Cassiar committed to McDame asbestos mine

Asbestos producers have faced numerous difficulties over the years including Cassiar Mining (TSE) whose product quality is one of the highest in the world. In terms of usage its fibre is also among the safest which, in part, explains why Cassiar is making a major financial commitment to develop its McDame deposit near Cassiar, B.C. (N.M., March 28/88).

Although North American demand for Cassiar’s asbestos output has dropped by about two- thirds in the past seven years, there has been “a big expansion in South America and the Middle East,” James O’Rourke, president, told The Northern Miner. But he emphasized this didn’t happen by accident; rather, it resulted from “market diversification on Cassiar’s part.”

Since taking control of Cassiar last year, O’Rourke and his fellow board members have moved decisively to market the company’s asbestos products and develop a workable game plan for the future. O’Rourke even made a trip to India to reassure customers there that Cassiar would continue to supply asbestos to them, albeit from the new McDame deposit. It will eventually replace the company’s existing open pit mining operation.

A seasoned mining engineer with a keen interest in new investment opportunities, O’Rourke’s “hands on” management style is a refreshing change from that of many of his contemporaries. And his expectations that the Cassiar mining operation will be around for a long time are certainly not unfounded.

McDame tops the company’s list of priorities and he conceded the key to the project “will be the strengthening of our team with specialists in underground block cave mining methods.” Indeed, the company has already hired several technical people from a former asbestos producer in Quebec which employed the same mining method and operated at an almost identical rate to that proposed for McDame.

O’Rourke said that 1987 fibre production was the highest in six years and totalled some 96,014 tonnes. “Increased market penetration without further price erosion has provided the needed market confidence to support the McDame development decision,” he added. In certain product lines, the company has not ruled out price increases in the coming year.

Bidding is under way for the underground development work which should cost about $24 million, he estimated. A conveyor system will be used to deliver underground ore to surface where it will be transported to the mill by an existing tram line. So the cost of the project will be minimal, certainly in comparison to a brand new mine which he claimed would cost about $200 million.

Development of McDame should begin this summer and the first production is expected in mid-1990 when reserves in the open pit will be exhausted. The government of British Columbia is playing a major role in the development, having agreed to loan Cassiar up to $25 million which will be repaid from cash flow. “Bank financing has been arranged for the balance of the required funds,” he noted.

The company began construction of a new wet milling pilot facility at the mine site in December. In this method, fibre is extracted from mine tailings by a gravity process. The federal government is sharing the cost of constructing and operating the test facility and O’Rourke confirmed that research “indicates this process will enhance recovery of fibre from the current operation, as well as provide an economic method for treating the tailings stockpile from prior operations.” This is lower quality fibre, however, which of course would command lower prices.

Cassiar reported 1987 net earnings of $3.7 million or 23 cents per share compared to a loss of $547,000 or 11 cents per share the previous year. A total of $9.8 million was applied to debt servicing, leaving a year-end balance of $27 million. (This debt load was one of the reasons Cassiar was unable to finance the project itself.)

At year-end accounts receivable totalled $14.9 million which “will increase cash available for further debt reduction,” he said.