Canadian pair funds huge Montana deposit

There are a number of remarkable aspects of the Noxon silver- copper project in Montana where two junior Canadian companies, Jascan Resources and Atlantic Goldfields, are funding work to bring the property to the feasibility stage.

Some $10 million(US) has already been spent on the project by operator U.S. Borax and Chemical, a wholly-owned subsidiary of Rio Tinto-Zinc of London. About $2 million of that has come from the Canadian companies since entering the picture in mid-1987. More than 60,000 ft of drilling has been completed on the deposit.

Size is one of the stratabound deposit’s most remarkable features. Two ore zones measure about 8,400×1,800 ft with an average thickness of 33 ft. While grade is not as high as vein-type deposits such as those in Cobalt, Ont., or Idaho, drill indicated and inferred reserves at Noxon stand at 142 million tons grading 2.10 oz silver and 0.78% copper.

Borax’s northwestern regional manager exploration says reserves that would be mined in the first four years of operation are about 50% higher than the overall reserve grade; 3 oz silver and 1% copper. With recoveries in the 90-98% range, according to some metallurgical testing, that would indicate recovered mineral content at more than $30 per ton of ore based on 70 cents copper and $6.50 silver. Total operating costs including smelting and administration are estimated at $18 per ton.

The Noxon deposit underlies an officially designated wilderness area, enough to scare off many potential investors. But with the United States Forestry Service heralding development of the property with video-taped documentaries on how mineral development can co-exist with wilderness areas, concerns that environmental considerations might scuttle the project are greatly reduced. In fact, the deposit outcrops outside the wilderness area and, according to U.S. law, the deposit can be accessed from an adit outside the wilderness area.

The forestry service placed some unusual conditions on exploration work, however. Ironically, it was the forestry service’s restrictions that brought Jascan and Atlantic into the deal in the first place. The forestry service stipulated that all surface drilling be completed by the end of 1987. Borax only had a 1987 budget for the project of $700,000. So, Borax decided to joint venture the project and have the joint venture partners fund the work. Enter the two Canadian companies each with $3.5 million(US) raised in England through private placements. They put their combined $7 million in the bank for Borax, as operator, to use on the project as it needed and in return each of the junior companies gained a 22.5% interest.

Atlantic, in fact, had been established about a year earlier for the purpose of helping Jascan buy Borax’s gold interests. Jascan and Atlantic share key directors and are both part of the A.C.A. Howe group of companies. One of Atlantic’s directors is William Burton who was, until 1986, exploration manager for Borax responsible for eastern North America.

The balance of the money deposited by the Canadian companies, now down to $5 million, will go toward an initial environmental assessment study, bulk sampling for more metallurgical testing and a final feasibility study. Jascan President William Felderhof says the $5 million will carry the two companies for 18 months, but some additional funding may be required for the final feasibility study. The property is tentatively scheduled to be in production in 1991.

The Noxon property and another deposit one mile away called the Rock Creek deposit owned by Asarco, the largest silver producer in the U.S., are very similar to Asarco’s Troy mine 15 miles to the northwest. Recoverable reserves at the Troy mine are about 50 million tons grading 1.58 oz silver per ton and 0.76% copper. It has operated at about 10,000 tons per day to produce 4.42 million oz of silver and 20,000 tons of copper annually for the past five years.

Rock Creek has reserves of about 143 million tons grading slightly lower than the Noxon deposit. While the Rock Creek deposit has been fully delineated, the Noxon deposit is still open down dip.

The Troy mine, the Rock Creek deposit and the Noxon deposit are similar in that they are flat-lying, thick, stratabound deposits. The Troy mine uses room and pillar mining with low-cost, highly mechanized bulk mining methods, and a similar approach seems likely at the undeveloped deposits. Jascan says the Noxon deposit would likely handle a 20,000-ton-per-day opera tion.

Bulk mining will compensate for the relatively low silver grade of the deposits, but will mean a substantial capital cost probably of about $120 million.

While Jascan and Atlantic each have a 22.5% interest in the property, they will be required to each contribute 25% of necessary funds to maintain their 22.5% interests. Borax will also receive a management fee of 4.5% of operating costs.