Juniors, seniors form exploration ventures

Relations between junior and senior mining companies in Ontario couldn’t be better this year, as demonstrated by the number of exploration joint ventures under way on dozens of properties across the province. Since flow-through share financings have been made less attractive with the elimination of the Canadian Exploration Incentive Program, juniors have become more active in tapping into the resources of cash- rich senior companies which are eager to pick up encouraging gold properties for their exploration portfolios.

A typical joint venture arrangement between a senior and a junior mining company holds attractive advantages for both sides. The junior usually benefits from the senior’s technical expertise and credibility. While the senior partner’s reputation helps in raising capital for projects, it also ends up gaining control of a good property without assuming all the exploration risk by itself.

There are about as many different kinds of exploration joint venture agreements as there are junior companies. A brief look at some of the many exploration partnerships under way in Ontario reveals just how well these types of relationships are working this year.

Placer Dome (TSE), for instance, is experiencing a period of rapid global expansion with total exploration spending of about $60 million annually. Interestingly, the company has set a policy of becoming “the junior company’s partner of choice” in Canada.

In Ontario, Placer Dome is senior partner on an unusual 3-year exploration joint venture with junior Golden Crescent Resources (ASE). The deal is a little out of the ordinary because it calls for the junior company to spend $7 million in order to earn a 49% interest in 26 of Placer Dome’s exploration projects in Ontario.

So far, the Talbot Lake gold property, 62 miles northeast of Pickle Lake, Ont., has been receiving the most drilling — about 26,000 ft. in 47 holes.

The senior company also has the right to back into Golden Crescent’s properties in the Swastika/Kirkland Lake area. Shares of Golden Crescent have traded recently at around $1.75, up from a level of around 50cents when the deal was first struck last spring.

At Metalore Resources’ (TSE) Brookbank gold project in northwestern Ontario, Placer Dome is in another 33-month deal, calling for expenditures of up to $7 million to earn a 50% interest in the property. Three drills have completed more than 35,000 ft. of drilling in the first phase of that agreement. A lawsuit between Metalore and minority interest holder Ontex Resources (ASE) still overhangs the project, however.

Toronto-based Noranda (TSE), along with 50% owned subsidiary Hemlo Gold Mines (TSE), is beefing up its exposure to gold projects in the light of rising prices. Also, Noranda has several key exploration joint ventures in Ontario with junior companies like Central Crude (TSE), Akiko-Lori Gold Resources (VSE), Freewest Resources (ME) and Mishibishu Gold (VSE), to mention only a few.

Hemlo Gold has an exploration budget of some $15 million for grassroots projects in 1990, of which nearly half is in the process of being allocated.

In northeastern Ontario, a potential 2.5-million-ton gold deposit grading around 0.20 oz. gold per ton is shaping up on a Noranda joint venture involving Freewest Resources and Teddy Bear Valley Mines (COATS). That project is in Harker and Holloway twps., near Matheson, Ont. Noranda has tied up virtually all the ground along strike of the deposit by making a separate joint venture deal with Canamax Resources (TSE).

Meanwhile, Noranda is in an intriguing 50/50 joint venture deal with Akiko-Lori Gold, a Murray Pezim company, which could see $20 million spent on exploring the Springpole gold project, optioned from Gold Fields Canadian Mining.

That precious metals property is in the Birch Lake area, about 70 miles east of the town of Red Lake, Ont. Three drills were used to complete a 14,000-ft. drilling program on the property this winter, and a $750,000 option payment is due by the end of March if the joint venture elects to continue with the project.

Shares of Akiko-Lori have traded at more than $5 on the play, nearly triple their price of $1.85 at the beginning of 1990. The joint venture can earn up to a 70% interest in the Springpole claims as part of a 7-year deal.

Farther south and closer to the Trans-Canada Highway, Noranda and Central Crude are busy exploring the Moss Lake gold property, 70 miles west of Thunder Bay. Two drills are active there. The property is under option from Tandem Resources (ME) and Storimin Exploration (ASE). Under terms of that agreement, Central Crude must spend $4 million over a 5-year period to earn a 51% interest in the deposit. Noranda affiliate Hemlo Gold Mines holds a controlling 41.2% interest in Central Crude.

At the 60/40 Eagle River joint venture of Hemlo Gold and Central Crude in the Mishibishu Lake area near Wawa, Ont., underground work costing nearly $19 million is being completed and a production decision could be made by September.

About 30 miles west of Kenora, there is another promising joint venture exploration project for gold between Bond International Gold (TSE) — now 65% controlled by LAC Minerals (TSE) — and junior Kenora Prospectors and Miners (COATS). The 50/50 Shoal Lake joint venture, operated by Bond, has already outlined a deposit with preliminary estimates of reserves of 850,000 tons grading 0.35 oz. gold per ton. Last December, however, KPM launched a legal action against Bond for breach of contract on the project. LAC backed out of a promising underground exploration program for gold in Garrison Twp., near Matheson, Ont., with juniors Jonpol Explorations (TSE) and T&H Resources (TSE). Results are being compiled from that underground exploration work.

At the western end of the province, in the Red Lake mining camp, Inco (TSE) is still exploring the economic potential of underground gold reserves remaining in the past- producing Cochenour-Willans mine. That work is part of a joint venture involving Pronto Explorations (TSE), which holds a 12.5% indirect interest in the project, and Wilanour Resources (TSE) with 30%. Inco has a 50% interest and is operator of the joint venture, where more than 56,000 ft. of drilling have been completed as part of a $4.7-million underground and surface exploration program.