Abacus Tallies Growing Copper-Gold Resource At Ajax

VANCOUVER– It was an old box of forgotten data in the back of a mill building that changed everything for Abacus Mining & Exploration (AME-V, ABCFF-O). Now, three and a half years after finding the box and the treasure trove of information within, a new resource estimate at an old project has brought the junior one big step closer to production.

With the new estimate for the Ajax deposit near Kamloops, B. C., the junior can boast measured and indicated resources totalling 365 million tonnes grading 0.31% copper and 0.2 gram gold per tonne. Inferred resources add 38 million tonnes averaging 0.24% copper and 0.16 gram gold.

The resource is interesting in itself — Ajax now carries 2.7 billion lbs. copper and 2.5 million oz. gold in a deposit that sits only a few kilo-metres away from a major city served by highways and rail. But the real story is how Abacus found itself at Ajax in the first place and how the junior has navigated ownership triangles and joint-venture agreements to position itself to profit from an old project.

Abacus signed a deal with Teck (TCK. B-T, TCK-N) in 2002 to earn into a group of claims in and around the old Afton mine. Copper, gold and silver production in the Afton mining camp can be traced back some 100 years. In recent times, Teck ran the operation, sourcing ore from the Afton pit, as well as from three pits roughly 10 km to the west called the Ajax pits. Teck pulled some 31 million short tons of ore grading 1% copper, 0.58 gram gold and 4.2 grams silver per ton from the pits until production ceased in 1997.

When Abacus started exploring the area five years later, the company focused on two zones between the Afton and Ajax pits, called Rainbow and DM. Two years of drilling proved up roughly 40 million tonnes of resource at each. That’s when Abacus’s president, Douglas Fulcher, decided to approach Teck about the old infrastructure at Afton.

To make a long story short, Abacus bought the old mill building, shop building, and tailings facility at the Afton mine from Teck for $28 million, of which $10 million was cash and the rest was shares.

“A lot of people asked me, ‘Aren’t you putting the cart ahead of the horse, buying infrastructure so early in the process?'” Fulcher says. “But I just said that the opportunity was there and I had to take it.”

And the window of opportunity wouldn’t have stayed open forever, because Abacus wasn’t — and still isn’t — the only company working near the Afton mine. New Gold (NGD-T, NGD-X) was already well into drilling up a high-grade resource underneath the old Afton pit. New Gold is now developing an underground operation to tap into that resource, which carries probable reserves of 1 million oz. gold, 3.24 million oz. silver, and 960 million lbs. copper. But Abacus essentially bought the facilities — and land — out from above its competitor.

This is when the old box of data came into play. Walking through its newly acquired building, which once held a 10,000-tonne-per-day mill, Abacus’s management came across an old box of drill data. From that moment on, the company’s focus shifted completely.

“It turns out Teck had been looking for more ore and had punched a grid of 150-metre holes into Ajax,” Fulcher says. “And a whole whack of them ended in mineralization, like 1.5 per cent copper.”

From three pits at Ajax, Teck had taken roughly 12 million tonnes of ore. But the drill data suggested that much more remained, so Fulcher immediately sent his drills to the zone. In another interesting ownership tangle, New Gold held several square kilometres of land surrounding the old Ajax pits. But the pits themselves were not covered by mineral claims, like the surrounding area, but by Crown grants. Abacus managed to nab ownership of the grants, leaving the company with two small land holdings over the old pits completely surrounded by New Gold territory.

Drilling went well right from the beginning and Fulcher knew he needed to expand Abacus’s land position at Ajax. Luckily, Abacus also held something that New Gold needed: the land around the old Afton pit.

In 2006, New Gold was ramping up to start developing an underground operation at Afton and it needed land. Specifically, in order to build its processing plant, it needed the land at the old pit that Abacus owned.

The two companies eventually hammered out a deal. New Gold now owns enough land to develop its operation. In exchange, Abacus is 60% owner of the block of land surrounding its small claims at Ajax.

The dealing to date has been interesting enough, but it’s not over yet. Most of Abacus’s new resource — 80% — is within Abacus’s original claims, which the company still holds outright. The other 20% sits in the joint-venture land held 40% by New Gold and 60% by Abacus. The joint-venture deal stipulates that each partner pays its portion of the costs of work done on joint-venture land. But Fulcher says the way the deposit is laid out, it’s likely that the joint-venture area would see a considerable, and costly, pushback, even though the area only hosts a small portion of the deposit. So New Gold will have to decide the manner in which it wants to participate in the development of and profits from an Ajax open pit.

In a final complication, the Ajax deposit remains open along strike and at depth, so New Gold will likely want to see where and how much it grows before making a decision. In late 2008, Abacus drilled several holes into the Monte Carlo area, which is thought to be a northern extension of Ajax. Results from those holes are still pending.

Abacus now plans to complete a preliminary economic assessment contemplating a 60,000-tonne-per-day operation at Ajax. Abacus management believes that the new resource coupled with the existing infrastructure will allow the company to move quickly towards production.

At presstime, Abacus shares traded at 10¢. The company has a 52-week trading range of 2.5-54¢ and has 121 million shares outstanding.