San Andreas acquiring Hunt mine

Over a decade ago, silver speculators Nelson and William Hunt of Texas spent over $64 million to build a mine at Prairie Creek, a high-grade zinc-lead-silver-copper deposit about 300 miles west of Yellowknife, N.W.T.

The operation was about 90-95% complete and within months of startup when the Hunt brothers ran into financial problems and stopped advancing money. The property owner was then forced into bankruptcy, and the project was tied up in litigation until 1990 when a deal was made with creditors. Last summer San Andreas Resources (VSE) signed an agreement with the current owner to acquire up to a 100% interest in the property (less a 10% net profits interest) by spending $2.5 million, making cash payments of $1 million, and issuing 100,000 shares. The junior is headed by Peter Tsaparas, an engineer.

The acquisition includes a 1,200-ton-per-day capacity mill, tailings pond with a storage capacity of 7-8 years, service facilities, and a 3,000-ft. airstrip. The zone No. 3 deposit, described as a massive vein, contains reserves in all categories of two million tons grading 10.3% lead, 11.75% zinc, 0.42% copper and 5.3 oz. silver per ton. The mine has been developed underground on two levels by 4,000 ft. of drifting and 36 crosscuts. The zone is still open at depth, and at both ends along strike. Over 15 mineral occurrences have been identified on the 12-mile-long shear zone hosting the deposit, 12 of which are within the property boundaries. San Andreas plans to raise about $4 million to complete a 3-phase program. This will involve a cost analysis to complete the mine, mill and service facilities; update reserves to raise the confidence level; test for possible extensions to the main zone and other zones; and prepare an update to the 1980 Kilborn feasibility study which would include a financial analysis to bring the mine into production.

A preliminary estimate by Kilborn done last year estimates that capital costs to bring the mine into production would be about $8 million. The mine property can be reached by a 100-mile winter road, and studies were completed to improve it to an all-weather road.

A preliminary evaluation of project economics using current metal prices estimates operating (mining, milling, administration and transport) costs would be in the order of $117 per ton of ore milled to provide a net profit margin of about $50 per ton.