Giant Bay moves on Montanore

The acquisition of a private U.S. company will give Giant Bay Resources (TSE) an option on a 45% interest in the huge Montanore copper-silver deposit in northwestern Montana.

Giant Bay has agreed in principle with Montana Reserves shareholders to acquire all shares of the company in return for Giant Bay common stock. Shares will be consolidated on a 9-for-one basis, giving existing Giant Bay shareholders 2.3 million shares of the new company and Montana Reserves shareholders 14.3 million shares.

Noranda (TSE) owns Montanore while Montana Reserves holds a 5% net proceeds royalty. The royalty can be converted into a 45% working interest in the project by paying Noranda US$26.8 million (plus accrued interest) on or before June 30, 1994.

Montanore has had more than its share of problems on the environmental front. The stratabound deposit lies under a wilderness area, rendering exploration drilling from surface virtually impossible.

Previous drilling from surface totaled 39 holes and, based on 29 drill-hole intercepts, reserves are estimated at 134 million tons grading 0.8% copper and 2 oz. silver per ton.

A higher-grade zone within the reserve is estimated to contain 25 million tons at 1% copper and 3.3 oz. silver.

The deposit outcrops at surface and is wedge-shaped, dipping at about 20. It increases in width with depth. Mineralization is hosted in two separate 35-ft.-thick beds, about 100 ft. apart vertically. The zones are about 3,000 ft. wide horizontally, extend downdip about 1,100 ft. and remain open to expansion at depth.

As part of its feasibility work, Noranda planned to drive a 16,000-ft.-long decline to the deposit from nearby private land and to conduct further infill and exploration drilling from underground. It completed about 14,000 ft. before work was halted in late 1991 because of elevated nitrate levels in Libby Creek.

The company has done no work on the property since, concentrating instead on securing permits. Noranda expects to receive its last major permit shortly from the U.S. Forest Service. Once that permit is in hand, the remaining ones should fall into place, said Mark Petersmeyer, project director for Noranda at Montanore.

He does not expect nitrate output from future underground blasts to pose further problems. The outflow will be sprinkled over a large area to dissipate the nitrate.

The cost of completing a bankable feasibility is estimated at US$15 million, including underground work, drilling and engineering. But the company first wants to complete the sale of the 45% interest to Giant Bay, or failing that, bring on another partner.

Giant Bay is trying to raise funds to complete the purchase and finance its share of the estimated cost to finish a bankable feasibility. Giant Bay President Frank Duval is confident he can arrange the funding through some form of equity offering or with the aid of a third party. If project development starts next summer, Petersmeyer said, the feasibility work could be completed by the end of 1995 while construction would likely take 2-2.5 years.

A ballpark estimate of capital costs is US$250 million.