Financing News To Come Soon
By Chuck Tobin
A director with the revitalized United Keno Hill Mines Ltd. says the company should know soon about financing to restart production in Elsa.
Doug Goss said recently that representatives of Dynatec Corp., which has agreed to strike a joint venture arrangement with United Keno, will be at the mine site this week or next to assess how best to implement rehabilitation and start-up plans.
The two companies announced earlier this month they'll pursue a joint venture agreement, under which Dynatec would provide half of the $22 million required in pre-production working capital. Under the proposal, Dynatec would also assist United Keno with securing the remaining amount of pre-production investment.
Goss said the joint-venture agreement has not been signed, but both parties are committed to it.
"Hopefully, by the end of the month, we will have everything in place," Goss said. "There are a lot of pieces here."
The central Yukon mines were closed in January, 1989, and the townsite of Elsa essentially abandoned.
Dynatec is an international contract mining and metallurgical company, Goss said.
"They are up there right now to see how they are going to implement the whole mine rehabilitation and the mill rehabilitation."
Goss said it's still United Keno's intention to be back in production around October.
While the metal markets have taken a pounding recently, the price of silver has remained relatively buoyant. It opened this morning at $5.27 US.
United Keno chair Stephen Powell said Monday he can't say definitively that the price of silver will stay strong, since he can't predict the future.
But if you look at the silver picture globally, stockpiles of the precious metal are being used up faster than they are being replaced, Powell pointed out.
He said the Comex Commodity Warehouse in 1995 reported 330 million ounces in above-ground silver inventory. It's now reporting 85.9 million ounces in inventory, Powell said, adding the annual demand has recently been outweighing supply by 150 million ounces.
"It is a very interesting story to me," said Powell. "I mean, here you are using more than we are providing from mining or recycling, and growth is continuing to increase.... Yeah, we are coming into a good market for silver."
Powell said its encouraging when a company like Dynatec, which he describes as a premier mining operator, jumps on board and puts up half the money required for pre-production preparation. Not only is it willing to put up half, but it's also amenable to standing behind the attempt to attract other investors, he said.
Powell, who is also optimistic United Keno will be back in production by this fall, said he's already stated his preference for hiring Yukoners over workers from Outside.
"I think we would be safe to say we will use up to 100 people in the initial phase, and I believe 100 to 130 at any given time during operation."
He said it will be a camp operation, with employees spending a given amount of time working at the camp with a given number of days off.
With the 30 million ounces of silver already identified by United Keno, there is enough paydirt today to keep the mine working for eight to 10 years, said Powell, who also served as United Keno's chief executive officer.
The long-term plan, he reiterated for the company, is to start putting money in the bank, then developing the nearby Marg deposit. That deposit was brought to the table as an asset of NDU Resources when it merged with United Keno this past winter.
Developing Marg would require a newer and larger mill that would significantly increase daily production capacity, said Powell. Such a boost would reduce the cost of production by as much as 65 to 70 cents per ounce of silver.
"That is substantial," Powell said.
"This is the start - get-going-and-put-the-money-in-the-bank phase. And the next phase will be to prove up Marg; build a new mill."
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