Montana silver project owes its prospects to persistence

Big miners move mountains of ore and mountains of money, but they don’t make all of the discoveries. The small companies, the prospectors — they locate, explore and point the way for the big corporations to follow. Prospectors and small organizations have made a contribution out of all proportion to their size.

I like to count myself among those small operators because before the real growth of Pegasus (which was started by my wife and I and some friends back in 1971), I can remember writing personal checks for core-drilling at what are now the Zortman and Landusky mines. I also remember scraping up another few dollars for one more drill hole. And one more. And one more. * * *

I also know that if U.S. Borax hadn’t kept after a deposit under the Cabinet Mountains in Montana, between Libby and Thompson Falls, I wouldn’t be part of the Montana Project, probably the biggest silver mine in the world. On April 19 of this year, we were advised by the Montana Department of State Lands that our permit had been granted, allowing us to commence driving a 17.5×15-ft adit, 18,000 feet down to the heart of the deposit. Work should commence within six weeks.

This Montana Project is a joint venture. It’s a combination of American prospecting expertise, a Canadian operator and Montana labor.

The Montana Project is also — as one New York mining banker put it — “one of the greatest mineral discoveries of the twentieth century:” three hundred million ounces of silver — that’s 12.5 tons of silver — and two and a quarter billion pounds of copper. Calculate that out at today’s prices. It all adds up to a gross value near $5 billion. And the orebody is still open on two sides.

Currently, reserves are stated at 142 million tons of ore, grading an average 2.10 oz of silver per ton, and 0.8% copper. In addition there is a more than 25 million tons in a high-grade halo which grades up to six o unces of silver, and over 1% copper. Geologic indications are that the orebody may be twice the known size, giving the planned mine a potential life of 30 years or more, at a mining rate of seven million tons per year.

U.S. Borax discovered the orebody in 1984, just one mile from Asarco’s Rock Creek deposit of 143 million tons grading 0.68% copper and 1.65 oz silver, and about 12 miles south of the existing Troy mine which has successfully operated since 1981.

My partner, Harry Magnuson, and I were able to reach an agreement with U.S. Borax to buy their interests and, subsequently, their junior partners’ interests for a total of $94 million(US) — $74 million of that was cash. In September of last year, we entered into a joint venture agreement with Noranda. The resource development giant became project manager and 55% owner of the Montana project.

We are spending over $30 million in evaluation, design and permitting budgets in 1989 and 1990. That will be followed by an estimated additional investment of $200 million to build the mine and milling facilities.

Once in operation, we’ll extract 20,000 tons of ore per day. Annual production of silver will run 14 million oz and 100 million lb of copper in an average year. In the early years, mining is in the high-grade zone, and annual production is anticipated to be 24 million oz of silver and 140 million lb of copper.

These figures clearly identify the Montana Project as a world class ore body. This mine will be the world’s largest single producer of silver.

We’re planning to spend over $70 million a year in local mining costs in Stevens and Lincoln counties. There will be 450 new jobs, over $100 million in state and local taxes and $150 million in federal taxes over the first 15 years of production.

The project will utilize the underground room-and-pillar method, with primary crushing facilities underground as well. Our only surface presence is the mill — which is outside the wilderness area — and the tailings containment, which is well outside the wilderness boundary. Both sites will be completely reclaimed at the end of the mine’s life. Our design goals are to preserve the environment and have only beneficial impact on the quality of life of Sanders and Lincoln counties.

Both the state and federal governments understand the importance of the Montana Project, and appreciate the responsibility, sensitivity and experience of Noranda, the mine’s operator.

Noranda will run the mine for the venture. They’ve got 13 mines, representation in 65 countries and last year they topped $8 billion in sales.

Noranda also has some of the world’s cleanest, safest, most modern smelting operations. Copper and silver concentrates will all be smelted at Noranda facilities.

Over 15 million oz of silver will flow from that mine every year. Every 12 months 114 million lb of Montana copper will hit the world markets. Using silver as a $6-per-oz credit, the Montana Project will be able to produce copper at a total cost of 25 cents a lb, according to information published by Noranda. We will be one of the world’s lowest- cost producers.

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