Exploration spending slows to trickle in B.C.

British Columbia exploration dollars are flowing into low-risk, conservative plays this year as investors try to shelter funds from frosty winds on the home front.

Jack Patterson of the B.C. & Yukon Chamber of Mines says investors see the province as offering only increased taxes and uncertainty. The current NDP government is proposing a doubling of parklands to 12% of the land area, native land claims remain unsettled and a compensation package for expropriated land is being proposed that is considered as tokenism by some. Venture capitalists and markets see foreign opportunities in Mexico, Chile, or — ironically — even the Philippines as looking better than those in the province.

“The Philippines has had its second democratic election,” says Patterson, adding that the ruling party also made peace with the Communists, leading to a more stable political environment.

The result of all this is that investors are following advanced work and ignoring true exploration or grassroots work. The plays which are just too good to walk away from are the ones still being worked, and many of these are large capital projects in areas not under land-use conflict. Meanwhile, metal prices have not tempered the severe domestic climate, as only copper and zinc have shown some movement. “Silver has been a disaster,” says Patterson, and gold, despite a brief summer rally, seems to have lost its lustre.

Patterson estimates that spending will amount to $70 million — “maybe even $50 million” — this year, down considerably from 1991. He says the industry needs about $150 million spent on exploration to keep it strong. And he says majors are spending less on exploration in British Columbia as well, although he had no figures.

Taseko Mines (VSE) and El Condor Resources (VSE) are two companies expected to spend a hefty portion (Patterson estimates up to 20%) of the funds trickling into the province this year.

“I wouldn’t be surprised,” says Robert Hunter, chairman of Taseko and El Condor, speaking of the figure. Taseko raised $7.1 million earlier this year in a private placement and since then has continued with an $8.5-million exploration, engineering, feasibility and permitting program at the Fish Lake gold-copper project near Williams Lake, B.C.

“We have four drills going 24 hours a day,” says Hunter of the first phase work geared to flesh out the full extent of its 1991 findings. The 1991 drill results outlined an initial reserve block containing 600 million tons at an average grade of 0.32% copper and 0.016 oz. gold per ton, that was still open in all directions.

The second phase consists of delineation and in-fill diamond drilling, pilot plant metallurgical work and an environmental permitting program. This information will be used to develop a bankable feasibility evaluation of the Fish Lake project, expected to be one of the largest open pit porphyry copper projects in Canada.

Hunter says El Condor has raised, but not committed, $7.2 million in exploration dollars. It had anticipated a greater 1992 expenditure on its Kemess South gold-copper deposit, where it has a 60% interest. The remaining 40% belongs to St. Philips Resources (VSE). However Rio Algom, which owns 30% of St. Philips, was not prepared to go ahead with its share of funding, says Hunter. As a result, only $1 million will be spent.

“We can demand that under the agreement,” says Hunter, adding that El Condor’s share will be $600,000.

Kemess North, wholly owned by El Condor, has one drill working on site, says Hunter, and currently $1.5 million is being spent drilling 25,000 ft. The budget isn’t fixed, says Hunter, adding that “if we get lucky, and hit another deposit, we may throw another drill at it and drill the hell out of it.”

In March, El Condor filed a pre-application for a mine development certificate for Kemess South, a 44,000-ton-per-day open pit, gold-copper project. Hunter says he anticipates hearing from the government on the application by mid-September, and if approval is given, more funds could go into development. In the meantime, Taseko and El Condor will seek to interest a major to buy their respective projects.

Ecstall Mining (VSE) President Chris Graf says “we are hardly spending anything” in B.C. The two properties his company holds are being worked under farm-out agreements. Minnova (TSE) can earn a 60% interest in three Gataga properties, considered prospective for massive sulphide deposits, by spending $1.5 million and making cash payments totalling $150,000 to Ecstall by March, 1996.

On the company’s Forgold property, Gold Fields Mining has taken a farm-in position. This 4,819-acre polymetallic property is owned 50% by Ecstall and Omega Gold (VSE), with Gold Fields holding an option to earn a 75% interest by paying Ecstall $500,000 in cash and spending $4 million on exploration by October, 1996. Following the work done by Gold Fields, Ecstall will have a 25% interest in the venture.

Graf says farm-outs provide virtually the only alternative for smaller companies to carry on exploration work today because of a lack of interest in the province. Raising money on the stock market has simply become too difficult.

“You can’t do anything meaningful in terms of exploration without spending hundreds of thousands of dollars. If your stock is only worth 25 cents, you virtually have to give away the company,” he says, adding flow-through share funding has also flagged lately.

Minnova has optioned International Curator Resources’ (VSE) Seneca property (it can earn up to 60%), a massive sulphide prospect 60 miles east of Vancouver. The first phase of the 1992 drill program was recently completed, which brought expenditures to date to $1 million. A second phase, says Curator President Michael McInnis, is expected this fall.

Curator, while not spending its money on Seneca, has been pushing work ($200,000 worth this season) to increase reserves at its Jualin gold property in southeastern Alaska.