A recently completed agreement gives Varitech Resources (VSE) the right to earn a 100% interest in the Big Onion deposit, about nine miles east of Smithers, B.C. Varitech was halted at the 85 cents level prior to dissemination of the news on April 12 and was relisted on April 16, trading as high as $1.09 on over 200,000 shares.
The Big Onion deposit was drilled by a number of companies in the 1960s and 1970s resulting in preliminary estimates of reserves of 80-100 million tons grading 0.42% copper and 0.02% molybdenum. No gold or silver grades were calculated.
Varitech can earn the interest by paying a total of $4 million over a 4-year period as well as issuing 200,000 shares. The payments will be made in 6-month increments starting with the first payment of $100,000 and increasing by $100,000 increments up to $500,000. The payment remains at $500,000 until the final payment of $1 million.
The interest is subject to a 3% net smelter royalties which Varitech can purchase for an additional $5 million.
Canadian Superior Mining, the last operator on the property, twinned a number of percussion holes with diamond drill holes. As a result, the company estimates previous percussion drilling underestimated copper grades by about 50% which would boost the grade to over 0.60% copper.
Bradford Cooke, president of Varitech, said a large portion of the deposit could be leachable which would greatly improve project economics by eliminating a concentrator.
The deposit has a number of near-surface supergene zones where chalcopyrite and pyrite have been almost completely leached, and the copper redeposited in a higher grade zone of chalcocite and covellite.
The zone should be amenable to copper leaching and electrowinning at a significant capital and operating cost-saving to conventional grinding and flotation.
Cooke noted the supergene material could make up as much as 75% of the deposit’s reserves.
Varitech plans to complete a private placement in the near future to raise in the order of $500,000 for an initial exploration program.
The company plans to conduct further drilling to test the deposit’s grade, including assays for both gold and silver. Varitech also plans to conduct leachability tests on the material as well as test for extensions of the deposit which remains open to the north.
The deposit remains open to depth as well. Cooke said most of the percussion holes were drilled to only 300 ft. and remained in good-grade copper mineralization while the deeper (600-ft.) diamond drill holes bottomed in low-grade copper.
He also noted the deposit has very little overburden with most of the holes only encountering 40-80 ft., indicating the stripping ratio would be less than 1-to-1.
Cooke said the company plans to follow up the private placement with a public financing in the next few months to raise about $2 million.
Varitech has about 4.8 million shares outstanding and currently has no working capital.
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