Cross Lake Minerals year-end financial review
Cross Lake Minerals Ltd CRN
Shares issued 32,782,665 Aug 10 close $0.10
Fri 11 Aug 2000 Company Review
Mr. Henry Ewanchuk reviews the company
The highlights of the year for Cross Lake Minerals was its acceptance for
listing on the Toronto Stock Exchange, in June, 1999. This was a milestone
in the development of the company which significantly enhanced its
credibility and status. The company's shares began trading on the TSE on
June 14, 1999, under the symbol CRN.
The company ended the year with a cash position of approximately
$1.3-million, compared with $2.2-million in 1998. With depressed metals
markets and booming Internet stocks, raising money for exploration has been
difficult. As a result, only one financing was completed in 1999. A small
private placement of $250,000 closed in April, 1999, with the funds being
used primarily on the Sheraton-Timmins property. The difficulty in raising
funds also resulted in the company having to reduce expenditures in order
to conserve cash. Acquisition and exploration expenditures amounted to
$755,640 in 1999, versus $2,616,991 in 1998. General and administrative
costs totalled $477,780 in 1999, compared with $683,296 in the previous
year.
PROPERTY REVIEW
ONTARIO
Sheraton-Timmins
The company continues to focus on its most advanced project, the
100-per-cent-owned Sheraton-Timmins property, a copper-zinc-silver massive
sulphide deposit, located 45 kilometres east of Timmins, Ont.
Zinc grades are mainly in the range of 1 per cent to 6 per cent, but local
high-grade pods contain 18 per cent Zn over a true width of three metres,
with silver values ranging up to 911 grams per tonne Ag. Drilling carried
out in early 1998 indicated that the zinc zone subcrops, to within 30
metres of surface, which opened the possibility for open pit exploitation.
Copper grades of 1 per cent to 3 per cent have been encountered over
estimated true widths of up to 12 metres, including higher grade sections.
The deposit is open to the east, west and at depth. This 2.0-kilometre
mineralized zone is contained within a four-kilometre-long induced
polarization (IP) geophysical anomaly, of which 2.0 kilometres remain
untested.
During 1999, the company conducted two phases of drilling. Both phases
established that the sulphide-content increases down plunge; confirmed that
the zinc/silver mineralization continues down dip and remains open at
depth; and provided a number of new target areas to be tested. Pulse
electromagnetic (EM) surveying of holes CLS 99-67, 69 and 70A showed the
presence of conductive bodies below these holes, indicating that conductive
sulphides continue to depth. A coarse fragmental breccia was identified in
holes CLS 99-67, 69 and 70A, and is the continuation of the rhyolite
breccia in hole CLS 98-63 that lies stratigraphically above the zinc zone.
This coarsening breccia suggests that a rhyolite volcanic centre occurs
down plunge in the direction of the increasing sulphide content and
corresponding borehole pulse EM anomalies. Additional drilling needs to be
carried out in this area.
The first phase, in the spring of 1999, consisted of 2,632 metres of NQ
diamond drilling in five holes, followed by borehole and surface pulse EM
surveys, which continue to be an effective tool in tracing conductive
sulphide zones. The program was successful in several ways: discovering the
new Footwall zone, with hole CLS 99-69 indicating a stacked sulphide
system; verifying the continuity of the mineralization in the Cross Lake
zone with infill holes CLS 99-67 and 99-69; extending the Cross Lake zone
150 metres down plunge from CLS 98-59 with hole CLS 99-70A for a total
length of 1,000 metres down plunge; and, intersecting conductive
mineralization in all pulse EM anomalies drill tested.
