Deak Res. set to acquire old MacDonald zinc mine

Intermittent squabbling between Noranda and the previous directors of its 49% joint venture partner MacDonald Mines (COATS) have convinced Noranda that the time is right to sell its interest.

But Toronto-based Deak must satisfy Noranda that it can assume responsibility for any pollution problems at the Dufresnoy Twp., open pit before the deal is completed.

While Noranda officials were reluctant to comment before a deal is signed, the company is concerned that it may be held responsible by the Quebec provincial government for any acid flowing out of the pit and into Lake Dufault.

Since low zinc prices forced Noranda to close the mine in late 1985, Noranda has been responsible for operating a filtration plant designed to purify water from the MacDonald open pit.

“They want to ensure that the new owner won’t expand their liability,” said Deak President Frank Smeenk. If Deak is successful in obtaining the necessary permits from the Quebec government, zinc reserves within the MacDonald deposit should ensure a feasible mining operation, he told The Northern Miner.

Reserves in the property’s open pit are estimated at 765,000 tons grading 6.67% zinc, 0.024 oz gold and 0.79 oz silver per ton. An additional 385,000 tons of underground reserves grading 7.19% zinc, 0.025 oz gold and 1.03 oz silver lies on the property. A lower level orebody also contains 261,000 tons of 6.55% zinc.

“If we can solve the environmental problems, we can get into production very quickly,” said Smeenk. He predicted that terms of the final agreement would make Deak operator with a 51% interest, MacDonald will hold 49%, while Noranda retains a 15% net profits interest. MacDonald may also merge with Les Mines Gallen, a private company set up by Noranda and MacDonald to hold their respective interests in the property.

If zinc prices remain at current levels (90 cents US per lb), and the property is brought into production within 15 months, Deak will contemplate building a 2,000-ton-per- day milling facility to process ore from MacDonald and its Hebecourt Twp., and Aldermac properties.

Like MacDonald, the Hebecourt (copper) and Aldermac (copper- zinc-silver) properties are located in the Rouyn-Noranda area and they are part of Deak Resources’ plan to become a diversified metals producer.

Hebecourt, contains 790,000 tons grading 2.7% copper while Aldermac hosts 1.15 million tons of grade 1.54% copper, 4.43% zinc, 0.91 oz silver and 0.014 oz gold.

Assuming the agreement is close it will be considered a major achievement by MacDonald President Milton Snow. A director of the company since 1981, Snow was around when his fellow directors were threatening to sue Noranda after it shut the operation down for the first time in 1982.

After the directors resigned in 1987, Snow was able to rally a new group of shareholders and rescue the company within a year. “We settled with our lawyers (owed money for previous work) and everything is back in place,” said Snow. “Shareholders will now be able to see what the property is really worth,” he said. Five MacDonald directors recently agreed to advance $50,000 to the company for working capital purposes.

The amount is secured by a promissory note convertible to units made up of one share and one warrant at 30 cents per unit. If regulatory approval is given, the warrants will be convertible to common shares at 35 cents each.

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