Favourable drill results from the Pogo gold project in central Alaska have induced operators to expand the program by 20,000 ft.
The project is a joint venture between
The company has completed the initial phase of this summer’s surface drilling program, which consisted of 25,000 ft. The program consisted mostly of definition drilling but included some stepouts to the southeast. Teck says the results demonstrate internal continuity of the Liesse L1 and L2 zones, as well as an extension to the southeast.
In a conference call, President Norman Keevil told analysts he expects the drill results will expand the resource base.
In the meantime, the underground exploration program is progressing. Operators are driving a 5,200-ft. adit under Pogo Ridge to intersect the main L1 zone, the objectives being to obtain geotechnical data, confirm the continuity of the body and obtain a bulk sample for metallurgical testing. The adit is expected to be into the ore by October; at last report, it had been driven a distance of 800 ft.
The Liesse deposit is characterized by a series of large, tabular, gently dipping subparallel quartz bodies. Liesse is divided into the main L1 zone and a lower zone called L2. The two zones are spaced about 500 ft. apart. The bodies range in thickness from 1 to more than 70 ft., averaging about 20 ft. The main L1 zone is 4,500 ft. long and 2,000 ft. wide, and remains open to the southeast and northwest. Parts of L1 are within 350 ft. of surface.
The L1 and L2 zones are conservatively estimated to contain a resource of 10 million tons grading 0.52 oz. gold per ton, equivalent to 5.2 million contained ounces.
Fred Daley, vice-president of exploration, says most of the 20,000 ft. of additional drilling will target the southeastern extension of the L1 and L2 zone as a follow-up to some encouraging intercepts recorded along the perimeter. Some 3,000-4,000 ft. of drilling will also test mineralization that appears to extend north of the existing L1 zone across Liesse Creek. A smaller amount of footage is planned even farther north at what is tentatively called the North zone.
Daley says a structure running parallel to Liesse Creek appears to have dismembered the L1 zone and brought it closer to surface, moving to the north.
Teck has focused its drilling efforts on a limited 1-sq.-mile portion of the property, leaving 71 sq. miles unexplored. Last year, regional reconnaissance work identified an 8-mile-long trend of anomalous gold in rocks and soils extending to the southeast.
This year, a surface mapping and sampling program identified two potential zones of mineralization in the Sonora Creek area, 5 miles east of the Liesse deposit. Much of the analysis is not yet available, but work to date indicates a series of outcropping and subcropping veins similar in mineralogy to the Liesse deposit. Teck has traced the veins for several hundred feet in an east-west direction.
Daley says there is not a lot of outcrop but that sampling of the float material is showing encouraging values, including several values in excess of 1 oz. per ton. Geochemical sampling has defined a soil anomaly covering one or two ridges in Sonora Creek that has a “significant size to it,” with gold values in excess of 100 parts per billion. The joint venture has allocated a small amount of money to undertake a short drill program on priority targets later in the year. Daley expects to drill-test two or three of the best targets later this year.
Keevil said the Sonora Creek geochemical anomaly and surface showings are “substantially better than the original Liesse.” The Liesse deposit was discovered by a one-point geochemical anomaly that Teck now thinks may have nothing to do with the mineralized body, which is said to be quite deep.
A prefeasibility study is to be completed by the end of the third quarter, and this will be used in the permitting stage.
During the past quarter, Steven Dean, who had been chief executive officer of PacMin, was appointed to the new position of president and chief executive officer of Teck’s gold division. This unit includes the company’s interest in the the Williams and David Bell mines in Hemlo, Ont., the Tarmoola mine and the Carosue Dam project, which are held through Teck’s 80%-owned Australian subsidiary PacMin Mining, and the Pogo project, plus several other properties with indicated gold resources.
Teck is currently producing about 500,000 oz. gold on an annual basis, and, following the completion of various development projects, this could increase to 750,000 oz.
Teck posted a second-quarter loss of $2.3 million (or 3 cents per share) on sales revenue of $137.4 million, compared with earnings of $3.1 million (3 cents per share) on sales of $171 million in the corresponding period last year.
Operating cash flow was $25 million, versus $35 million in the same period a year ago. Second-quarter results were hampered by low metal prices and low coal sales.
Working capital at June 30 was $374 million, including $318 million in cash. Long-term debt, excluding the Inco-related exchangeable debentures, was $442 million, or 20% of total capitalization.
During the quarter, Teck acquired an additional 4.9 million shares of Cominco at an average price of $20.40 per share, boosting its current stake to 40.4%.
Gold production in the second quarter was 133,000 oz., compared with 112,000 oz. a year ago. The Tarmoola mine in Western Australia accounted for 54,000 of those ounces at a cash cost of US$196 per oz., versus a year-ago cost of US$237 per oz. The two Hemlo mines produced 76,000 oz. at US$197 per oz. in the recent quarter, which was little-changed from a year ago.
During the second quarter of 1999, Teck realized a gold price of US$324 per oz.
Coal operations continued to be affected by lower prices and lower sales volumes as a result of cutbacks in the Japanese steel industry. Cash operating profits in the second quarter were $2.6 million, compared with $11.6 million a year earlier. Production rates at the Elkview and the 61%-owned Bullmoose mines in British Columbia were cut back significantly in response to high port inventory levels. Bullmoose produced 143,000 tonnes during the recent 3-month period; Elkview, 445,000 tonnes — down substantially from 281,000 tonnes and 883,000 tonnes, respectively, a year ago.
The economics at Bullmoose are expected to improve over the next three years, as the stripping ratio falls to 2-to-1 from 6.2-to-1.
Copper production in the quarter totalled 27 million lbs., compared with 31 million lbs. a year ago. The decline is due to the shutdown at the Highland Valley mine in southern British Columbia. Teck realized a copper price was US77 cents per lb. during the period.
Financing of the Antamina zinc-copper project in Peru concluded with the signing of a definitive agreement in late June for US$1.32 billion of the project’s anticipated US$2.35 billion in capital costs. Closing of the financing and the first drawdown is scheduled for September. Up to June 30, Teck had advanced $159 million toward the project, out of a total projected investment of $335 million. This will increase to about $175 million by the time of the drawdown.
Mitsubishi of Japan has agreed to acquire a 10% interest in the project from the partners, subject to certain conditions, including the closing of project financing. This will leave
Meanwhile, at the Carosue Dam project, 110 km northeast of Kalgoorlie, Teck’s 80%-owned subsidiary, PacMin Mining, completed 35,000 metres of drilling and announced an upgrade in the resource to an indicated and inferred 2.2 million ounces contained in 40 million tonnes grading 1.7 grams gold per tonne. This
represents an 84% increase in contained ounces over the previous estimate.
A probable reserve is defined in three deposits for a total of 16.5 million tonnes grading 1.96 grams, equivalent to just over 1 million contained ounces. Teck is proceeding with a comprehensive bankable feasibility study.
The prefeasibility study shows economic potential for a stand-alone 1.5-to-2-million-tonne-per-year carbon-in-pulp plant that would produce an annual 120,000-150,000 oz. gold over a mine life of 8-10 years.
Infill drilling has identified previously unrecognized supergene gold in the laterites overlying parts of the deposits. This supergene mineralization occurs as shallow as 10 metres from surface. Capital costs are projected at US$23 million.
At the El Salvador base metal project in Mexico’s Zacatecas state, Teck is conducting additional ground geophysics and mapping on targets outside of the San Nicolas deposit. Four or five geophysical anomalies have been drill-tested but no significant base metal mineralization was encountered. Teck is also compiling geological information for the Villa de Ramos concession in an attempt to outline exploration targets, which will likely be tested next year.
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