More study ordered for part-time garnet mine

The British Columbia government is calling for additional study on the Crystal Peak garnet project before a permitting decision is made.

Anne Edwards, energy and mines minister, and John Cashore, minister of environment, lands and parks, announced the studies in response to concerns expressed in last fall’s round of public consultation.

Polestar Exploration (VSE) and Hawkeye Developments (VSE) hope to develop a garnet quarry near the Apex alpine ski area in southern British Columbia, but have encountered considerable opposition from local interest groups. The study will be managed by an independent facilitator, Ken Youdo, in conjunction with Ken Peterson, a resource economist, who will carry out an economic analysis.

Planned studies include a review of garnet markets and local garnet sources, a benefit/cost evaluation including potential impacts on environment and tourism, as well as studies to further mitigate the impact of the project. Cashore stated that the issue boils down to a question of whether Polestar’s quarrying operations can co-exist with recreation businesses and values. He added that more study is needed to resolve the issue.

The companies’ plans involve quarrying about 75,000 tonnes of garnet during a 6-week period in the spring of each year after the end of the ski season. The garnet would be stockpiled and milled throughout the year at a processing facility outside the recreation area. Production is estimated at 60,000 tonnes per year of clean garnet which will be trucked to markets throughout western North America.

Hawkeye is not holding its breath waiting for approval on Crystal Peak. Joe Whipple, president of the company, said the company is taking a “wait and see attitude” on the government’s study while it forges ahead with operations at its Emerald Creek garnet operation in Idaho.

The company bought the U.S. operation late last year for US$2.5 million. Whipple said production last year was about 30,000 tonnes and the company hopes to increase production to an annualized rate of about 60,000 tonnes by the end of this year.

Whipple declined to make cash flow projections for this year or next, although he did say profit margins are in the order of 45% while overall prices for the quarry’s product average about US$157 per tonne. The company is concentrating on high-end markets for its product, particularly the filtration industry and for use in water-jet cutting. As a result, Whipple expects his average price to increase to the US$185-per-tonne-level.

Hawkeye signed an agreement with Flow International (NASDAQ) in February for a worldwide sales and distribution agreement for the water-jet grade garnet. Flow is billed as the world’s leading manufacturer of ultra high-pressure water jets for industrial cutting and cleaning.

The company’s activities have lit a fire under its stock price. Since the beginning of the year, the issue has risen from the $3 level to a high of $9 before settling at its recent price of about $8.

With the conversion of debentures at $1.10 per share, Hawkeye has about 10.5 million shares outstanding, giving it a market capitalization of about $84 million.