Global mining giants eye Quesnel Trough

British Columbia’s Quesnel Trough could see heightened exploration this year now that several international majors have taken an interest.  

Option deals have been announced between small B.C. juniors with projects in the area and heavyweights such as Xstrata (xta-l), Freeport-McMoRan Copper & Gold (FCX-N), Newmont Mining (NEM-N, NMC-T) and less recently, Gold Fields (GFI-N).

The Quesnel Trough runs northwest-southeast in central B.C., with Northgate Minerals‘ (NGX-T) Kemess gold-copper mine near the northern end and Imperial Metals‘ (III-T) Mt. Polley copper-gold mine near the southern. The geologic belt hosts several large tonnage copper-gold alkali-porphyry deposits, and is often covered by a blanket of glacial till with little outcrop.

The deals with the majors are relatively modest in size, but they still point to hard investments by companies absent from the province for some time.

“I can’t remember any other period in the last forty years where you had the largest companies in the world, instead of sniffing around like they often do, actually signing on the dotted line,” said Tom Schroeter, president and CEO of Fjordland Exploration (FEX-V). Fjordland and joint venture partner Cariboo Rose Resources (CRB-V) teamed up with Gold Fields in 2009 to explore the Woodjam North copper-gold project near the town of Horsefly.

“I think it’s another sign that this year is going to be a beautiful year for exploration,” Schroeter said.

The heightened interest comes as construction progresses at Thompson Creek Metals‘ (TCM-T, TC-N) Mt. Milligan copper-gold mine on the Quesnel Trough, the first metal mine to be built in the area in years.

AME BC president and CEO Gavin Dirom said the recent investments have happened partly because, over the last decade, the provincial government has been “consistently moving to incrementally improve policy so that it’s an attractive place to invest. The government is actually encouraging investment.”

The recent deals follow a familiar pattern and come at a fairly early stage. All see the big companies securing an initial 51% share of the project that can then be increased generally to 70% for what amounts to relatively little money for the majors, but could prove significant for the juniors.

Freeport-McMoRan recently struck a deal with Serengeti Resources (SIR-V) for its Tchentlo and Choo copper-gold properties in central B.C., which span 148.3 sq. km, sitting 15 to 45 km east of the Mt. Milligan project.

To earn 51% of the project, Freeport must spend US$5 million on exploration over four years and pay $230,000 in cash. Once earned, either company can elect to form a 51-49% joint venture, or if neither company chooses to do so, Freeport can earn an additional 19% by fully funding and completing a feasibility study on the project.

Strongbow Exploration (SBW-V) has entered into a deal with Xstrata for its Inza copper-gold property. Xstrata can earn 51% of the property by spending $1.1 million and paying Strongbow $100,000 in cash over four years. To earn a further 24% interest, Xstrata will have to complete a pre-feasibility and feasibility study, or spend $20 million working towards the studies.

The Inza property spans 61 sq. km and sits roughly 54 km northwest of Fort St. James and 40 km southwest of Mt. Milligan. Strongbow reports that it has identified a 1.1 km by 1.2 km, “drill-ready” copper-gold porphyry target on the property.

In April Tiex (TIX-V) announced it had completed an option agreement with Newmont on the junior’s 17-claim, 161.8-sq.-km Bullion property. The property is surrounded by Fjordland claims near the town of Horsefly, with the Mt. Polley mine roughly 40 km north.

The two-phase deal requires Newmont to spend $2.5 million on exploration and issue $370,000 in cash over 5 years to earn 51%, then spend another $7 million in exploration, or complete a positive feasibility study on the property to earn a further 24%.

Strongbow, Tiex and Serengeti all announced their deals within a week of each other near the end of April, while Gold Fields’ deal with Fjordland and Cariboo from two years ago has already resulted in extensive exploration.

Recent work at Woodjam North has centred on the Deerhorn zone. Recent results have included hole 11-32 that hit 207.5 metres grading 1 gram gold and 0.18% copper from 84 metres, hole 11-26 that cut 151.5 metres grading 0.83 gram gold and 0.21% copper from 140 metres downhole, and hole 11-30 that returned 160.3 metres carrying 1.03 grams gold and 0.25% copper from 65 metres.

Gold Fields has now moved the drill rig to the Woodjam South property that it optioned into last year. In the deal, Gold Fields can earn 70% of the 138.1-sq.-km property by spending US$15 million on the property over 7.5 years, subscribe to $500,000 worth of Fjordland and Cariboo shares, and complete a feasibility study on the project. The Woodjam North deal has Gold Fields earning 70% of the project by spending $19 million on the project and paying $350,000 cash. Both the Woodjam South and North deals have a first-phase 51% earn-in.

For 2011 Gold Fields has outlined a $6-million exploration program for the Woodjam North and South projects, while between 2009 and 2019 it spent roughly $7.5 million in exploration drilling 26,500 metres over 82 holes. Fjordland noted that the 2010 work was the third-largest mineral exploration drill program in B.C. that year.