Juniors shift attention to base metals as prices for precious

On the edge of the world’s largest anorthosite intrusion, 25 miles north of Lac St. Jean, Que., the rumble of diamond drill rigs echoes across the rolling terrain.

Drill results from this summer’s work could tell whether a new base metal camp is about to unfold in this virtually unexplored region.

In one clearing, trenching has exposed the sparkle of copper and nickel mineralization. Last year, those patches of base metals ignited a staking rush not seen since the days of the gold rushes at Hemlo or Casa Berardi.

More than 20 junior companies flocked to the Lac St. Jean area and tied up ground for miles around. Copper and nickel prices were booming, and the timing of the new discovery, called McNickel, couldn’t have been better.

But in an ironic twist, common to the cyclical mining industry, the new discovery comes just as base metal prices appear to be headed for a downturn.

McNickel Inc.’s (COATS) $3.5- million exploration program north of Lac St. Jean is just one of several base metal projects being conducted across Canada, as junior companies seek refuge from falling gold and silver prices.

The dramatic rise in nickel, copper and zinc prices during 1988 generated renewed interest in polymetallic deposits. Not surprisingly, junior mining companies shifted attention back to base metals, after nearly a decade dedicated solely to gold.

But one question remains: Will the shift to base metals in the junior sector continue even if solid metal prices aren’t sustained?

Concerns about a deteriorating outlook for new base metal mines in Canada have been trumpeted by governments and industry alike during the past year. Several senior mining companies have already beefed up their base metals exploration programs.

Any indication that junior base metal exploration might be on the rise would be seen as encouraging, especially as gold and silver prices continue to freefall.

Although the lofty prices of 1988 are already starting to come down — and analysts expect the decline to continue — last year’s boom was enough to spark at least some renewed base metal activity in the junior sector.

For now, junior companies seem to be surviving, and the new McNickel project stands out as a tangible symbol of the bullish mood for base metals. With more than 20 junior companies involved in the region, much exploration news is expected in the months ahead.

Across the country there are a number of other junior base metal projects under way. Atlantic Canada, for instance, has become a major exploration hot spot. The Rambler joint venture, with Petromet Resources (TSE) and Newfoundland Exploration (TSE) has recently completed a $3.8-million exploration program for copper and zinc in northern Newfoundland. Scores of other juniors are active elsewhere in that busy province.

In New Brunswick, Marshall Minerals (ASE) is advancing its Restigouche lead-zinc-silver property where reserves totalling 1.73 million tons have been outlined grading 6.9% zinc, 0.35% copper, 5.3% lead, with gold and silver as well. Another junior company, Novagold Resources (TSE) hopes to develop a copper zone on its Murray Brook bet where a gold gossan zone is to be mined. Stratabound Minerals (ASE) is also exploring for zinc-lead-silver on its CNE property, near Bathurst, N.B.

Moving up the St. Lawrence River, the new base metal exploration play near Lac St. Jean, Que., is focused on copper-nickel-cobalt mineralization. Further north, in the remote Ungava region, Falconbridge affiliate New Quebec Raglan Mines (TSE) continues to ponder the future of its high grade nickel deposits which host reserves of some 12 million tons grading 3.1% nicke l and 0.79% copper with appreciable platinum group metal values.

In Ontario’s Timmins camp, the small high-grade Redstone nickel deposit has been developed this year by a private company, Timmins Nickel Inc., controlled by Malcolm Slack. The Redstone deposit, optioned from BHP-Utah Mines, hosts reserves of 453,000 tons averaging 2.9% nickel.

In Manitoba and Saskatchewan, a few junior base metal projects are on the go. Lynngold Resources (TSE), for example, is re-examining two former producing copper- nickel bets near Lynn Lake, Man.

