The Ghanaian gold mine operated by Glencar Mining, the Irish exploration company, is commercial and can be mined profitably, the company has confirmed. This follows the completion of a feasibility study which concludes that the Wassa project can be operated as a low-cost mine over its life. The market reacted positively, the shares rising from 48p to 53.5p. Pincock Allen & Holt (PAH), a Denver-based firm of international consultants, concluded that the mine, in which Glencar has a 66 per cent interest can be operated at $160 (£110) an ounce, ranking it among the lowest-cost gold producers in Africa. Significantly, Glencar has organised debt financing so there should be no recourse to shareholders.

Satellite Goldfields, Glencar's subsidiary company, has signed a letter of agreement - subject to due diligence and approval from the Ghanaian government - with Standard Bank London to underwrite debt facilities of $40 million. It has also reached agreement with a development finance institution to provide a further $10 million in subordinated debt.

"As a consequence", Glencar said, it "does not expect to issue any new shares in 1997, since it has adequate resources for all planned programmes for the foreseeable future"

The estimated cost of the mine is $48.5 million. The estimated annual production is 95,000 ounces.

Glencar's managing director, Mr Hugh McCullough, told The Irish Times that the debt could be repaid over a two-and-a-half-year period. Based on current plans, the Wassa project is expected to generate positive cash flow during the first quarter of 1999 at the latest. The mine has an initial estimated life of six and a half to seven years but further drilling could extend its life. Glencar was "looking for 12 years", said Mr McCullough. He reckons that the net cash flow attributable to Glencar could be $6.5 million to $7 million a year, based on a gold price of $350 an ounce. This cash flow should come through for at least four years but this would be extended if further gold were found.

Glencar estimated proven and probable mineable reserves of 1.1 million ounces of gold last May. That was calculated on a pit design gold price of $385 an ounce. Because of the weakness in the gold price, PAH was asked to design a pit based on a price of $300. This led to the mineable reserve being estimated at 932,000 ounces of gold by PAH.

Since the database closed for the PAH estimate, 13,000 metres of drilling was carried out, resulting in further discoveries which extend the reserves.

Glencar noted that the orebody was still open in many directions and further drilling was planned. "We confidently expect to add to the mineable reserve. Furthermore, should the gold price recover above current levels, we expect that additional resources will be profitable to mine and so will be transferred back into the reserve category."

Satellite Goldfields has been awarded a new prospecting licence by the government of Ghana covering a total area of 97 sq kms to the north of the Wassa mining lease.