Rio not funding Kemess work, partners consider alternatives

Partners St. Philips Resources (VSE) and El Condor Resources (VSE) are reviewing financing alternatives after Rio Algom announced it will not fund St. Philips’ portion of this year’s exploration costs on the South Kemess property.

The property is in the Toodoggone region of north-central British Columbia and is owned 60% by El Condor and 40% by St. Philips.

Rio already owns about 2.4 million shares of St. Philips and holds an option to purchase 1.26 million shares at $3 each plus an additional one million shares at $4 each.

El Condor is in the process of completing a $7.2-million financing through the issuance of 1.8 million units including a share plus half a warrant. As operator on the porphyry copper-gold project, El Condor plans to spend $10.5 million this year on further diamond drilling, bulk sampling, metallurgical testing and engineering studies.

St. Philips’ financing shortfall affects El Condor because, according to the joint venture agreement, St. Philips can stipulate maximum expenditures of $1 million per year on the property at its option. Alternatively, the spending limit could be increased if St. Philips can arrange backup financing or if El Condor funds St. Philips’ share through the purchase of treasury stock. El Condor reports that the two companies are now discussing various financing possibilities in order to expedite the proposed exploration program. Reserves on the South Kemess property were last reported at 228 million tons grading 0.23% copper and 0.019 oz. gold per ton at a copper-equivalent cutoff grade of 0.40%.

On El Condor’s wholly owned North Kemess property to the north, the company anticipates beginning an exploration program on July 1, including diamond drilling on four high priority copper-gold targets.