8 million on exploration over five years.

Situated in the Forrestania greenstone belt, the properties host the southern extension of the highly prospective Bounty horizon. On the Bounty property (contiguous with the newly acquired properties), the horizon hosts the Blue Vein, Twinings, Van Uden and Lounge Lizard gold deposits. Drilling peripheral to the Lounge Lizard deposit has identified an indicated resource of 593,000 tonnes grading 3.94 grams gold per tonne, based on a cutoff grade of 1.5 grams gold. The company believes there is potential to develop an underground resource below the deposit, where drilling intersected up to 20.6 metres grading 6.85 grams gold.

Viceroy plans to spend US$2.4 million exploring the Bounty and Outokumpo land packages this year. This work will consist of mapping, rock-sampling, drilling and data compilation.

Viceroy acquired the Bounty gold mine last year from Toronto-based LionOre Mining International (LIM-T) for US$24.6 million in cash and shares. At the end of 1999, proven and probable reserves stood at 2 million tonnes grading 5.17 grams, equivalent to 331,000 oz. The total resource was 8.8 million tonnes grading 3.92 grams, equivalent to 1.1 million contained ounces.

Bounty is an underground operation, supplemented by smaller, lower-grade open-pit deposits. The carbon-in-leach plant is capable of processing 750,000 tonnes per year. In 1998, the mine produced 117,251 oz. at a cash operating cost of US$254 per oz., and, during the first six months of 1999, 51,576 oz. were produced at US$276 per oz.

Last year, Viceroy posted a loss of $56.7 million on revenue of $84.9 million; the loss included US$50 million worth of writedowns, namely at the Brewery Creek gold mine in the Yukon. The operation turned out 48,164 oz. gold last year at a cash cost of US$288 per oz., down from 79,396 oz. produced a year earlier at a cash cost of US$177 per oz. The lower performance was attributed to newly mined ores, which exhibit a longer leach time than previous deposits.

Overall, Viceroy produced 154,830 oz. in 1999 at US$266 per oz., compared with 146,248 oz. at US$244 per oz. in the previous year. The Castle Mountain mine in California turned out 71,228 attributable ounces last year, up from 66,852 oz. in 1998.