year end results ... last part impressive on the 15 cent warrants...
1998-08-26 close $0.17
Thursday Aug 27 1998
Mr. Robin Slaughter reports
The year has seen a period of significant consolidation and advancement of the company. El Misti underwent a dramatic expansion during the financial year with an improved financial condition. New capital raised was $13.4-million, including $6.5-million in convertible debentures and $6.9-million in new equity; $4.1 million was subsequently raised by June 30, 1998. The ability to finance the company during difficult market conditions was a significant achievement. These capital raisings allowed the company to increase its investment in mineral properties in Peru during the year by $8.1-million, a 68 per cent increase. In an independent review of exploration activity in Peru the company was ranked the number five explorer in 1997 behind such companies as Newmont, Barrick, Buenaventura and Southern Peru Copper (Minas Y Posoz June 1998). This reinforces the company's strategy of sole focus on Peru in terms of its ability to compete for mineral resources. Properties were selected in mineralized areas with evidence of previous production and disseminated mineralization in a specific structural setting. The company continues to be an aggressive explorer and is committed to the philosophy that drilling is a key ingredient to advancing exploration projects to resource definition stage and thereby adding shareholder value. The company completed four significant drill programs to date; San Nicolas, 10,000 metres; Sinchao 1997, 1,700 metres; Sinchao 1998, 6,700 metres; and Santa Rosa, 14,000 metres. These drill programs have, as reported in Stockwatch July 21, provided the basis for commencement of pre-feasibility studies at the San Nicolas and Santa Rosa properties, to be carried out by Roscoe Postle and Associates and the second phase drilling program at Sinchao. The company completed a second phase drilling program at Sinchao in August this year under difficult drilling conditions with extremely fractured and water logged ground being encountered. A total of 5,175 metres of diamond drilling (10 holes) and 1,508 metres of reverse circulation drilling (seven holes) was completed. Assay results have been received for the reverse circulation drilling and three holes of diamond drilling, with encouraging results. All holes contained copper, gold, silver and zinc mineralization over significant drill widths. Assay results from the remaining drill holes are pending. Metallurgical testwork completed to date on drill samples has been encouraging as well with 90 per cent of copper, gold, silver and zinc contents of the feed samples reporting to a bulk flotation concentrate. Further metallurgical testing is required to determine the metal recovery from the concentrates. The drill program at Sinchao indicates the presence of a major polymetallic mineralized system that warrants systematic evaluation. The company completed a 100 per cent acquisition of the key tenements at its flagship property, Sinchao, including purchase agreements on the royalty provisions. The royalty buy-outs announced on March 30 are subject to regulatory approval. At Sinchao alone, as at July 31, the company has an estimated investment of $16.6-million. Sinchao is immediately west of the Cerro Tanthuatay property where Southern Peru Copper and Buenaventura have announced a drill defined resource of 6.6 billion pounds of copper and four million ounces of gold. Property payments of $550,000 (U.S.) on tenements of lesser importance remain to be paid in 1998. Early in March 1997 the company secured an option in an eventually unsuccessful bid to acquire the Cerro Corona property 8km southeast of Sinchao. This property was identified as having close synergy with the company's Sinchao and San Nicolas properties. The falling share price and lack of market support prevented the transaction from completing. Cerro Corona is reported to have resources of 1.3 billion pounds of copper and three million ounces of gold. On April 3, the company entered into an option to purchase a 100 per cent undivided interest in the Colpayoj and Chamis concessions immediately southwest of the successful Yanacocha gold mine, which produces in excess of one million ounces of gold annually. The company regards this region as one of the most prospective for bulk tonnage open pittable gold deposits in Peru. Gold assays in a drill hole of 0.6 g/t over 165 metres have been encountered by previous explorers. The company reported in Stockwatch April 7, 1998 that it has secured an 18 month option to purchase the San Nicolas heap leach operation including a pilot treatment plant which is three kilometres south of Sinchao. In addition, the San Nicolas mine and Consulado options have been renegotiated with more favourable terms. The company has until October 1999 to complete a feasibility on these projects. The company plans to use the pilot plant to carry out in-field metallurgical testwork on bulk samples from the Sinchao, San Nicolas, Consulado and Colpayoj/Chamis properties. in addition to the Sinchao, San Nicolas, Colpayoj/Chamis, Santa Rosa and Don Jeronimo properties post year end, the company rationalized its exploration holdings in Peru to 21,000 hectares (51,870 acres) encompassing six projects. Base metal sulphide deposits containing copper, zinc and lead sulphides typically require significant energy input to extract the base metals from the sulphide minerals in finished form. The extraction of base metals relies heavily on pyrometallurgy and smelter technology. The company has been particularly encouraged by recent extraction developments where hydrometallurgical methods are being piloted to extract finished metal. These methods incorporate solvent extraction and electrowinning, which is commonly used in the extraction of copper from oxide deposits. In Australia, such technologies are being developed by Atomaer, Intec, Activox and Bactec. In North America, Geobiotics is developing a low cost approach. The company is in close contact with these groups and continues to monitor their progress. The hydrometallurgical processes being developed all have one key element, which is critical to their viability. They require a secure and low cost source of energy. It was for this reason that the company announced that it is taking steps to secure such an energy source near its San Nicolas and Sinchao properties in Peru. In December 1997 the company reported a $4.3-million working capital deficit. This was reduced to $760,000 at year end. At the time of writing this report the company's working capital deficit had increased to an estimated $1.8-million (unaudited). This reflects the growing pains of an aggressive junior explorer which has, over the past 15 months, worked positively and diligently in Peru in a time of weak market conditions. The company needs to raise additional capital to complete the probable needs of a new drill program, make the required property payments and pay off the remaining costs of the phase I drill program. The company has repaid the intercompany debt. The company has a plan to finance its deficit such that obligations can be dealt with in a timely manner and to finance future activities in a weak market. Strong and decisive management is required. The company is facing critical decisions in Peru. It must decide whether to complete the feasibility studies on its advanced projects, San Nicolas and Santa Rosa, and advance them to production with the resultant cash flow financing future drilling of Sinchao or continue to drill the Sinchao property or seek partners for its projects in Peru. This will depend on the drill results received from the second phase Sinchao drill program, the conclusions of the feasibility studies and, to some degree, on market conditions which will enable the necessary funds to be raised to complete the programs. During the year the company received resignations from four directors - senior mining executives: Dr. Andrew Robertson and Ray Soper and Peter Slaughter, and senior financial executive George Milton. The directors have entered into a private placement of up to 3,000,000 units at 15 cents. Each unit will consist of a share and a warrant to purchase an additional share for one year at 15 cents. A commission of 7 per cent will be payable. |
