Arauco starting with basics

Through grassroots exploration, mainly in Chile, Arauco Resources (VSE) hopes to find its way to producer status.

The jointly owned company has been concentrating efforts in southern Chile on the premise that the area is essentially unexplored despite its favorable geology. To date, it has staked more than 20 properties in the area and, more recently, has branched out into Argentina by acquiring five prospective copper properties covering 185 square km.

Arauco was formed in 1990 as a private exploration joint venture among International Northair Mines (VSE), Princeton Mining (TSE), Rea Gold (TSE) and a private British Columbian company.

It was originally listed in February, with the initial public offering raising $937,500 through the sale of 750,000 shares at $1.25 each. Private placements to St. Mary Minerals, a private Denver-based company, Teck (TSE) and the public offering have increased outstanding shares to about 5.7 million. Of those, 8.6% are owned by International Northair, 6.6% by Princeton, 10.1% by Rea, 6.6% by the private B.C. company, 17.4% by St. Mary and 12.8% by Teck.

Teck holds warrants to buy an additional 1.5 million shares (31,600 of which have been exercised) at $2 each until Jan. 15, 1994, plus a further 1.5 million shares at $2.50 each until Jan. 15, 1995.

According to Teck’s private placement agreement with Arauco (and as long as it maintains at least a 5% interest), the major has the right to earn a 50% interest in any of the junior’s properties by completing a final feasibility study and arranging project financing.

Repayment of capital and interest would be a joint-venture responsibility, giving Teck a relatively inexpensive “in” on any potential discoveries. Since the beginning of the year, Arauco has concentrated on two properties: Barba Rubia, about 200 km south of Santiago, and Joya, about 20 km west of Barba Rubia.

It recently completed a 750-metre drill program on Barba Rubia to test a geophysical and coincident surface gold-in-soil anomaly. The drilling returned anomalous gold values in all holes, with the best intersection assaying 3.1 grams per tonne over 3.05 metres within a wider zone grading 1.2 grams over 13.42 metres.

Meanwhile on Joya, Arauco identified northerly-trending quartz veins. Subsequent channel sampling on the main vein structure returned values of up to 3.2 grams gold over a strike length of 320 metres.

The company is not planning any surface drilling on Joya and is reviewing plans for the Barba Rubia ground.

Arauco also has an agreement with the University of Chile and the Interamerican Development Bank for a 4-year program of exploration in a relatively unexplored area of south Chile. The budget of US$2.3 million will be funded jointly by Arauco, the university and a US$1.1-million grant from the development bank.

The exploration area covers about 12,000 square km which are believed prospective for subvolcanic exhalative Kuroko and massive sulphide deposits as well as porphyry copper, skarn and epi-thermal precious metal deposits. This year’s program, budgeted at US$840,000, includes stream sediment, soil- and rock-sampling, prospecting, mapping and trenching under the control of 14 geologists. To date, six areas of interest have been identified, which will be evaluated for further possible work.

As of March 31, the company had adequate funding with about $1 million in working capital.