The second phase of work, in November, 1999, consisted of five NQ drill
holes totalling 1,338 metres. The highlight of the program was the
extension down dip of the zinc-silver mineralization at the northeast end
of the Cross Lake zone, thereby enhancing the possibility for open pit
extraction in this area. Holes CLS 99-73, 74 and 75 were successful in
expanding the near-surface zinc-silver mineralization in the Cross Lake
zone. Additional drilling is planned in this area in order to further
delineate the full extent of this zone. Although no significant economic
mineralization was encountered in holes CLS 99-71 and 72, which were
drilled 500 and 1,000 metres to the northeast of the Cross Lake zone, the
presence of the widespread felsic (rhyolite) pile to the northeast
indicates that there is a large underexplored area favourable for hosting
volcanogenic massive sulphide-type (VMS) deposits.
In June, 1999, the company engaged the services of Dr. James M. Franklin,
PhD, former chief scientist with the Geological Survey of Canada, to review
the property. Based on his recommendations, detailed contour maps of
numerous elements (copper, potassium, manganese, magnesium, lead, zinc,
silver and sodium) were prepared using the extensive lithogeochemical data
that had been obtained from all of the drill holes. This work expanded the
sodium depletion footwall zone and identified several elevated magnesium
and manganese zones which reflect footwall alteration and identify possible
vent areas. A separate compilation study was completed on the total
sulphide thickness and revealed that total sulphide content is increasing
with depth, another indication that drilling should be continued to depth.
There are three phases of drilling which the company is planning to conduct
in and around the Cross Lake zone to advance the property, subject to
availability of financing. The first phase would be to expand the
near-surface zinc-silver mineralization and infill drill around the
high-grade existing intersections. The second phase would consist of deep
drill holes below the Cross Lake zone where the whole rock interpretation,
sulphide thickening, geological interpretation and borehole pulse EM
surveys all indicate a favourable environment for massive sulphide
deposition. The third area to drill test would be at depth, down plunge
from the copper mineralization previously intersected by holes collared 1.5
kilometres southwest of the Cross Lake zone.
Currie-Bowman
The company holds a 40-per-cent interest in 130 claim units in Currie and
Bowman townships, with Echo Bay Mines holding the right to earn the
remaining 60 per cent from Falconbridge Limited. The claims are subject to
net smelter return royalties from 1 per cent to 3 per cent. Falconbridge
originally optioned the property in January, 1995, and in December, 1998,
assigned its interest to Echo Bay. While Echo Bay earns in, the company
will not be required to make joint venture contributions for up to four
years, while maintaining its 40-per-cent interest.
In December, 1998, Echo Bay carried out its initial program of induced
polarization (IP) surveying, followed by diamond drilling. Five holes
totalling 1,549 metres were completed.
Subsequent to year-end, the company was advised by Echo Bay that additional
NQ diamond drilling was commencing on the property. A program of seven
holes totalling 2,100 metres was planned, including three holes to further
test the Grindstone Creek zone in the area of hole CB-04.
In November, 1999, 24 claim units in Currie and Bowman townships were
acquired under an option to earn either a 50-per-cent or 65-per-cent
interest from Expatriate Resources Ltd. These units now form part of the
property and the company may earn either a 20-per-cent or 26-per-cent
interest therein. Eight of the units in Currie township are located half
way between the Tillex deposit and the Grindstone Creek zone.
Mortimer
The company holds a 70-per-cent interest, subject to a 2.5-per-cent net
smelter return royalty, in 96 claim units in Mortimer township. Ground
horizontal loop EM (HLEM) and magnetic surveys and one drill hole were
completed in 1994 by Noranda Mining and Exploration Inc. and a number of EM
conductors were outlined. In July, 1998, the company completed a program of
IP surveying on two separate grids. The surveys outlined several areas of
high chargeability, which corresponded to the EM anomalies outlined earlier
and provided several interesting target areas. In April, 1999, the company
granted an option to Fairhaven Resources Ltd. to earn a 30-per-cent
interest in the property by incurring $60,000 in exploration expenditures.
A four-hole, 850-metre diamond drilling program to test the target areas
was carried out in May, 1999, giving Fairhaven its 30-per-cent interest. No
significant intersections were encountered and no further work is planned
on this property.
