Placer, Corona bid for Eskay while Musselwhite waits

As two of the country’s biggest gold producers, Corona (TSE) and Placer Dome (TSE), continue battling for control of the high-profile Eskay Creek gold discovery in northwestern British Columbia, the companies appear content to shelve another rich gold deposit they own in northwestern Ontario. Situated about 80 miles north of Pickle Lake, Ont., the Musselwhite property is held by a joint venture comprising Placer Dome (43%), Inco (32%) and Corona (25%). It hosts a number of gold deposits in a belt of iron formation and volcanic rocks, which have received considerable exploration over the past decade. The largest of the deposits outlined so far contains 7.4 million tons grading 0.20 oz. gold per ton.

But the old saying “one in the hand is worth two in the bush” doesn’t seem to apply when comparing Musselwhite to the rich Eskay Creek play in northwestern British Columbia. The latter prize has proven irresistible to Placer Dome, which recently went head to head with Corona to gain a major stake in the Eskay bet.

Back in Ontario, a major drawback to developing the Musselwhite deposit has been its remote location near Opapimiskan Lake, about 300 miles north of Thunder Bay, Ont. Neither Placer Dome (operator) nor Corona seems anxious to build a mine at Musselwhite until economic conditions improve. To date, a total of nearly $36 million has been invested in the Musselwhite project.

Between them, the two major companies already control most of Ontario’s largest gold mines in the Timmins, Hemlo and Red Lake camps.

Last year saw the completion of a $17-million underground exploration program, a $1.6-million surface drilling program and a feasibility study at Musselwhite. After completing that study, the partners said the potential $100-million mine would be postponed “because of the high cost of infrastructure and power related to the remote location of the project.”

They added that “economic conditions which could lead to a development decision will be monitored continually.”

Meanwhile, in British Columbia, the joint venture partners are now engaged a bidding war for control of the remote Eskay Creek gold deposit near Stewart. That high- grade deposit has been estimated to contain at least three million ounces of gold, but final minable reserve figures are still awaited.

This summer, a $12.5-million exploration program is being bankrolled by 50% owner and operator of the Eskay project, Prime Resources Group (VSE). An earlier phase of exploration was completed at Eskay Creek in May at a cost of $15 million.

Prime, estimated to be worth a market value of up to $487 million, would be a high-priced takeover target for either Placer Dome or Corona to swallow.

There is speculation that either Placer Dome or Corona will eventually wind up as operator of the Eskay Creek project, but observers predict the next stage in the drama will focus on negotiations between the two majors. The two already are joint venture partners at Musselwhite and on the Marigold mining project in the western U.S.

At last count, about 31% of Prime was owned by Corona, while another 14% was held by a group led by Prime’s Chairman Murray Pezim.

Adding another twist to the Eskay drama is Pezim’s current appearance at hearings before the British Columbia Securities Commission into allegations that he took advantage of assay results not disclosed to the public from Eskay Creek last summer.

The other half interest in the Eskay Creek property is owned by Stikine Resources (TSE), which in turn is 43% owned by Corona with Placer Dome holding a 45% stake.

The Eskay Creek deposit, while unique and high grade, is remote and located on a plateau surrounded by steep mountains where no road access is expected until the fall of 1991. The $20-million road is being funded by major companies and the provincial government.

The deposit still ranks well behind other large gold deposits owned by Placer Dome and Corona in other established mining camps of northern Ontario. Placer Dome’s Campbell mine, which last year produced 267,876 oz. gold at a cost of US$147 per oz., hosts reserves of 6.7 million tons grading 0.64 oz. gold per ton. Corona’s 50% owned Williams mine at Hemlo, Canada’s largest gold producer, contains reserves of 37 million tons grading 0.18 oz.

With exploration still continuing at Eskay Creek, it remains to be determined just how big the deposit will eventually be and how much it will cost to develop it.