Dickenson Mines plots new strategy for growth

A change in image is in the works for Dickenson Mines (TSE).

The Toronto-based company, incorporated in 1945, is known basically for its operation of the Arthur W. White gold mine near Red Lake in northwestern Ontario, in which it has a 66% interest.

Recently, the company started buying stock in Wharf Resources (TSE), which operates a producing heap leach mine in South Dakota, building its equity interest in the company to about 33% and along the way gaining control of Wharf’s board of directors.

It’s all part of a new, aggressive approach by Dickenson to join the “second tier” of North American mining companies which produce 100,000-250,000 oz gold per year.

“We want to develop Dickenson into a pure precious metals company,” President John Kachmar told The Northern Miner. “And we want Kam-Kotia to become an operating company in selective industrial minerals.”

Kam-Kotia Mines (TSE) is Dickenson’s major shareholder with a 33.7% voting interest. (Dickenson, in turn, holds the controlling interest in Kam-Kotia.) Known mainly as a holding company, Kam-Kotia, too, has taken on a new direction with the recent acquisition (for $12.5 million) of the sodium sulphate division of Saskatchewan Minerals.

In addition to the White mine, Dickenson operates the Silvana silver-lead-zinc mine in southern British Columbia and the Havelock Lime Works (lime and limestone products) near Moncton, N.B.

If commercially beneficial to Dickenson and Kam-Kotia, Havelock could be spun off into Kam- Kotia, Kachmar said. White mine production

Last year the White mine, operated with partner Cambior Inc. (TSE) and located next to the Placer Dome (TSE) (formerly Campbell Red Lake) mine, produced 63,800 oz gold, of which Dickenson claimed 41,600 oz. This year the White mine is expected to produce 80,000 oz and the Wharf mine 53,000 oz, for a total of 133,000 oz, of which Dickenson’s share will be about 70,200 oz.

While Dickenson now controls Wharf, it might seem more to the former’s advantage to take over the smaller company completely, an idea not rejected out-of-hand by Kachmar. “We’ll examine the possible business combination of the two companies,” he said, suggesting Wharf would become a subsidiary (instead of an equity holding) of Dickenson if such a development took place.

The open-pit mine in South Dakota, which produced 46,000 oz in 1987 at an operating cost of $189(US) per oz, has proven and possible reserves of 24 million tons grading 0.04 oz gold per ton, Kachmar said. “I view it as a small Round Mountain,” he said in reference to the Nevada gold project of Echo Bay Mines (TSE). Talks with Cambior

As befitting its new image, Dickenson has approached Cambior with regards to buying the latter’s 34% interest in the White mine. “We’re certainly interested in acquiring that. We made an offer; we’re discussing it,” Kachmar said of the holdings which came into Cambior’s possession when the Quebec-based firm swallowed Sullivan Mines in 1987.

Dickenson saw its net earnings increase to $6.4 million in 1987 compared with $4.59 million in 1986, but output at the White mine dropped last year by about 4,000 oz. A month-long strike by workers and a shortage of skilled miners contributed to the production decline, the company said, as did lower millhead grades.

The popularity of flow-through financing by mining firms for exploration programs “has soaked up a lot of skilled miners,” Kachmar said. Dickenson came to grips with the problem at mid-year, he said, and by the end of 1987, the company had 35 trainees in the system.

Ore milled at the White mine increased slightly last year to 242,000 tons from 1986 but the average grade fell to 0.29 oz from 0.32 oz, a drop attributed to higher production from lower grade mechanized stopes. The operating cost also rose, to $321(US) per oz. Increased productivity

Mindful of the need to cut costs, Kachmar said a production figure of $285 has been targeted for 1988, and $270 for 1989. The company is hoping to increase productivity this year, he said, through a more experienced work force and by performing more of its own work rather than contracting it out. The company is also counting on 12 months’ production in 1988 and is expecting significantly higher gold output both this year and in 1989.

Kachmar said the company is gearing up for a production rate of 1,000 tons per day by the end of 1988 and has plans to increase the number of stopes, or work places, from 19 to more than 30. Scheduled for the year is some 14,000 ft of development footage and 72,000 ft of diamond drilling.

At the end of 1987, Dickenson calculated it had proven and probable reserves at the White mine of 3.3 million tons grading 0.32 oz. Underground drilling continues in earnest and, according to D. J. Libby, vice-president operations, indications are the grade is picking up at depth. Mine life

The White mine has been in operation since 1948 and has produced about 2.5 million oz gold during the past 40 years. While no one knows for sure, Liddy feels certain the mine has at least 30 more years of production ahead of it. To date, some 5.3 million tons of ore have been pulled out of the mine at an average grade close to 0.5 oz, he said.

Besides Kachmar and Liddy, the company’s senior officers are James Geddes, vice-president administration and secretary, R. E. Van Tassell, vice-president exploration, and R. H. Gibson, treasurer. Chairman is R. P. Douglas.

A native of Alberta and an accountant by profession, Kachmar, 51, has been involved in the Canadian mining industry for 25 years, working previously for Falconbridge Ltd. (TSE) and Cominco Ltd. (TSE). He was Dickenson’s vice-president finance before assuming the presidency in 1987 following the death of P. L. Munro.

Dickenson’s exploration arm, Goldquest Exploration (TSE), is active in the Red Lake area and also in the Matheson area of northeastern Ontario.

Making the news last year through equity purchases (under 10%) in both Dickenson and Kam-Kotia was Pamour Inc. (TSE), the Toronto- based, Australian-controlled mining company which let it be known it was seeking representation on Dickenson’s board of directors.

Kachmar said the slate of directors to be presented April 28 at Dickenson’s annual meeting contains no representation by Pamour. “We’re happy with the proposed slate and we don’t propose to make any changes,” he said.

Bound for Europe this month, and Boston and Montreal, on a journey “to tell the new Dickenson story” to institutional players, are company officers, Kachmar said.