OTHER PROPERTIES
Night Hawk Lake joint venture
The company, holds a 16-per-cent interest in 635 claim units and two
optioned patent lots (eight units) that constitute the Night Hawk Lake
joint venture. The other participants are Repadre Capital Corporation (60
per cent and operator), East West Resource Corporation (16 per cent) and
Canadian Golden Dragon Resources Ltd. (8 per cent).
To date, a total of 47 diamond drill holes totalling 15,026 metres has been
completed on the property, as well as 899 metres in four of the company's
holes which extended onto joint venture property from the company's
adjacent Sheraton Timmins property. Drilling has helped to define two
mineralized zones on the property, the Sheraton Lake zone and the extension
of the Cross Lake zone, as well as two zones in Bond township, one
zinc-load and the other a gold zone with narrow widths of 17.2 grams per
tonne gold over 0.5 of a metre.
Copper and zinc mineralization with important silver values has been
identified in the Sheraton Lake zone in every hole of widely spaced
drilling over strike length of 1,100 metres. The zone is open along strike
and at depth and associated with a zone of sodium depletion and IP
anomalies which extend under Sheraton Lake to the east and over 1,000
metres to the west. Drilling and subsequent thin section work suggest that
this zone has the signature of classic VMS base metal mineralization.
No work was completed in 1999. Given market conditions, minimum
expenditures are planned for the property in 2000.
CFM
The company holds an 8-per-cent interest in 16 claim units in Fallon
township, the other participants being Repadre Capital Corporation (80 per
cent and operator), East West Resource Corporation (8 per cent) and
Canadian Golden Dragon Resources Ltd. (4 per cent). The property is located
15 kilometres south of the Night Hawk Lake joint venture and covers the
terminus of the felsic volcanic belt that extends south and west from the
Sheraton Timmins property. No work is planned for 2000.
Bowman
The company holds a 100-per-cent interest, subject to net smelter return
royalties from 1 per cent to 3 per cent, in 19 claim units in Bowman
township. No work was carried out in 1999. The company is attempting to
interest other parties in this property.
Dougherty Lake
The 129-claim-unit property located in Timmins township is held on a
10-60-30 basis by the company, East West Resource Corporation and Canadian
Golden Dragon Resources Ltd. The property had been under option to Royal
Oak Mines Inc. which assigned it in March, 1998, to International CanAlaska
Resources Ltd., with the right to earn a 50-per-cent interest.
In June, 1999, International CanAlaska gave notice of its intention to
abandon its interest in the property. The company does not intend to
finance any further work on this property at this time.
Edwards North
A 30-claim unit group located along the Edwards-Mortimer township boundary
is held by the company (25 per cent), Cathedral Gold Corporation (25 per
cent) and Anvil Resources Ltd. (50 per cent and operator). In 1996, five
drill holes were completed by Anvil that intersected quartz zones and a
regional graphitic marker with associated anomalous zinc values. In 1997,
Anvil completed its earn-in and a joint venture was formed. No work has
been carried out since 1997 and none has been proposed for 2000.
Edwards South
This 17-claim unit is held 100 per cent by the company and covers three
airborne electromagnetic conductors which have now been outlined by HLEM
surveys. These conductors may represent massive sulphides and graphitic
conductive zones that are oriented on a northeast fault structure. No work
was carried out during 1999 and the company is presently attempting to farm
out this property.
Fox-Stimson and Fox-Stimson Perimeter
Both the 23-claim unit Fox-Stimson property and the 16-claim unit
Fox-Stimson Perimeter property remained inactive in 1999. During the year,
101 claim units were dropped from the Fox-Stimson Perimeter property. The
properties are held under separate joint venture agreements with Noranda
which holds 70 per cent of the Fox-Stimson and 50 per cent of the
Fox-Stimson Perimeter. Further exploration would include pulse EM and
possible detailed IP surveys in order to locate extensions of the base
metal (zinc, lead and copper) mineralization previously discovered (1993)
in central Stimson township. No work is planned during 2000. Joint venture
participation is being sought on the properties.
