El Condor raises funds for work on Kemess development program

In order to finance what is being touted as “Canada’s largest development program,” El Condor

Resources (VSE) recently completed an 800,000-unit financing for ongoing exploration of the Kemess copper-gold project in north-central British Columbia.

The units are priced at $2.75 each and include a share plus a share-purchase warrant. The warrant gives the holder the right to purchase one additional share at $2.75 for the first year, increasing to $3.03 per share in the second year.

Management and directors of the company agreed to subscribe for 500,000 of the units which will be designated as flow-through for income tax purposes. El Condor, along with 40% partner St. Philips Resources (VSE), plan to begin drilling shortly on the South Kemess property to test the extent of a copper-gold porphyry system discovered last year. The mineralization covers an area measuring about 1,300×1,600 ft., extends to depths ranging up to 700 ft. and is open in all directions.

Preliminary estimates of reserves put the total at about 78 million tons grading 0.3% copper and 0.018 oz. gold per ton.

El Condor also owns a 100% interest in the adjacent North Kemess claims which are estimated to contain in the order of 84 million tons grading 0.16% copper and 0.010 oz. gold. The estimate is based on a limited amount of reconnaissance drilling and the company is confident that this reserve will increase substantially with further drilling.

Douglas Hurst, a mining analyst at McDermid St. Lawrence, noted that the current size of the Kemess deposits are not yet large enough to support a mining operation. But he added that should the property live up to promotional expectations, it will have the potential to host a larger deposit. Following the recent merger with Covenant Resources, El Condor’s management team includes Robert Hunter and Robert Dickinson, two of the former principals of Continental Gold. The two hope to repeat the success achieved at Continental when that company and its large Mt. Milligan copper-gold property were taken over by Placer Dome (TSE).

Placer paid a total of $258 million for the property which at last report was estimated to contain 330 million tons grading 0.75% copper-equivalent at a 0.4% copper-equivalent cutoff.

Hurst also pointed out that results from Placer’s feasibility study on Mt. Milligan are expected by year-end and may affect the general opinion with regard to the economics of mining these types of deposits.

In addition to their involvement with El Condor, Hunter and Dickinson are in the process of attracting buyers for Taseko Mines (VSE). The two took over management of the company earlier this year and recently appointed Goepel Shields & Partners as financial advisers to the company.

Taseko controls the Fish Lake copper-gold property near Williams Lake, B.C. At a 0.4% copper-equivalent cutoff grade, the Fish Lake deposit contains an estimated 362 million tons grading 0.23% copper and 0.013 oz. gold per ton at a strip ratio of 1.5-to-1.

In a recently released research report, L.O.M. Western Securities estimates the deposit has a pretax discounted cash flow (at a 10% rate) of about $55 million based on a copper price of US$1 per lb. and a gold price of US$375 per oz.

The estimate uses an operating rate of about 22 million tons per year to produce about 230,000 tons of copper concentrate containing 94 million lb. copper and 215,000 oz. gold over a 16-year mine life beginning in 1995. The report estimated capital cost of the project at about $400 million, and a cash operating cost of $3.85 per ton.

Under a recently completed agreement with Cominco (TSE), Taseko retains management of the property until May 31, 1994, after which the property reverts to Cominco with Taseko retaining a 20% net profits interest. If Taseko manages to attract a buyer for the deposit, the sale price will be split between the two companies. If the price is $60 million or under, Cominco will receive $20 million. At a value of $60-70 million, Cominco will receive $20 million plus 80% of the value exceeding $60 million. At a sale price in excess of $70 million, Cominco will receive 40% to a maximum of $48 million.