Unable to secure financing for its Copper Rand 5000 project,
The company is disposing of contaminants used in underground production and returning mining equipment to surface before dewatering is halted in September.
“We are continuing discussions on the financing and I remain confident in our ability to complete something,” says MSV Resources President Andre Fortier. “On the other hand, I want to make sure that everyone understands that it could be the end. Particularly in the local community, the more forewarning I can give, the better.”
MSV acquired the neighbouring Copper Rand and Portage copper-gold mines in February 1993, re-opening them a month later. Operations at both aged mines were suspended in 1997.
In August 1997, MSV completed a feasibility study of the Copper Rand 5000 project, a development aimed at exploiting new, deeper copper-gold ore zones at the 5,000-ft level. Reserves are pegged at 2.4 million tons grading 1.71% copper and 0.109 oz. gold per ton.
The study calculated a rate of return of 17.5% based on copper and gold prices of US$1.05 per lb. and US$340 per oz., respectively, and capital costs were estimated at $40 million for the deepening of shaft 4 and associated underground work.
In May 1998, MSV arranged a $30-million loan and raised another $10 million by issuing convertible debentures to number of Quebec organizations, including the Quebec Solidarity Fund, the James Bay Development Corp., Soquem and the Regional Solidarity Fund of Northern Quebec.
However, celebrations were short-lived as the bank withdrew its loan offer. Explains Fortier: “Simply, the bank in question decided not to pursue anything in regards to commodities as a result of a corporate merger with another foreign bank.” He adds that the $10 million the company raised is still on the table, and that some of the investors are considering a greater equity stake.
“Also, at the time, a lot of people were concerned about the long construction period of 33 months,” continues Fortier. “That hurt the project at the start, and that’s why we went back to the drafting table and came up with a different development approach that eliminated 10 months.”
Under the new plan, the sinking of shaft 4 would stop at level 4235 instead of level 5235, and a haulage drift at the 5000 level would have been replaced by an inclined gallery joining level 3970 of shaft 4 to the deposit.
This new approach would have boosted daily production by 440 tons, to about 2,000 tons, though mining would still have been conducted by sub-level, open-stope methods with backfill. The cost of the revised plan remains in the $40-42 million range. However, the new plan would have allowed the company to stretch that money farther.
“About $5-6 million would be generated by coming into the ore zone midway, allowing us to gain a number of months and also start producing before we continued the ramp to the 5,000-ft. level,” says Fortier. He adds that the revised cash costs come in below $40 per ton and that the project generates a positive cash flow with a copper price of 75 cents per lb. and a gold price of US$261 per oz.
During the winter, as MSV searched for new sources of funding, the company rehabilitated the existing portions of shaft 4 and pushed the potential production date back to 2001.
Should the Copper Rand 5000 project be officially scrapped, the company’s chief asset at the site will be its 3,000 ton-per-day mill.
“Obviously a mill without an orebody loses a lot of its value, so whether we demobilize it or not is the next question,” says Fortier. “The mill is seen as quite an economic asset for the town, so there’s a lot of people who are very concerned about maintaining it.”
However, prospects for securing local mill feed are bleak as no nearby mining projects are at an advanced stage. The only two mines in the region —
“We’re working with a lot of people studying the project and seeing how it could go, and honestly, the emphasis is more on that than how to do the closure,” says Fortier. “But I want people to know that our liquidity situation is very tight. It’s a tough situation that’s been with us for two years now. I’m amazed we’re still here, but I think there’s still hope.”
On March 31, 1999, MSV’s cash position showed a deficit of $5.4 million and a long-term debt of $1.6 million.
For the year ended Dec. 31, 1998, MSV recorded a net loss of $2.1 million (or 6 cents per share) on no sales revenue. This compares with a restated net loss of $1.7 million (5 cents per share) on sales revenue of $23.5 million in 1997.
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