Getting active on Afton: a new project in an old camp

Kamloops, B.C. — Just west of where the Trans-Canada Highway meets the Coquihalla Super-Highway at the city of Kamloops, DRC Resources (DRC-T) is advancing development of a new copper-gold mine at the site of a former major copper producer, the Afton mine.

The proposed underground copper and gold operation has been met with excitement in this interior British Columbia community with a long history of resource development. Kamloops has become a bit of a mining centre in the province, with a large, skilled labour force as well as extensive equipment suppliers and infrastructure.

The original Afton copper deposit was found by Chestar Millar, in the early-1970s, upon noticing native copper mineralization on the property. Subsequently Teck Cominco (TEK-T) acquired a majority interest in his junior company, Afton Mines, and put the project into production. Teck operated the Afton mine from 1978 until 1987 when copper ore could no longer be economically mined by open-pit methods. They built the mine at a capital cost of about $90 million and, at its peak, it produced about 60 million lbs. of copper and 60,000 oz. gold annually. Production continued from two satellite pits, Crescent and Pothook, until 1990. The development of two low-grade deposits located several kilometres to the southeast, known as the Ajax pits, added production until operations were suspended in 1991. Production resumed for a few years in the mid-1990s until the operation was permanently shutdown in 1997.

Higher-grade copper and gold mineralization, about 10.5 million tonnes of 1.52% copper and 1.1 grams gold per tonne, was identified beneath the pit by Teck, but further development never proceeded due to commodity prices and economics at the time.

Enter DRC Resources, which in late-1999 acquired an option to purchase the Afton mine property from two private companies, one of which is controlled by DRC President John Kruzick. The company will issue 2 million shares, staged over six years, and commit to exploration and development expenditures of $6.5 million over 9 years. Additionally, DRC must bring the project into production by 2009 to retain full ownership.

DRC was already active in the Afton copper camp with its Python property which is adjacent to the two Ajax pits. Within 6 months of optioning Afton, the company initiated a $5-million financing coupled with a 5,000-metre drill program aimed at expanding Teck’s previously drilled deep copper-gold mineralization, both to depth and along strike.

The deeper mineralization, below the pit at Afton, has differed from most porphyry copper deposits where the grades tend to decrease with depth in the sulphide zone, below the supergene enrichment blanket. In this deposit, the grades show a significant increase with depth, prompting detailed studies suggesting that the ore deposit might be comparable to a magmatic copper-nickel deposit.

DRC’s initial drilling turned up native copper mineralization and copper sulphides in significant intervals well below the bottom of the Afton pit, indicating supergene enrichment extending deeper than originally thought. High-grade intervals in excess of 8% copper were encountered in the first hole. The second drill hole returned 235 metres grading 2.37% copper and 1 gram gold along with some palladium and silver. The potential of the deeper mineralization was now evident.

Based on the successful results and following the closure of its financing, DRC Resources added a second drill rig to its program which now continued to extend the deep mineralized zone towards the southwest. Interestingly, as drilling continued to stepout in this direction, the palladium and gold grades increased.

Following its first year of drilling and encouraging results, an independent scoping study was launched to examine mining, mineral processing, infrastructure and permitting for the Afton project. Results indicated that favourable economics for Afton were possible and outlined a block caving method of underground mining. Block caving is an inexpensive method of subsurface mining whereby large blocks of ore are undercut so that they break, or cave, under their own weight.

Subsequent infill and stepout drilling over the following two years further extended the mineralized zone and expanded the copper-gold resource of the project, and in early-2003, the company enlisted engineering firm Behre Dolbear to begin a prefeasibility study on Afton.

Surging metals prices late last year placed the spotlight on Afton and DRC was able to close a $24-million financing to fund its next stage of advanced exploration and development.

The latest advanced scoping study at Afton, conducted by Behre Dolbear in early-2004, outlined a measured and indicated resource of 68.7 million tonnes grading 1.08% copper, 0.85 gram gold, 2.62 grams silver and 0.12 gram palladium. The in-situ contained metals amount to more than 1.6 billion lbs. copper and nearly 1.9 million oz. gold. An additional inferred resource of 7.45 million tonnes grading 0.92% copper and 0.78 gram gold has been calculated.