Reeves and Sewell
The company has a 100-per-cent interest in both the Reeves property and the
Sewell property. The two properties comprise 117 claim units located 58
kilometres southwest of Timmons, Ont. The properties cover both mafic and
felsic volcanics interpreted to be equivalent to the Kamiskotia volcanics
and are, therefore, Tisdale in age. These rocks host numerous gold and
copper-zinc deposits in the Porcupine camp.
In November, 1999, East West Resource Corporation terminated its option to
acquire up to a 50-per-cent interest in the property. The company is
attempting to interest other parties in this property.
Sherring
This 72-claim-unit property in Sherring township is held on a 50/50 basis
with Canadian Golden Dragon Resources. Ground EM and magnetic surveys were
completed on these claims in early 1996. No exploration work was carried
out since then. Efforts are being made to interest other parties in this
ground.
Arthur Lake
The company holds a 29.4-per-cent interest in 47 claim units in Knight and
Natal townships under a joint venture with KRL Resources Corp., the
operator, holding 30.6 per cent and Kevin Filo with 40.0 per cent. No work
has been proposed for 2000.
Gerry Lake
The Gerry Lake property was held pursuant to an option to acquire a
100-per-cent interest in the 129 claim units. In 1996, approximately 68
kilometres of lines and IP were carried out which located a number of new
massive sulphide targets and in April, 1998, a diamond drilling program on
four holes totalling 1,005 metres was completed. Narrow anomalous zinc
values were intercepted and the program confirmed the presence of a
geological environment favourable for VMS-type deposits.
Pakwash Lake
This property, 32 kilometres southeast of Red Lake was acquired by staking
in 1996. Boulders of copper and zinc mineralization were located down ice
south of this claim group in the form of disseminated sulphides and
oxidized material. Therefore, reconnaissance IP was used as the tool to
explore for base metal mineralization as well as map shear structures with
potential for gold mineralization.
Efforts to joint venture the property were successful and the claims were
allowed to expire in 1999.
BRITISH COLUMBIA
Ladybug property
In November, 1998, the company acquired an option to earn a 100-per-cent
interest, subject to a 2-per-cent net smelter return, in 70 claim units in
the Kamloops mining division. The property is on the west side of the
Seymour arm of Shuswap Lake approximately 44 kilometres north of Salmon
Arm.
During the summer of 1999, a program of magnetometer and IP surveys,
mapping and soil sampling identified several moderate to highly anomalous
areas. A follow-up program of five holes, totalling 282 metres of diamond
drilling, was completed. Although some of the results were anomalous in
zinc, copper, silver and lead, there were no significant assays. The
property was returned to the vendors in January, 2000.
Lay, Lovell and Tenakihi
In July, 1998, the company acquired by slaking three properties in the
Omineca mining division following the release of a B.C. regional
geochemical stream sediment and water sampling survey.
The Lay property (14 claim units) is located approximately 210 kilometres
north-northeast of Smithers, the Lovell property (44 claim units)
approximately 105 kilometres north-northeast of Smithers, and the Tenakihi
property (14 claim units) approximately 205 kilometres north-northeast of
Smithers.
In the summer of 1999, small reconnaissance exploration programs,
consisting of stream sediment sampling, prospecting, mapping and rock
sampling were completed. Further work was recommended and efforts are being
made to interest other parties in these properties.
Sustut Perimeter and Willow
In December, 1996, the company acquired by staking two properties in the
Omineca mining division, approximately 200 kilometres north of Smithers. A
program of geological mapping and geochemical sampling was carried out in
August, 1997. Efforts to farm out these properties were unsuccessful and
the claims are not being renewed as they become due.
