Development work under way at Mount Polley

Partners Imperial Metals (TSE) and Sumitomo are developing, under a revised agreement, the Mount Polley gold-copper project in central British Columbia.

The new agreement gives Sumitomo a 45% interest in the project in return for financing up to $54 million of Imperial’s 55% share of the estimated $123.5-million capital cost.

Imperial has spent $8 million of the remaining $14 million it is required to put up and will fund the balance with working capital.

An earlier agreement that gave Sumitomo a 35% interest was altered to reflect the downward revision in the minable reserve grade, says Brian Kynoch, senior vice-president of Imperial.

The project now contains an estimated open-pit reserve of 82.3 million tonnes grading 0.3% copper and 0.417 gram gold per tonne at a 1.16-to-1 stripping ratio. An earlier estimate calculated 49 million tonnes grading 0.38% copper and 0.56 gram gold at a 1.76-to-1 stripping ratio.

All permits for the mine are in place and the joint venture expects to complete construction in time for a fall 1997 production start.

The government of British Columbia has agreed to provide assistance and support for railway, port and hydroelectric charges. All three services can be provided by crown corporations.

Rated at 18,000 tonnes of ore per day, the mine is expected to produce 24 million lb. copper and 100,000 oz. gold per year during the first four years of operation, after which it will produce 71,000 oz. gold and 29 million lb.

copper per year over a mine life of 12 years.

According to Kynoch, the project will be a gold operation during the first four years, with a cash cost of US$171 per oz., based on a gold price of US$400 per oz. After the fourth year, Kynoch says copper will become the more significant commodity. The cash cost of the red metal is estimated at US49 cents per lb., based on a price of US$1.10 per lb.

Imperial Metals has 57 million shares outstanding, or 63 million on a fully diluted basis. The dilution includes share purchase warrants that will be issued to Sumitomo as part of the joint-venture financing agreement.

The warrants give Sumitomo the right to buy 1 million shares at $1.40 per share until June 30, 1997, plus a further 1 million shares at $1.70 per share until June 30, 1998.