DRC is proceeding with an underground exploration program, recently awarding mining contractor Ross Finlay 2000 a pact to develop an exploration decline. The planned 2,000-metre decline will allow access to the Afton mineralized zone for definition drilling, bulk sampling and further studies.

The Afton copper mineralized trend extends for well over 20 km from northwest to southeast and measures about 5 km in width. It is associated with the Jurassic felsic intrusives of the Iron Mask Batholith that intrudes Upper Triassic Nicola Group volcanics and sediments. A structural corridor has been outlined along the northwest-southeast trend and is evident from Afton to the Ajax pits, slightly more than 10 km.

Recent drilling by DRC between the two past-producing Ajax pits has identified a significant zone of copper sulphide containing gold that extends to depths below that which was mined.

Much of the area, along trend and between DRC Resources’ Afton project and the Ajax Pits, is held by the other major explorer in the area, Abacus Mining & Exploration (AME-V).

Abacus launched efforts to acquire its Afton land package from Teck Cominco in 2001, and in the following year, secured an agreement to acquire a 100% interest in several of Teck’s properties covering about 70 sq. km of strategic ground both east and southeast of the Afton pit and DRC’s new discovery. Abacus’s earn-in terms included issuing 250,000 shares to Teck and spending $1.5 million on exploration over four years. Teck retains a back-in right for up to a 65% interest should Abacus proceed with a prefeasibility study on or spend a total of $5 million on any deposit on the property.

Abacus accelerated its earn-in and has now fully vested its 100% interest through exploration expenditures in excess of $3 million, easily fulfilling the terms of the agreement, two years before it needed to. The company has conducted extensive drilling throughout its Afton land package, targeting known mineral occurrences and geophysical induced-polarization anomalies, identifying and confirming a number of copper-gold mineralized bodies.

Abacus’s drilling program has focused on the 2 and 22 zones on the Rainbow property, which have the potential to come together. Four significant zones of copper-gold mineralization have been discovered on Rainbow and occur along the northwest structural corridor.

The area encompassed by the Rainbow property has seen activity since the late-1800s with extensive exploration evidenced by two small shafts and numerous trenches and pits. Further exploration from the 1960s through the 1990s took the form of drilling and geophysics in the area.

Abacus initiated its drilling in 2002 and by 2004 had extensively tested the four zones on Rainbow, returning significant copper and gold grades over intervals of up to 300 metres. Additionally, values of palladium, molybdenum and cobalt have been encountered in sections. Drilling has been successful in extending the mineralized
zones striking northwest on the structure.

Abacus has also focused a portion of its exploration efforts on the Comet/Davenport claims, situated east of the Afton pit and including the past-producing Crescent pit. The DM and Audra zones align with the mined out Crescent deposit along a local east-west structure. Induced-polarization geophysics on the area indicate the potential for these zones to coalesce at depth. Thus, the company is planning further deep drilling.

Much of the claim area being worked by Abacus lies much higher, stratigraphically, than the Afton pit. In fact, most of the company’s drilling to date has not reached the level equivalent to the top of the old Afton pit. This gives Abacus significant depth potential in its exploration program, especially as DRC’s orebody is developed and becomes better understood.

With DRC pushing towards planned copper and gold production at Afton, Abacus will benefit in its position as a strategic land holder and will be able to leverage the focus on the area to further drill define its copper-gold zones along the Afton trend and at depth.

The planned underground mining operation by DRC at Afton has a calculated mining life of about 18 years based on the existing resource. In recent public meetings in Kamloops, DRC outlined the potential for at least a couple of hundred direct, full-time jobs at the operation plus significant service and support implications within the city.

DRC’s mine development plans have indicated an estimated initial capital cost of about $140 million, a figure that has benefitted from the abundance of infrastructure available in the area. Proximity to highways, water, power and a skilled, local labour force, as well the existence of permitting, all favourably contribute to the economics of the project.

DRC Resources has 13.2 million shares outstanding and is trading in the $5 per share range. Abacus Mining has 34.4 million shares outstanding in the 20-25 per share range.