Doug Ashbury
Northern News Services

NNSL (Nov 09/98) - Royal Oak Mines Inc. has paid off construction company creditors with shares.

The company, which has gone heavily into debt to build its Kemess gold-copper mine in northern British Colombia, issued 7,079,646 shares Wednesday. These shares amount to about five per cent of the company's fully diluted stock.

The shares, issued at $1.13, were worth $8 million.

Issuing shares in lieu of cash to settle accounts payable improves the company's liquidity position and its ability to meet other short-term financial commitments, Royal Oak said.

"We sincerely appreciate the co-operation we have received from many of our trade creditors who have agreed to take shares in settlement of their accounts payable," Royal Oak CEO Margaret Witte said.

"The reason Royal Oak is doing this is because of a cash-flow problem," investment banker Todd Ferguson with TD Evergreen in Edmonton said.

He also said creditors anxious to receive payment will likely sell the stock for cash.

Expect sales of this stock to drive Royal Oak's share price down in the short-term.

Royal Oak's stock fell 10 percent to 97 cents in Thursday morning trading, recovering slightly to $1 mid- afternoon.

This decline was out of line with the performance of other gold companies Thursday morning.

While Royal Oak's stock was off 6.5 per cent Thursday mid-afternoon, the TSE gold index rose 3.5 per cent.

On Kemess' progress, Royal Oak said the new mine has produced about 51,900 ounces of gold and 6.9 million kilograms of copper contained in concentrates, since it started operating May 19.

Concentrates are being shipped to the Far East for smelting and refining to recover gold and copper.

Kemess' mill availability, at 90 per cent in September, is expected to reach 94 per cent after maintenance work on the mine's tailings pipelines is complete.