QUEBEC
Casa Berardi -- Estrees joint venture
The company holds a 50-per-cent interest in 101 claim units located in
central and eastern Casa Berardi township with East West Resource
Corporation holding the other 50 per cent. Inco Limited, under a now
terminated option agreement, drilled two holes in early 1995 and
intersected sulphide- and carbonate-altered horizons as well as the eastern
extension of a gold-bearing carbonate-porphyry system that extends from a
discovery on Hemlo Gold Mines-Maple Minerals (formerly Glen Auden
Resources) claims. Assays up to 8.7 g/t gold over one metre occur along the
common claim boundary. Two additional holes were drilled in early 1996 near
the Theo River and varying amounts of pyrite and carbonate alteration were
encountered. No work was carried out during 1998 or 1999, and efforts are
being made to interest other parties in a joint venture.
FINANCIAL
During fiscal 1999, the company incurred a net loss of $1,408,761 (four
cents per share) after a one-time write-off of $1,023,731 of mineral
property costs, compared with a loss of $594,980 (two cents) per share in
1998 after a $43,475 write-off. The loss before write-offs was reduced to
$385,030 in 1999 from $551,505 in the previous year. General and
administrative expenses decreased to $477,780 in 1999 from $683,296 in
1998. The reduced operating costs in 1999 reflect the company's efforts to
conserve cash. Reductions occurred in wage, office and shareholders
communication expenses. Professional fees decreased once the company
attained its TSE listing in June of 1999.
Revenues were $92,750 in fiscal 1999, compared with $131,791 in 1998.
Interest income decreased to $76,870 in 1999 from $116,955 in 1998 as the
company's cash position in 1999 was reduced from the prior year. Management
fees in both years were consistent and arose primarily from charge-outs for
the use of company personnel, facilities and equipment.
Mineral property exploration expenditures for 1999 were $681,984, compared
with $2,482,844 in the previous year. The company recognized that market
conditions would make it expensive to raise additional monies so it
concentrated exploration on the advanced Sheraton-Timmins property,
reducing other expenditures to conserve cash. The company spent $562,107
(82 per cent of total) on the Sheraton-Timmins property in 1999, versus
$2,113,231 (85 per cent of total) on this property in 1998.
The company expended $73,656 (including $12,000 in share capital) on
mineral property acquisition costs in 1999, compared with $134,147 ($64,600
in share capital) in 1998. The 1999 costs related primarily to the
Sheraton-Timmins property and, in 1998, to the Sheraton-Timmins, Reeves and
Sewell properties.
The company had a working capital position of $1,318,206 at Dec. 31, 1999
($2,183,722 in 1998). This working capital is considered sufficient for
currently planned exploration programs, property maintenance requirements
and administrative overhead until at least the second quarter of 2001. The
company invests surplus cash in liquid, high-grade investments, with
varying maturity dates, selected with regard to operational cash
requirements and prevailing interest rates.
OUTLOOK
Junior exploration companies, including Cross Lake, rely primarily on
equity financing for financing, and market conditions in 1999 were not
favourable. Therefore, until market conditions improve, the company will
continue to conserve cash by concentrating its efforts on its more advanced
properties, seeking joint ventures for some of its other properties while
acquiring properties of merit as financing permits.
STATEMENT OF OPERATIONS
Year ended Dec. 31
1999 1998
Revenues
Interest $ 76,870 $ 116,955
Management fees 15,880 14,836
----------- -----------
92,750 131,791
----------- -----------
Expenses
Depreciation 27,509 43,976
General
exploration 22,991 18,782
Insurance 16,418 12,300
Office 61,048 92,777
Professional and
listing fees 81,365 180,058
Shareholder
communication 37,484 62,913
Travel 6,666 6,068
Trust and filing 28,063 37,897
Wages and fees 196,236 228,525
----------- -----------
477,780 683,296
----------- -----------
Income (loss)
before undernoted (385,030) (551,505)
Write-off of
mineral properties (1,023,731) (43,475)
----------- -----------
Net income (loss)
for the year $(1,408,761) $ (594,980)
=========== ===========
Income (loss)
per share (0.04) (0.02)
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