LATIN AMERICA — Cominco expands search for zinc — Improved demand prompts major to strengthen position

Zinc is Cominco’s (CLT-T) largest single source of revenue, representing 48% of the total. The company has been a leading producer of the metal for more than 80 years, and recently, in light of improved demand and strengthening prices for the metal, has been attempting to consolidate its already strong position in the world’s zinc industry.

While much of that effort involves projects in North America (including a highly successful program to expand reserves at the Red Dog zinc mine in Alaska), Cominco has several projects under way in South America that will also boost its profile in the zinc industry.

The company already owns 82% of the Cajamarquilla zinc refinery near Lima, Peru, which last year produced 105,400 tonnes of zinc metal, the highest production since the plant went into operation in 1981. The operation had been plagued by problems with power transformers in previous years, but these were resolved in 1995, enabling the refinery to produce at record rates in almost every month of 1996.

A 20,000-Tonne-per-year, US$30-million expansion of the plant has been approved, with construction set to be completed early next year. Cominco also is well into a feasibility study aimed at increasing Cajamarquilla’s annual capacity to 230,000 tonnes.

As majority owner of Cajamarquilla, Cominco is keeping a close eye on sources of feed for the Peruvian refinery. Toward that end, it has made zinc projects the main focus of its exploration efforts.

Last year, 46% of the company’s $48-million, worldwide exploration budget was directed towards zinc prospects, and the company says this emphasis will continue this year. While much of the funds were spent in North America, Cominco appears to be taking a keen interest in zinc projects in Peru, where it has launched a grassroots exploration program to test several properties.

Exploration is a primary tool used by Cominco to find mines. This is borne out by the fact that, over its 90-year history, the company has discovered 23 of the 32 mines it has operated. Acquisitions and joint ventures with junior companies are also part of the company’s growth strategy.

The major already has acquired a 22.5% interest in a Peruvian company that holds a 51% interest in El Broca, which, in turn, owns and operates the 2,100-Tonne-per-day Colquijirca zinc-lead mine in Perus’s Central Highlands.

El Brocal also owns the nearby San Gregorio zinc deposit and the Marcapunta copper deposit.

A preliminary estimate of the San Gregorio resource is 70 million tonnes grading 7% zinc and 2% lead, amenable to open-pit mining.

Open-pit prospect

Drilling to date at Marcapunta indicates a 50-million-Tonne resource grading 1.8% copper which appears to be amenable to open-pit mining. While the company notes that the principal ore mineral is enargite (which is of limited interest to most conventional copper smelters), preliminary tests have shown that a new proprietary hydrometallurgical process designed by Cominco Engineering Services may yield high copper recoveries while fixing the arsenic in an environmentally stable form.

In northern Peru, Cominco has taken an interest in the 700-sq.-km Bongara zinc project held by Solitario Resources (SLR-T). Late last year, the major signed an agreement to earn a 60% interest by making exploration and development expenditures and by other payments.

The most advanced prospect at Bongara is Florida Canyon, a stratabound zinc sulphide occurrence in carbonate rocks. It grades 7% zinc over a true thickness of 40 metres, including 16% zinc over 6 metres. Similar showings have been found 300 metres to the east in the same rock unit. This year’s exploration program, budgeted at US$2.5 million, will include 4,000 metres of drilling.

Cominco also is exploring for copper. Last year, exploration for the red metal accounted for 27% of the exploration budget, and a similar proportion is planned for this year. Most of this exploration work is directed towards porphyry copper deposits in Chile, Peru, Bolivia and Argentina.

In Chile, the company explores for copper under a joint venture with Teck (TEK-T). Cominco owns two-Thirds of this venture, with the remainder held by Teck. Last year, 10 targets on seven properties were drill-Tested, and this year, drilling is planned for several new targets.