U.S. REPORT (August 05, 1991)

Following the completion of a 20,000-ft. drilling program earlier this year, RFC Resource Finance (TSE) reports a jump in reserves at its Pend Oreille zinc-lead project.

Preliminary estimates put reserves at 3.9 million tons grading 10.4% zinc and 1.7% lead, up from the previous estimate of 3.7 million tons grading 8.8% zinc and 1.9% lead. The change represents a 24% increase in contained zinc. The Pend Oreille property is in northeastern Washington state, about 50 miles southeast of the Trail lead-zinc smelter. RFC purchased the property and all the associated infrastructure in 1990 for US$1.25 million.

The Pend Oreille was first brought into production in 1906 and operated sporadically until an 800-ton-per-day mill was constructed in 1929. The mill was expanded in 1951 to handle 2,400 tons per day and operated continuously until 1977 when it was forced to close due to low metal prices. The operation mined in the order of 15 million tons of 4-5% zinc and 1% lead from the Josephine horizon, a gently dipping bed of zinc-lead mineralization ranging up to 100 ft. in thickness.

The old room and pillar workings in the Josephine are extensive, measuring about 8,000 ft. downdip and 4,000 ft. laterally. Ore was crushed underground and conveyed up an incline to surface.

Prior to closing, a parallel horizon of zinc-lead mineralization was discovered about 1,000 ft. below the Josephine. The horizon, known as the Yellowhead, hosts RFC’s current reserves.

The previous operator drove a decline from the lower Josephine workings to the zone and a limited amount of mining was done.

Raymond Dujardin, a director of RFC, estimates the company mined about 400,000 tons from the Yellowhead zone using the same mining methods employed in the Josephine. The Yellowhead is considerably thinner than the Josephine horizon, however, and as a result, dilution cut the grade to less than 4% zinc which proved uneconomic.

RFC optioned the property in 1988 and dewatered the old workings after conducting some surface drilling.

The recent drilling, conducted from the old Josephine working above, has identified the Yellowhead horizon over a downdip extent of over 5,000 ft. RFC has identified three connected zones in the Yellowhead, including the South, Central and the Northeast zones.

The Northeast zone, located the furthest downdip, is higher grade than the other two zones. A separate reserve calculation for the Northeast zone estimated preliminary reserves at 2.2 million tons grading 11.04% zinc and 1.2% lead. The zone has been traced over a downdip extent of about 2,000 ft., averages about 400 ft. in horizontal width and has an average thickness of about 13 ft.

The Northeast zone remains open downdip but further development work will be required before drilling can test the extent of the zone.

Dujardin said the current reserve in the Northeast zone is probably large enough to support a mining operation and further downdip drilling is not a priority.

RFC plans to extend the existing development in the Yellowhead zone an additional 2,000 ft. to reach the Northeast zone in order to determine the economics of mining the deposit.

The company plans to conduct a $6-million rights offering this fall to finance further work on the property.

A bullish outlook for nickel is coinciding with a recent decision by Cominco Resources International (TSE) to double production at its 50% owned Glenbrook nickel smelter in Riddle, Ore.

The remaining interest in the project is owned by Cominco (TSE), which also has a 64.6% equity interest in Cominco Resources.

The companies plan to purchase and import 800,000 tonnes (880,000 tons) of high-grade lateritic nickel ore per year from New Caledonia. This would boost nickel production to about three million pounds per month, from the current level of about 1.5 million lb. per month.

The company said this decision is based on “very favorable” results from a recent 20,000-tonne (22,000-ton) test-shipment of ore from New Caledonia, which is about 2.5 hours by air northeast of Brisbane, Australia. The test work led to an agreement for the purchase of the ore which will be shipped to Glenbrook’s port site in Coos Bay, Ore., where it will be dried and crushed before being trucked 85 miles to the smelter.

The project will involve capital expenditures of about US$30 million, with an additional US$12 million of working capital required. Interim financing will be provided by Cominco.

First-half earnings for Amax Gold (NYSE) jumped to US$15.5 million this year from US$5.5 million reported for the first six months of 1990.

The previous year’s results include a writedown of US$12.6 million in the company’s investment in Canamax Resources (TSE).

Revenue for the six months totalled US$69.3 million, compared with revenue of US$72.5 million in the first half of 1990.

Second-quarter earnings totalled US$7.5 million on sales of US$36.1 million. This compares with a loss of US$4.5 million in the second quarter of 1990 as a result of the writedown.

Gold production for the second quarter was 87,727 oz. at a cash cost of US$170 per oz.