Continental Mt Milligan

According to Dickinson, these reserves now stand at 134 million tons grading 0.3% copper and 0.025 oz gold. He is confident that the grades would stand despite the wide-spaced nature of the drilling (generally 100 m centres) and the unusually high gold content for a British Columbia porphyry deposit.

These reserves are in the MBX and 66 zones over a north-south distance of 2,300 ft and an east-west dimension of 2,000 ft in the MBX, and 650 ft in the higher grade portion of the 66 zone, he said. The 66 zone is a large, disseminated gold zone which seems to have a stratigraphic control and a higher grade core. He suggested reserves here could be about 35 million tons. Dickinson expected a pre-feasibility study to begin in the next few months at which time an independent audit of reserves would be completed.

Continental’s immediate plans are to outline the rough extent of at least three deposits that occur within a massive doughnut-shaped sulphide system measuring two miles in circumference.

Dickinson said that BP Resources Canada, its 30% participating partner, is using the Ridgeway project in South Carolina as a mine model. Operated by BP America, Ridgeway is a conventional low grade gold project with a reserve grade averaging 0.03 oz over mine life, roughly the gold grade projected for Mt. Milligan by Continental. Although engineering is strictly conceptual, the company would look seriously at taking out higher grade, near-surface material in the early years.

Preliminary feasibility work has yet to begin, but Dickenson said that project economics look favorable at 25,000 tons per day or nine million tons per year, assuming a number of factors fall into place. Not the least of these are grade estimates and metal recoveries.

Metallurgical test work (cyanidation and flotation) on composite samples from drill core in the MBX and 66 zones yielded recoveries of 94.7% for gold and 91.6% for copper, he noted — exceptionally high by industry standards. (Initial metallurgical test results are based on composite samples from 32 lb of drill core which the company has applied to the drill indicated reserves). (Porphyry copper deposits with comparable grades in B.C. don’t fare quite as well. The head grade at Teck’s Afton mine last year was 0.32% copper and the recovery rate was 68%. Placer’s Gibraltar mine had the same grade but recoveries of 78.6%. There is generally a direct relationship between grade and recoveries: The lower the grade, the lower the recoveries.)

If the West Breccia and MBX zones join together to the north, Dickinson suggested the throughput could increase significantly. Also, a good geochemical anomaly exists to the south which the company would like to follow up with an induced polarization survey. This extends, at present, some 5,000 ft south from where they are presently drilling.

Most of the sulphide mineralization in these zones occurs in volcanics around a relatively small stock or intrusive. Continental said the mineralization is disseminated and contains no silica, suggesting a reasonable work index.

In determining the economics of porphyry deposits, industry sources emphasize the need to be near infrastructure such as power, a railway, and a community to house mine staff. Mt. Milligan is located reasonably well, about an hour’s drive (35 miles) from Mackenzie which has a rail line and power.

These type of deposits also need an extremely large reserve base to benefit from economies of scale and, under ideal circumstances, it should take no more than two metal cycles for the mine to recover its capital.

One metals analyst said such deposits should have a smaller, high grade reserve to ensure a rapid payback, but he cautioned that in many cases it is almost impossible to selectively mine the higher grade areas. Citing the high capital investment for these projects, the analyst insisted the economics must be done “on a very conservative basis.”

Another highly placed executive used the Highland Valley copper project in British Columbia (owned by Cominco, Rio Algom and Teck Corp.) as an example of what it would cost to develop a new porphyry copper deposit from scratch. He said developing the project as a single mine/milling operation today would require a high level of confidence that copper prices would remain above $1.25(US) per lb. Some companies are using $1 per lb but at least one analyst said 90 cents or lower was probably more realistic.

A number of undeveloped deposits remain in British Columbia, the largest of which is Teck’s Schaft Creek deposit, 200 miles north of Stewart. That deposit is about one billion tons, averaging 0.3% copper, 0.034% molybdenum, 0.004 oz gold and minor silver, but it is remote from any infrastructure. Cominco Ltd. (TSE) and Taseko Mines (VSE) have a better located, 210-million-tonne porphyry deposit 100 miles west of Clinton, B.C. It averages 0.24% copper, 0.015 oz gold, and 0.033 oz silver and has been known for more than a decade. Imperial Metals (TSE) and Corona Corp. (TSE) have a 61.6% and 38.4% interest respectively in the Mount Polley copper/ gold deposit, 35 miles northeast of Williams Lake. That deposit grades 0.44% copper and 0.017 oz gold, is accessible by paved road and has additional reserve potential.

Another executive noted that grindability was a major factor in the success of Placer Dome’s Gibraltar mine at Williams Lake where power consumption is lower than other producers in the province.

Dickinson said that Continental is for sale “at the right price.” On a fully diluted basis at today’s market price, a takeover of Continental would cost about $48 million. That’s what it will cost to take a closer look at what the company is describing as a “world class” gold- copper deposit.

In the event a major company did step in to take control of Continental, this would be the second exploration and marketing success for Dickinson and Robert Hunter, past chairman of Breakwater Resources. They managed to sell the ir interest in North American Metals (VSE) to Homestake Mining for $5 share after demanding and obtaining an extra $1 per share.

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