Taseko retains Fish Lake deposit

Persistence appears to have paid off for Taseko Mines (VSE), a Vancouver-based junior that has been battling base metal giant Cominco (TSE) for the past six years to regain control of its Fish Lake copper-gold deposit near Williams Lake, B.C.

Preliminary estimates based on work by a previous operator place reserves on the property at about 201 million tons grading 0.24% copper, 0.015 oz. gold and 0.33 oz. silver per ton with a modest stripping ratio.

Cominco held an option to earn an 80% interest in the deposit by bringing it into production. Taseko was of the view that this option had lapsed because Cominco didn’t develop a mine, and it went to court to try and have the 1979 option agreement nullified. But Cominco argued that the project wasn’t economically viable, and the junior lost its suit and a recent (1990) appeal of that decision.

Taseko intended to continue its legal battle with Cominco by proving that the project is indeed economic at current metal prices. That would mean the major had not lived up to the terms of the option agreement. But a new turn of events began when Robert Dickinson and Robert Hunter of Mt. Milligan fame took over management of the junior earlier this year.

Rather than continue the fight in the law courts, the parties began negotiations. Driving a bargain with Cominco was probably no easy task, and the end result for Taseko was a rather complex agreement which essentially gives it the exclusive right to control the property for the next three years.

Should Taseko be the subject of a successful takeover bid or sell the property during this period, Taseko and Cominco agreed to divide the “project value” of the property.

For example, if the project value is $60 million or less, Cominco will receive $20 million. If it’s $60-70 million, the major will receive $20 million, plus 80% of the amount by which the project value exceeds $60 million. Cominco will receive 40% of the project value if it’s $70-$120 million, and if it exceeds the $120 million, the major will receive and be capped at $48 million.

Taseko also agreed to issue up to one million of its shares to Cominco on a staged basis. If there has been no takeover of Taseko or no sale of the property by May 31, 1994, the property will revert to Cominco with Taseko retaining a 20% net profits interest.

But Taseko will be granted a right of first refusal on any proposed sale of the property by Cominco for 2.5 years after May 31, 1994.

The Fish Lake property has been tested by 86,548 ft. of drilling in 168 holes. This work outlined a cylindrical-shaped deposit with an average diameter of 2,952 ft. and a depth of at least 1,804 ft. It is considered to be well located with respect to infrastructure and is amenable to bulk open pit mining techniques. Reserves are open for expansion. Taseko expects to release a complete technical update of the Fish Lake project shortly.