Kennecott brings Canadian unit back to life

The long-dormant Canadian subsidiary of Kennecott Corp., backed by its parent company’s renewed commitment to exploration, is beefing up staff, dusting off a decades- old inventory of properties and jumping into new ventures in efforts to revitalize its Canadian presence. Riding the crest of prosperity brought on by productivity improvements made in the 1980s and a new mining-based owner, Kennecott of Salt Lake City, Utah, has put Canada high on its list of exploration plans in 1991.

“Canada is probably the most attractive terrane for exploration in the world,” President Frank Joklik said during a recent interview with The Northern Miner.

“Geological thinking and exploration techniques are the cutting edge in Canada,” says Joklik, and that reflects the quality of the country’s geological database and potential. “By and large, the government is pretty supportive, too.”

Joklik, president of Kennecott since 1980, began with the company as a 25-year-old exploration geologist in 1954 shortly after emigrating to the U.S. Born in Vienna, Austria, he received a Ph.D. from the University of Sydney in Australia in 1953.

Kennecott, was sold by BP Minerals America in mid-1989 to RTZ Corp. of London, England, as part of a transaction worth $4.3 billion — at the time the largest ever private transaction between two British companies. BP is a unit of British Petroleum of London, England, while RTZ is the world’s largest mining company in terms of annual revenue.

Kennecott has had a Canadian subsidiary since the 1940s, but Joklik says it has been little more than a “listening post” for the past few years. Now, with a worldwide exploration budget of US$25 million, Kennecott is breathing new life into its Canadian operation.

The first step was the appointment in November of John Stephen0000,0506 son, 49, as president of Kennecott Canada. Stephenson was previously president and chief operating officer at Vancouver- based Pacific Gold Corp.

“We plan to be very active in ’91,” says Stephenson, although he would not specify how much he plans to spend during the year. “For a startup year, I’d say we have a very healthy budget.”

Stephenson, now working from a wood-panelled Toronto office formerly occupied by the president of Noranda Mines, will be moving into new quarters in Toronto’s BCE Place in March. He is also re- establishing a Vancouver office at Granville Square.

An indication of the company’s budget is Stephenson’s plan to hire three or four “highly motivated, field-oriented” geologists for the Vancouver office to augment a similar staff in Toronto.

Kennecott Canada currently owns mineral rights in 20 Canadian properties and is involved in a number of joint ventures. For example, the company is already earning a 50% interest in a group of 12 properties from High Frontier Resources (VSE) by spending $1.4 million. Kennecott, which can increase that interest to 60% by spending a further $1 million, is operator.

Stephenson says the company has also talked to mining promoter Murray Pezim about the possibility of joint ventures with companies he controls.

One project that has enjoyed some success recently is the South Kemess property in the Toodoggone area of British Columbia. Kennecott and El Condor Resources (VSE), through a 40-60 joint venture, can earn a 60% interest by spending $1.1 million. Recent stepout holes drilled at 100-metre intervals cut wide intervals with copper and gold values such as 108 metres of 0.61 grams gold per tonne and 0.23% copper (T.N.M., Dec. 24 /90).

One of the first tasks for Stephenson and his staff, however, will be to re-examine properties currently held, including several porphyry copper properties along the Quesnel trough in British Columbia.

“Properties we haven’t looked at for 20 years are being re-evaluated,” says Stephenson.

Other prime targets are British Columbia’s Stikine Arch in search of “Eskay Creek type” deposits and the Abitibi greenstone belt in Eastern Canada which Stephenson considers “one of the best areas for gold and massive sulphide exploration” even though ground is tightly held.

Aware of the cyclical nature of the mining business, the company has not ruled out any geographic area or commodity.

“Vogues come and go in mineral exploration,” says Joklik. “It depends on metal markets, serendipity, geology and financing.”

Stephenson says he will look at any kind of vehicle for projects — grassroots work, joint ventures, options and acquisitions. He will not insist on being operator or majority owner.

“We’ll go on a case-by-case basis.”

Grassroots projects, which would be undertaken by contractors under his staff’s supervision, are high on Stephenson’s list. But he says the company will not keep properties if no work is planned for them. “We’ll either advance them or farm them out.”

With juniors looking for partners because of the poor climate for raising equity capital on their own, Kennecott can “certainly take advantage of that,” says Stephenson.

Joklik recognizes that in Canada Kennecott has not brought any projects to production. Even internationally, the company has suffered a “hiatus between vigourous worldwide exploration and production,” but says the company’s record has changed.

In the past two years Kennecott has brought four new mines into production, he says: Ridgeway, a 52% owned gold mine in South Carolina; Barneys Canyon, a 100% owned gold mine in Utah; Denton- Rawhide, a 51% owned gold mine in Nevada; and Greens Creek, a 53% owned silver-zinc mine in Alaska.

Kennecott’s main asset is the Bingham Canyon mine in Utah with 25 years of reserves. Recent plant expansions and modernization have brought throughput there to 150,000 tons of ore per day to increase annual production to 250,000 tons of copper, 400,000 oz. gold, three million ounces silver, 12 million lb. molybdenum and some platinum group metals.

Although Joklik says exact costs are not made public, cash costs of copper production at Bingham Canyon are about 35 cents per lb. when credits from other metal production are included making it one of the lowest cost copper mines in the world.