Aur downgrades reserves at Louvicourt significantly

With just a few months left until startup, Aur Resources (TSE) has stunned the mining community by downgrading reserves at its Louvicourt base metal project, near Val d’Or, Que., by 41%

Following Aur’s completion of some 79,000 metres of underground delineation drilling, undiluted geological reserves for the deposit (incorporating a 2% copper equivalent cutoff grade) have been recalculated at 15.7 million tonnes grading 3.4% copper, 2.2% zinc, 31 grams per tonne silver and 0.9 grams gold. This figure includes 2.6 million tonnes situated between the 475- and 880-metre levels. The average grade of this reserve, based on previous calculations from surface drilling data, is 1.5% copper, 3.9% zinc, 27 grams silver and 0.7 grams gold.

In comparison, the previous undiluted geological reserve calculated from surface drilling was 26.5 million tonnes with an average grade of 4.2% copper, 2.2% zinc, 28 grams silver and 1.1 grams gold.

“It’s not unusual for surface drilling to give a different

picture than underground drilling,” Aur’s executive vice-president, Howard Stockford, told The Northern Miner. “Sure, we’re disappointed in the tonnages, but we’re working hard to get them back up again.” The reduction in reserves within the area tested to date is principally a result of reserve losses on the eastern and western portions of the deposit. Underground work has shown that the eastern boundary of the ore zone is 80 metres west of the position indicated by surface drilling and has a steeper plunge than originally thought. Stockford says this change in position has meant the loss of 3.5 million tonnes from the east side of the deposit. Apparently strong deviations in the surface drill holes led to problems with borehole survey techniques, which ultimately caused the position of the holes to be misinterpreted.

In the western portion of the deposit, reserve losses resulted from reduced continuity of the mineralized zones as caused by complex folding. “We originally thought the deposit consisted of five stacked lenses,” Stockford said, “but now it appears there may be a series of lenses on the same horizon that have been repeated by folding.”

Underground exploration also led to a 4% change in specific gravity calculations which caused an additional 1-million-tonne loss in reserves. Stockford said that even with the decrease in reserves, the project ranks as one of the top 10 massive sulphide deposits in Canada.

Not all the news from the interim progress report was negative. Although underground development is eight weeks behind schedule, the $319-million project is nevertheless $30 million under budget.

The underground drilling has confirmed the presence of a high-grade core, and the mine plan is being designed to increase metal production and cash flow by as much as possible in the early years of operation without jeopardizing the integrity of the deposit.

Geological and geophysical data obtained during the course of the underground program have also identified new targets outside the area of the delineated reserves, which are readily accessible from the existing infrastructure. Aur believes these targets have the potential to augment reserves and extend the overall life of the mine, which, based on the new figures, has been reduced to 12 from 17 years.

Mill startup is still scheduled for July, with commercial production of 2,400 tonnes per day expected to be reached by October. Full production of 4,000 tonnes per day is scheduled to be achieved in 1995.

Raymond Goldie, an analyst with Richardson Greenshields, does not believe the reduction in reserves will adversely affect the payback period for the deposit, which he estimates will be under five years. (Aur’s payback is two years.)

“No doubt the announcement has reduced the value of Aur’s proven assets, but only by about 40-50 cents per share,” says Goldie. The market did not share Goldie’s view, as the share prices of Aur and its partners Novicourt (TSE) and Teck (TSE) moved lower in active trading. Aur dropped $1.75 to $4.25, Novicourt fell $1.80 to $3.15 and Teck A shares were off $1.25 to $22. Louvicourt is owned 30% by Aur, 25% by Teck and 45% by Novicourt (a subsidiary of Toronto-listed Noranda).