Underground cheaper than pit at Kutcho: American reserve

A preliminary report on the Kutcho Creek copper-zinc massive sulphide property indicates the deposit could be mined using underground methods with lower capital and operating costs than an open pit operation. American Reserve Mining (VSE), 66% owner of the project, commissioned the report after environmental concerns were expressed over an open pit operation. An open pit would displace an estimated 90 million tons of potentially acid generating waste.

American Reserve purchased a 60% interest in the project, 100 km east of Dease Lake, B.C., from Homestake Mining (NYSE) in early February, 1990, in exchange for 870,000 common shares and $6.5 million in preferred shares.

The company has the right to earn an additional 20% in the property by spending $3 million. Homestake, in turn, has the right to redeem the preferred shares for a 30% interest which would result in a 50-50 joint venture.

The underground study, done by consultants Laxey Mining Services, is based on probable reserves on the Kutcho lens calculated by Homestake and pos-sible reserves on the Esso West lens estimated by Laxey.

At a cutoff grade of 1.8% copper-equivalent and a mining dilution of 23%, minable reserves total 14.3 million tonnes grading 1.76% copper, 2.54% zinc, plus 35 grams silver and 0.37 grams gold per tonne. About 80% of the total reserves are in the Kutcho lens.

The Kutcho lens dips at an average of 50

, is about 15 metres thick and extends over a vertical distance of 200 metres and a strike length of 1,320 metres.

Part of the Kutcho deposit extends on to ground owned by Sumitomo Metal Mining and would be included in any future mining venture. Sumitomo currently provides 50% of the engineering costs for the project.

The study estimates capital cost of the project at $120 million based on a 4,400-tonne-per-day operation with operating costs projected at $23.20 per tonne.

Capital cost for a 4,000-tonne-per-day open pit operations were estimated at $145 million with operating costs totalling $29.20 per tonne.

Carl Zuber, president of American Reserve,said the company planned to conduct further metallurgical testing budgeted at $500,000. It also plans to study the possibility of developing the deposit from the footwall rather than the hangingwall side.

He said the existing adit would be extended into the footwall and drifted to the east and west to test the competency of the rock.

Zuber said significant savings in both capital and operating costs could be realized if the test is successful. He added the company hopes to proceed with a final feasibility study following the 1991 program which is expected to take about six months to complete.

Although funding for the $2.35-million program is not yet in place, Zuber is confident work will begin within a few months.

As at Nov. 30, 1990, American Reserve had a working capital deficit of $963,000.