Price swings renew majors’ exploration in B.C.

For British Columbia’s mining industry, 1989 was a year where the only constant was change. Most notably, the past year saw the return of major exploration companies as the leading spenders and a resurgence of exploration for base metals.

The reasons are obvious enough. The heady days of easily available flow-through financings are becoming a distant memory for juniors facing a new economic reality. Base metal prices were stronger and precious metal prices weaker, although the reverse was more the case as the year ended.

According to Jack Patterson, general manager of the British Columbia & Yukon Chamber of Mines, these and other changes are setting the stage for some unsettled times for the mining industry in the years ahead.

“There’s no question juniors are finding it tougher to raise money,” he said. “And if base metal prices continue to weaken, the majors will likely curtail some of their exploration spending down the road as well.”

The final numbers aren’t tallied yet, but according to the British Columbia & Yukon Chamber of Mines, exploration expenditures in the province should total $135-140 million for 1989. If so, this would be a drop of $65-70 million from the record level of $206 million in 1988.

These numbers support Patterson’s view that times are indeed getting tougher for juniors, particularly those involved in grassroots exploration. The demise of flow- through financing dramatically curtailed juniors’ exploration programs — about $55-60 million in 1989, compared with the $143 million spent in 1988.

On the other hand, expenditures by majors are expected to reach $80 million, which would represent a substantial increase from the $63 million spent in 1988.

Because of the renewed interest in base metals from companies of all sizes, these expenditures were widely distributed throughout the province. This was in contrast to 1988 when most of the funds were channelled to precious metal projects in the Iskut River-Sulphurets- Stewart region of northwestern British Columbia, now dubbed the “Golden Triangle.”

Tom Waterland, president of the Mining Association of British Columbia, agrees with Patterson that the trend toward more base metal exploration is a positive development for the long-term future of the province’s mining industry.

“The eggs are no longer all in one basket,” he said, noting that the large-scale base metal or polymetal projects have more impact on the province’s economy with respect to job creation and mining revenues than smaller-scale gold mining operations.

Among the major plays that dominated the scene in the past year were the Windy Craggy massive sulphide project (gold-silver-cobalt) in the Haines Triangle of northwestern British Columbia, near the Yukon-Alaska border.

Road planning studies are under way to study possible access routes to this world-class mineral deposit owned by Geddes Resources (TSE). The company is reported to be within weeks of applying for a permit to mine the deposit which has attracted the attention of major mining companies. Northgate (TSE) r ecently upped its interest in Geddes to 42% from 31% after Cominco (TSE) purchased a 17% equity stake.

Considerable work was also done on the Mt. Milligan and Mt. Polley (alkalic copper-gold porphyry) deposits in central British Columbia.

Project operator and 70% owner Continental Gold (VSE) recently announced the start of a $7.1-million feasibility and government permitting program for Mt. Milligan, a joint venture with a unit of BP Canada (TSE). The company is envisioning a milling rate of 50,000 tons per day, to produce up to 400,000 oz. gold and 100 million lb. of copper. Rio Algom (TSE) has a minor equity stake (7.7%) in Continental.

Imperial Metals (TSE) is the operator of the smaller-scale Mt. Polley project, also at the feasibility stage. The company and partner Corona (TSE) plan a 15,000-ton- per-day mining operation to produce about 75,000 oz. gold and 32 million lb. copper annually for at least 10 years.

The Eskay Creek project in northwestern British Columbia (epithermal gold-silver with associated base metals) was the focus of a large- scale drilling program by Prime Explorations that led to a staking rush in this region. And work programs by Curragh Resources, which include underground exploration and bulk sampling, continued at the Cirque project (sediment hosted lead-zinc-silver massive sulphide) in northeastern British Columbia.

Despite softening gold prices, the spectacular Eskay Creek discovery by Calpine Resources (VSE) kept interest in precious metal exploration at healthy levels in the province. But the weaker prices took their toll on a number of mines that were expected to open during the year.

Seven were anticipated, but only four came on stream. They were the Lawyers gold-silver mine in the Toodoggone, owned and operated by Cheni Gold Mines (TSE); the Golden Bear gold mine near Dease Lake, operated by North American Metals (VSE) and controlled by Homestake Mining (NYSE); the Samatosum silver-base metal mine, operated by Minnova (TSE) under the terms of a joint venture agreement with Rea Gold (TSE); and the Premier Gold project, operated by Westmin (TSE) under its partnership with Pioneer Metals (TSE).

On a positive note, mineral claim staking increased appreciably over 1988 levels, particularly in the Iskut-Unuk River area of northwestern British Columbia. In recent months, however, the validity of title to some of these claims near Eskay Creek have come into question.

The Galore Creek region north of the Iskut River area also came to life as Mingold which, operating on behalf of Hudson Bay Mining & Smelting (TSE), continued exploration of the large Galore Creek gold-copper porphyry deposit. A program is planned for 1990 that may include a drill program. A number of other companies are active in the area; notably Pioneer Metals, Corona, Pass Lake Resources, and Prime group companies.

Placer Dome (TSE) acquired control of the Kerr porphyry copper- gold deposit north of Stewart, and it is expected the property will be drilled this summer.

Major mining companies have been picking up the slack for the financing of work on projects since the flow-through tap was turned off, but as might be expected, only the better quality projects are selected.

And these days, the hard-nosed majors are not necessarily signing generous joint venture deals with juniors. Instead, many are reducing their risk by making small “toehold” equity investments in juniors with promising properties to provide funds for the smaller companies to continue work.

Placer Dome, Teck and Cominco have been the more active players in this regard, acquiring equity interests, or in some instances, signing joint venture deals with a growing list of juniors. As Cominco President Robert Hallbauer told The Northern Miner in a recent interview: “Things are back to n ormal.”