Teck to go underground at Pogo

At the Pogo gold project in east-central Alaska, Teck (TEK-T) has completed a $5.5-million program of surface exploration consisting of 91,000 ft. of definition and stepout drilling in 97 core holes.

The net effect of the 1998 program is an increase in the geological resource to 5.2 million oz. contained in 10 million tons at an average grade of 0.52 oz. gold per ton, based on a cutoff grade of 0.1 oz. (The previous estimate was 4.5 million oz. contained in 11 million tons grading 0.41 oz.)

“We were able to increase the total number of ounces of gold contained in the resource by approximately 16%, even though the majority of the 1998 program was devoted to infill drilling,” says Moira Smith, senior geologist and exploration manager. “However, the 27% increase in the average grade should prove to be even more important, since it will have a direct impact on operating costs.”

Teck can earn a 40% interest in the project from Japan’s Sumitomo Group by spending US$28 million to produce a feasibility study by the end of 2000. Teck is responsible for the first US$33 million of capital costs.

The Pogo deposit is in the northwestern corner of the Stone Boy property, 150 km southeast of Fairbanks. The property is accessible by helicopter and small fixed-wing aircraft, with road travel limited to the winter months.

The deposit is characterized by a series of subparallel and tabular quartz vein zones hosted by Paleozoic gneisses. Pogo is divided into an upper and a lower zone. The upper is referred to as the Main Liese, or L1; the lower, as the Lower Liese, or L2. The Main Liese is 500 metres above the Lower Liese.

Most of this year’s drilling was directed at infilling a higher-grade section in the deposit’s core. The increased drill density confirmed the continuity of the two flat-lying lenses, while stepout drilling extended the veins, particularly to the southeast.

The Main Liese is estimated to contain a resource of 7.25 million tons grading 0.53 oz., equivalent to 3.8 million oz, whereas the Lower Liese hosts about 2.7 million tons grading 0.5 oz., equivalent to 1.4 million oz.

The deposit is still open to the southeast and the northwest. In addition, a possible third zone has been intersected by two deep drill holes 400 ft. below the Lower Liese. Hole 71, drilled last year, intercepted 42.7 ft. of 0.58 oz., whereas this year, hole 124, which was drilled 200 ft. from hole 71, cut 19.2 ft. of 0.75 oz.

In addition to further infill and stepout drilling, Teck intends to go underground at Pogo in 1999 with an adit, the purpose being to obtain geotechnical data, test the continuity of the veins for mining, and obtain a bulk sample for metallurgical testing. (The Main Liese comes within 350 ft. of surface.)

Engineering and environmental studies to support a feasibility study will be carried out.

During the recent third quarter, Teck earned $2 million (or 2 cents per share) on sales revenue of $186 million, compared with earnings of $16 million (17 cents per share) on $193 million in the corresponding period last year. Cash flow from operations was $35 million, up from $33 million in 1997, partly due to higher gold production.

Quarterly earnings were dragged down by losses of $5 million incurred by 35%-owned affiliate Cominco (CLT-T), compared with equity earnings of $11 million a year ago.

Teck produces gold, copper, zinc, lead, molybdenum, niobium, silver and metallurgical coal from working interests in 11 mines, nine of which are in Canada, one in Chile and one in Australia.

The company produced 120,788 oz. gold in the third quarter, up from 97,562 oz. a year ago. Combined output from its two mines in Hemlo, Ont., was 73,000 oz., comparable to year-ago levels. The Tarmoola open-pit mine in Australia, which has been fully consolidated since June, contributed 45,000 oz., compared with 18,000 oz. in the third quarter of 1997. Cash operating costs at all three mines were US$194 per oz, unchanged from a year ago. The average realized gold price was US$331 per oz. at the Hemlo mines and US$316 per oz. at Tarmoola.

The discovery of an area of gold mineralization in the eastern flank of the Tarmoola mine is expected to increase reserves. Follow-up drilling is planned. The minable reserve at the end of 1997 was estimated to be 20.1 million tonnes grading 2 grams gold per tonne, equivalent to 1.3 million contained ounces.

Teck will install a 2-stage crushing unit at Tarmoola to increase annual throughput to 3.2 million from 2.7 million tonnes. As a result, annual production is expected to increase to beyond 200,000 oz.

Copper production amounted to 32 million lbs. in the third quarter, compared with 31 million lbs. a year ago. The average realized copper price was US$0.79 per lb., compared with $1.06 per lb.

Coal production from the Elkview and Bullmoose mines in British Columbia totalled 1.1 million tonnes in the quarter — off only slightly from year-ago levels.

Meanwhile, Teck and partners Rio Algom (ROM-T) and Noranda (NOR-T) have reached an agreement with the Peruvian government to develop the Antamina copper-zinc project, in which Teck has a 25% interest. The partners have until June 6, 2002, to invest US$2.5 billion in the project or pay the Peruvian agency Centromin 30% of the difference between that amount and actual project expenditures.

Engineering work is in progress and the the construction contract is under negotiation with Bechtel. Project financing negotiations with a consortium of banks and export credit agencies are reported to be well-advanced.

Perched at an elevation of 4,200 metres, roughly 380 km north of Lima, the Antamina skarn deposit hosts an estimated open-pit resource of 500 million tonnes grading 1.2% copper, 1% zinc, 0.03% molybdenum and 12 grams silver per tonne. A further 500-million-tonne resource exists, at similar grades.

At a planned milling rate of 70,000 tonnes per day, the project is expected to produce 600 million lbs. copper and 360 million lbs. zinc annually over a 20-year mine life at projected cash costs averaging US40 cents per lb. copper, net of byproduct credits.

Farther north, in the central Mexican state of Zacatecas, Teck is conducting metallurgical testwork and a preliminary economic evaluation on the San Nicolas polymetallic massive sulphide deposit.

A preliminary reserve estimate for an open-pit model on the deposit totals 72 million tonnes grading 1.35% copper and 2.27% zinc, plus 0.53 gram gold and 30 grams silver, to a depth of 400 metres.

Geotechnical drilling suggests the life-of-mine stripping ration can be reduced to less than 5-to-1.

The deposit occupies part of the El Salvador project, a 55-45 joint venture between Teck and Western Copper Holdings (WTC-T). The partners recently announced a new silver find 5 km northeast of San Nicolas. A single vertical hole returned a near-surface intersection of 32.6 metres averaging 230 grams silver starting at a depth of 3.1 metres. Drilling is continuing on other exploration targets in the area.

Teck has 96.9 million shares outstanding and working capital of $275 million, including $205 million in cash. Long-term debt, excluding exchangeable debentures, is about $452 million.