In Saskatchewan, the Hanson Lake joint venture of Cameco, Trimin Resources (VSE), and Esso Minerals has been drilling a copper- zinc deposit in Precambrian rocks beneath a cover of Ordovician dolomite. Edmonton-based Gamsan Resources (ASE) has been exploring a zinc-copper deposit near Brabant Lake, north of La Ronge, Sask. The company recently announced geological reserves of 3.7 million tons grading 4.8% zinc, 0.55% copper and 0.27% lead, along with silver and gold values.

British Columbia probably has the highest number of advanced exploration prospects for base metals involving junior companies.

The federal department of Energy Mines and Resources estimates that out of a total of 22 base metal deposits in Canada which are currently classified as “promising,” nine are located in British Columbia.

One of the biggest and most remote is Geddes Resources’ (TSE) Windy Craggy copper-cobalt-gold deposit near the Alaskan border. The company is conducting a $10-million exploration program this year to further define reserves and prepare for a feasibility study.

On Vancouver Island, reserves totalling 583,000 tons of 5.8% zinc, 1% copper, 1.2% lead, 2.9 oz silver and 0.14 oz gold per ton have been outlined by Laramide Resources (VSE) in the Lara deposit. Minnova Inc. (TSE) has a stake in the Lara deposit.

Elsewhere in British Columbia, Redfern Resources (VSE) is busy on its Tulsequah Chief prospect where reserves stand at 2.4 million tons grading 6.3% zinc, 2% copper, 1.25% lead, 0.075 oz gold and 2.7 oz silver per ton. Senior companies Teck Corp. (TSE) and Cominco Ltd. (TSE) have a stake in Redfern.

In the Yukon, the Mt. Hundere lead-zinc-silver deposit was recently acquired by Hillsborough Resources (TSE). Mt. Hundere hosts geological reserves estimated at 5.2 million tonnes grading 13.3% zinc, 5.3% lead and 63.8 g per tonne silver. The reserves are contained within two main areas situated three km apart.

In the Northwest Territories, drilling is continuing on Aber Resources (TSE) and Hemisphere Development’s (VSE) volcanogenic silver-base-metal deposit at Sunrise Lake, 112 km north of Yellowknife. Reserves there are estimated at 2.06 million tons grading 8.9% zinc, 4.2% lead, 11.8 oz silver and 0.03 oz gold per ton. Noranda Exploration recently took a 50% option on part of the Sunrise property.

Last year’s resurgence of base metal prices provided a welcome boost to the mining industry, particularly for the major producing companies. It was especially good news in the context of the country’s diminishing base metal reserves and the need to focus on base metal exploration.

The Prospectors and Developers Association of Canada (PDAC) said: “The resurgence of base metal prices is also likely to provide a balance between base metal exploration and the recent market-driven focus on precious metals.”

While base metal prices were a positive note, the PDAC also notes that the junior sector continues to languish under the burden of depressed share prices since the 1987 stock market crash, sliding precious metal prices, and uncertainty about new tax rules and a new exploration grant system — C EIP.

Industry sources say there are still plenty of base metal prospects in Canada that could be developed if prices are right. Many of the prospects have been drill tested and remain idle, awaiting further exploration. One of the legacies left by the flow-through exploration boom during the 1980s is an enhanced geoscience database. Government assessment files can now be mined for the geological information left over from the boom years.

A mainstay of mineral exploration is the availability of a high- quality geoscience database. In view of the pressing need for new base metal deposits, and the fact that most of the orebodies of tomorrow are well-hidden at depth, the dependence on the geoscience database is becoming even more critical.

According to Donald Cranstone of the federal department of Energy Mines and Resources, there are only about 22 “currently promising” base metal deposits in Canada, compared with 139 for gold. The ministry classifies deposits as “promising” if tonnage, grade, cumulative exploration work, and infrastructure indicate production is possible in the foreseeable future.

Even with a cyclical downturn in base metal prices on the way, Canadian companies may have to keep spending on exploration to replace dwindling reserves, Cranstone warns.

“A greater sustained effort directed at base metals is required if a stream of copper, zinc, and lead deposits are to be found in time to sustain Canadian production beyond the middle of the mid-1990s” said Cranstone.