Billiton joins Copper Ridge at Howard’s Pass

On the heels of its friendly takeover offer for Rio Algom (ROM-T), London-based Billiton has signed a letter of intent with Copper Ridge Explorations (KRX-V) to participate in the evaluation and potential development of the large Howard’s Pass base metal deposit on the Yukon-Northwest Territories border.

“This is an important step forward for Howard’s Pass,” says Gerald Carlson, Copper Ridge’s president. “Billiton brings its credibility as one of the world’s largest mining companies to one of the world’s largest zinc deposits.”

Considered one of the largest undeveloped zinc resources in the world, Howard’s Pass hosts 110.5 million tonnes grading 5.3% zinc, 2.4% lead and 16 grams gold per tonne. The resource is spread among three large stratiform zinc-lead-silver deposits discovered by Placer Dome (pdg-t) in the 1970s.

Most of the resource occurs in the XY and Anniv deposits. Mineralization at XY occurs on the western limb of a synclinal fold that increases in grade and thickness downdip toward the east.

Copper Ridge sees plenty of upside for the project, particularly given the resource’s potential amenability to bulk-tonnage mining methods and proprietary hydrometallurical processing techniques developed by Billiton. There is also excellent potential for new discoveries, adds Carlson.

According to the deal, Copper Ridge must spend $2 million on a scoping study and pay $1 million to the property’s claim-holders — Placer and U.S. Steel (X-N). The payment satisfies a portion of its obligations to those companies, which are to be paid $10 million over four years in exchange for the property.

In return for a half-stake, Billiton must complete two private placements in Copper Ridge of $200,000 each, with proceeds from the first to go toward a drill program. The second placement is to follow the completion of a positive due-diligence review, set for mid-October, itself to be followed by $5.5 million in expenditures over two years.

The deal also provides Billiton with the option to increase its stake to 70% following another $7 million in expenditures, to be covered by both companies. To acquire the 20%, Billiton alone would have to finance the project to production, though it can recoup Copper Ridge’s 30% pro rata share from future cash flow.

Billiton has already begun metallurgical tests on samples of the deposits.

Meanwhile, Rio has denied Noranda‘s (nor-t) request to review its operations and books. The request was made in order to help the major and its partner, Chilean state-owned Codelco (Corporacion del Cobre de Chile) decide if a higher bid is justified (T.N.M., Sept. 4/00).

“We were surprised by their reaction,” says Noranda spokesman Dale Coffin. “We believe they need to be looking out for the best interest of shareholders at this time and we fail to see how denying us the opportunity to assess the company’s true value fulfils that obligation.”

For Rio’s part, Vice-President Corey Copeland says Noranda’s hostile approach, by definition, forgoes the opportunity for due diligence: “So [our response] was just a function of the approach Noranda chose to take in the first place.”

On Aug. 25, just days after Noranda announced its intentions, Billiton announced its own intentions to offer $27 apiece for all of Rio’s 60.6 million shares outstanding. The $1.7-billion offer concluded weeks of negotiations and trumped Noranda’s bid by $200 million. By that time, Noranda had acquired 8.9% of Rio’s equity on the open market.

According to its agreement with Billiton, Rio is prevented from disclosing non-public information unless it receives a better proposal. In other words, Noranda, or any other party, must first table such a proposal before it can see the books. However, Billiton may view any such proposal and need only match it.