Large porphyry copper deposits drawing attention

Copper has always played an important role in British Columbia’s metal mining industry, consistently accounting for the lion’s share of the province’s yearly metal production on a dollar-value basis.

In 1990, copper production amounted to $956 million, almost four times the province’s gold production, its closest rival at $249 million. There can be little argument that gold was the metal of choice for exploration companies in the late 1980s. However, recent years have seen a resurgence in investor and company interest in the search for large porphyry copper deposits, albeit with associated gold values playing a part. Investor interest in large-scale, low-grade copper deposits was piqued in 1989 as drilling at the Mt. Milligan project in north-central British Columbia proceeded to outline a huge porphyry copper-gold system. Ultimately Placer Dome purchased the property last September from owners BP Resources (30%) and Continental Gold (70%) for a total of about $250 million. Shareholders that stuck with Continental from early drilling in 1988 to Placer’s $20-per-share take-over, experienced an almost 10-fold increase in share price.

At last report, the deposit is estimated to have a minable reserve of 550 million tons grading 0.57% copper-equivalent using a 0.20% cut-off. The jury remains out on the project however, with many in the local mining community skeptical of Mount Milligan’s economics at today’s copper and gold prices. Former Continental principals, Robert Dickinson and Robert Hunter, have been active in two other large porphyry plays.

Earlier this year Hunter and Dickinson took over management of Taseko Resources (VSE) with the intention of re-activating the company’s Fish Lake deposit near Williams Lake, B.C.

The Fish Lake deposit contains preliminary reserves of about 201 million tons grading 0.24% copper, 0.015 oz. gold and 0.33 oz. silver per ton. Taseko recently regained operatorship of the property from Cominco (TSE). Cominco holds an option giving it the right to earn an 80% interest in the property by bringing it into production.

Cominco deems the property uneconomic at current metal prices and has had the project on hold until the economics improve.

Under Taseko’s new agreement with Cominco, Taseko regained control of the property for three years during which time the company hopes to attract a buyer. Proceeds from the sale of the property will be split between the two companies based on a complicated formula.

Hunter and Dickinson have also become involved in the South Kemess property located in north-central British Columbia through Covenant Resources (VSE). Covenant plans to merge on a one-for-one basis with El Condor Resources (VSE), 60% owners of the property. The balance of the property is owned by St. Philips Resources (VSE), although El Condor and Covenant hope to merge with it as well.

Drilling on the South Kemess property last year outlined a large copper-gold porphyry system measuring about 1,500 by 2,000 ft. with mineralization extending from near-surface to depths of up to 675 ft. The mineralization remains open in all directions and no reserve estimates have been released. The adjacent North Kemess property also contains large areas of mineralization although El Condor has concentrated its exploration efforts on the South Kemess property. El Condor plans to continue drilling on the South Kemess this summer in an effort to delineate the size of the deposit although Ron Thiessen, a director of El Condor, noted if a merger with St. Philips is not completed, the company may opt to drill on the wholly owned North Kemess ground instead. El Condor did announce plans to make an offer for all the outstanding St. Philips stock on the basis of one share of El Condor for two shares of St. Philips. Those plans were put on hold, however, after the company negotiated a deal with Kennecott to acquire that company’s interests in the North and South Kemess properties.

El Condor expects to make another merger offer to St. Philips shareholders in the near future. There are a number of large porphyry copper deposits in the Galore Creek area in northwestern British Columbia. The deposits were discovered in the 1950s but as yet have not developed primarily because of the area’s remote location.

The Galore Creek deposit itself, owned by Hudson Bay Mining & Smelting (TSE), Cominco (TSE), and Kennecott, is estimated to contain 125 million tons grading 1.06% copper, and 0.012 oz. gold.

The nearby Schaft Creek deposit, owned by Teck (TSE), is estimated to contain a geological reserve of one billion tons grading 0.33% copper, 0.034% molybdenum plus minor amounts of gold and silver

Also in the Galore Creek area, Consolidated Rhodes Resources (VSE) is earning a 50% interest in the Copper Canyonproject from Canamax Resources (TSE) by spending $5.9 million. A limited drilling program in 1957 outlined a preliminary reserve of 29 million tons grading 0.7% copper, 0.3 oz. silver, and 0.01 oz. gold. Drilling by Rhodes last year was designed to twin a number of the original holes which had extremely poor recoveries. The drilling encountered generally higher grades than those previously reported. Rhodes plans to conduct further drilling on the known copper zones this summer as well as on a number of targets to the northeast identified by an airborne geophysical survey.

Under Teck’s recent $5-million financing deal with Prime Equities (VSE), it can earn 50% of Rhodes’ interest in the property by funding the project to production. Teck’s costs would be refunded through future production if it elects to earn the interest.