Cominco Res. seeks $40m. for offshore exploration

A final prospectus has been filed by Cominco Resources International which should raise about $40.2 million for exploration work on properties outside Canada, Alaska and Australia. The international offering by the subsidiary of Cominco Ltd. will involve 13.4 million units priced at $3 each.

The units will consist of one common share and a share purchase warrant which will be exercisable until May 26, 1990. Three warrants plus $2.75 will be needed to acquire an additional common share.

The units will be offered through Wood Gundy and First Marathon Securities in Canada with S. G. Warburg Securities and Wood Gundy Inc. as lead underwriters internationally.

Cominco will receive 19 million units in exchange for the transfer to Cominco Resources of various mineral holdings and related assets outside Canada, Alaska and Australia. In the end, Cominco will own 58.6% of Cominco Resources and the former emphasizes it “intends to maintain a majority position.”

Cominco’s international exploration activities have been severely restrained in recent years because of adverse financial conditions. According to O. E. Owens, vice- president exploration, staff cuts have curtailed many activities and Canada’s flow-through funding program is not available outside the country “nor is it as easy to arrange joint ventures under acceptable terms.”

The objective of the prospectus offering is to raise sufficient funds to advance 2-3 properties to a production decision and also provide several year’s capital for exploration, he notes. Exploration activities will be directed primarily at gold. In addition to the Buckhorn gold mine in Nevada, Cominco Resources will also acquire an interest in a large gold deposit in Chile. This will be ready for a production decision later this year, he adds.

Cominco’s Buckhorn mine was brought into production in 1984. At present, the open pit heap leach operation is treating 800,000 tons of ore per year and reserves are sufficient to last through 1988. “We are aggressively continuing the search for more ore to augment the present ore reserves,” he points out.

Cominco Resources holds a minority interest in the Marte project in Chile. Mr Owens says they presently see reserves of more than 22 million tons grading 0.04 oz gold, noting the deposit is well suited for open pit mining at a low stripping ratio. At a production rate of 3-4 million tons per year, the mine would produce 90,000 to 120,000 oz gold annually at a low unit cost; production would begin in 1989. The company has a 50% interest in the Lobo deposit approximately five miles away where 7.5 million tons have been outlined at a similar grade.

Discussing the Maria copper project in northern Mexico, Mr Owens confirms that economic studies have shown that a “small profitable mine can be put into production.” The upper portion of the Maria deposit grades more than 10% copper along with substantial molybdenum and silver values.”We are discussing with a major Mexican mining company, the development of a 300 ton-per-day operation, with the ore trucked for processing at their existing copper- molybdenum concentrator.”

No capital contribution would have to be provided by Cominco Resources as the Mexican partner would earn its 51% interest by developing the project.