Claude Resources’ (TSX: CRJ; US-OTC: CLGRF) flagship Seabee gold mine in northeastern Saskatchewan has produced more than one million ounces of gold since it started commercial production in December 1991. Its Santoy mine complex, 14 km east of Seabee, has produced gold since January 2011.
But the company started running into headwinds in 2013, as weaker grades and higher costs pushed its balance sheet into negative territory, mining analysts Joseph Fazzini and Kent Neale of Dundee Capital Markets write in a new report marking the start of their coverage of the company.
The proportion of lower grade ore mined at the Santoy mine’s 8 zone slowed overall production and raised costs, while “volatile grades” from Seabee’s narrow veined orebody “hampered production,” the analysts note. At the same time, the company was spending significant sums to extend its shaft at Seabee from 550 metres to 1,000 metres, and investing $6 million to 10 million on exploration at its Madsen project in Red Lake, ON.
By the end of [2013], the company had violated a debt covenant with Crown Capital and entered into an agreement to waive the violation by issuing Crown Capital $1 million in stock to Crown. Management also sold the company's Madsen project for a cash and equity payment worth $11.2 million.
Last year, however, things took a turn for the better. The company introduced Alimak longhole mining at its Seabee mine, which resulted in improved productivity with lower development costs, and commissioned its higher grade Santoy Gap zone, measures that together helped drive 2014 production up 44% year-on-year to 62,984 oz of gold. Annual mill head grade last year also increased 43% year-on-year to 7.32 g/t Au.
Read the complete article at NorthernMiner.com/news/claude-resources
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