Taseko eyes Gibraltar rebirth

Vancouver — A mining investment partnership is looking to raise up to $35 million in an effort to resume operations at the historic Gibraltar copper mine in south central British Columbia.

Dubbed the Gibraltar Reclamation Trust (GRT), the limited partnership agreed to finance a qualifying environmental trust, which will allow the operating subsidiary of owner Taseko Mines (TKO-V) to access funds already held as a reclamation bond by the BC government. For its part, Taseko contributes the mine assets and agrees to finance the start-up expenses for the Gibraltar operation.

The Hunter Dickinson led junior then inked a one year option to buy the GRT partnership for 130% of the contribution made by GRT to the environment trust, estimated at 90% of the financing. The agreement, which is restricted to 2004, is payable in stock or cash.

In order to accelerate the financing, Taseko insiders have guaranteed up to $4.5 million, including a $2 million cash deposit to third parties. In return, the directors and officers get 10% of the guarantee paid in Taseko shares.

Taseko positioned itself for a recovery in copper prices back in 1999, when the Hunter Dickinson led company picked up the past producing property. At the time, copper was trading in the low-to-mid US$0.60 U.S. range compared to the current US$1 per lb. In the past year, copper prices rose more than 49% hitting their highest levels since 1997.

“We believe that this financing will facilitate the restart of Gibraltar,” says Taseko president, Ronald Thiessen. “We anticipate continued increases in world copper prices.”

The company had been examining the potential for producing copper cathode from concentrates using an innovative hydrometallurgical process developed by Cominco Engineering Services (CESL), a division of Teck Cominco (TEK-T).

In August, 2000, a scoping study concluded that the proposed refinery would result in a 22% reduction in copper production costs by eliminating the cost of transporting concentrate to offshore processing locations, reducing smelter charges and the achievement of greater mine site efficiencies. Mine start-up and refinery construction costs are currently estimated to be $120 million.

Gibraltar operated for 27 years, until 1998, when it was closed by then-owner Boliden (BLS-T) — which held the property through subsidiary Boliden Westmin — because of low copper prices. Sulphide resources, using a 0.2% copper cutoff grade, stand at 745 million tonnes, containing about 4.7 billion lbs. copper. This includes measured and indicated resources of 149 million tonnes grading 0.31% copper and 0.01% molybdenum in the 12-year mine plan, plus additional measured and indicated resources of 596 million tonnes grading 0.28% copper and 0.01% moly. The project also has in-pit, oxide resources suitable for processing in the existing solvent extraction-electrowinning plant.

Under an agreement between Taseko, Gibraltar and the GESL partnership, Taseko and Gibraltar can acquire the business of the partnership for a defined purchase price, which reflects a 30% premium over the GESL Partnership’s expenditures (expected to be equal to 90% of the offering amount) on the defined work program. Taseko and Gibraltar may fund the purchase by paying cash, or by issuing shares.

In July, the junior launched a 2,600 metre drill program designed to test several areas adjacent to the previous porphyry copper deposits on the property. The first target was the 98 Oxide zone, which lies 1.1 km east northeast of the Polyanna deposit (40 million tonnes grading 0.31% copper). Previous drilling in 1998 cut two zones of copper mineralization between surface and about 200 metres in depth. Enriched copper oxide mineralization, averaging about 0.5% copper, was encountered in the upper part of the hole to a depth of 30 metres.

The second area to be tested lies 1.2 km to the southeast, where a 1,200-by-600 metre geophysical anomaly has been identified. The company has not released any of the results.

More recently, Taseko reached agreements in principle to privately place 6.7 million units at a price of $0.60 for gross proceeds of $4 million. A unit holds one share and one warrant exercisable to purchase an additional share at a price of $0.75 for a two year period. The financing is expected to close in early Dec.

Taseko has 54.6 million outstanding shares, trades in a 52-week range of $0.25 to $2.58 and recently closed at $2.50.