Waterford linked to overstaking of Eskay claims

Speculation is growing that Waterford Resources (VSE) may have an inside track to acquire some disputed claims in the Eskay Creek region north of Stewart, B.C., possibly including ground overstaked by Ken McKenzie on behalf of a private company, Tagish Resources. Times may be tough for juniors these days, but that doesn’t appear to be the case for Vancouver-based Waterford. Since its initial public offering early this year, the company has seen its share price soar from 45 cents to a recent high of $2.80. In addition, the company recently announced a 1-million-unit brokered private placement for a price of 76 cents per share, with warrants for a further million shares at a similar price.

The company recently announced it was starting a first-phase work program to explore its key project, the Vine property near the Golden Bear gold mine in northwestern British Columbia. No results have yet been announced from the grassroots prospect, which suggests recent interest in the company may have something to do with its stated plans to acquire other properties.

In the company’s amended prospectus (dated May 10, 1990), it is noted that Waterford “is negotiating” to acquire mineral claims in the Eskay Creek area of northwestern British Columbia.

The prospectus also states that “the Eskay Creek claims overstake claims against which complaints under Section 35 of the Mineral Tenure Act (British Columbia) have been made.”

McKenzie is one of only several parties known to have overstaked claims fitting this description in the Eskay Creek area before the British Columbia government imposed a staking freeze earlier this year.

The other parties, Silver Princess Resources (VSE) and Canarc Resource (VSE), overstaked each other’s claims covering ground subsequently optioned to the Prime group of companies, controlled by Murray Pezim. Both stated they are not involved in negotiations with Waterford to vend disputed claims in the immediate Eskay Creek area.

McKenzie or his agents overstaked the majority of claims in the Eskay Creek area on the basis of Section 35 complaints, including certain claims that make up the Eskay Creek deposit itself, so it is likely that Waterford may be eyeing those claims.

Waterford President Harry McGucken refused to comment on the progress of negotiations to acquire the Eskay Creek claims, or with which parties the company was negotiating.

“When we have something to report, we’ll report it,” he said.

But sources recently told The Northern Miner that McKenzie’s staking effort, which took place in the late summer and fall of 1989, was carried out (at least in part) by geological consulting firms managed by prospector Bill Dynes, a director of Waterford Resources. Dynes, out in the field, was unavailable for comment.

McGucken, a former broker, refused to confirm or deny reports that Dynes was involved in McKenzie’s restaking effort.

“I don’t know a Ken McKenzie,” he said.

Dynes works out of a Vancouver address where office space is shared with various companies, including the exploration division of Equity Silver Mines (TSE), a unit of Placer Dome (TSE).

A Placer Dome spokesman said Equity Silver’s exploration division, managed by Richard (Terry) Heard, has shared office space at this address for a number of years. The spokesman said Equity Silver had no other involvement with directors of Waterford, outside of plans whereby Waterford might acquire some of Equity Silver’s exploration properties.

At one time Heard and Dynes were both directors of Lightning Creek Mines (VSE) (of the same address) although Heard resigned before taking on his position with Equity Silver. Lightning Creek confirmed that Michael Pym is a current director, a name familiar to Prime as it appears on claim posts placed by McKenzie or his agents on overstaked ground held by Prime companies.

The identity of McKenzie has been a mystery since news of his overstaking activities in the Eskay Creek camp came to light in 1989. That has led to some speculation that he may be a “red herring” in the overall scheme of things.

Two of McKenzie’s associates are quoted in a recent article by Terry O’Neill of British Columbia Report as saying: “This is not a nuisance case. We’re serious. We’ve gone over this a thousand times, had it examined by some of the best technical people in the industry, legally surveyed the area, and run it through our computers. We know we are legally and morally right.”

The drama is likely to continue for some time as McKenzie and his associates attempt to wrest title to various claims, including those covering portions of the Eskay Creek deposit itself.

He has already been awarded title to one of the claims making up Adrian Resources’ (VSE) Ski property, and he is challenging nine of the 12 claims making up the Albino Lake property held by Eurus Resource (VSE), among others. Both prospective properties are near or adjacent to the Eskay Creek project owned by Prime Resources (VSE) and Stikine Resources (VSE).

But McKenzie’s most serious challenge is to certain claims making up the Eskay Creek deposit itself, a dispute which British Columbia’s Acting Chief Gold Commissioner, Denis Lieutard, recently decided to hear.

“We are proceeding with the case,” Lieutard told The Northern Miner at presstime. “When the facts are known we will make a decision.”

McKenzie’s complaint was lodged against the TOK 3-6 claims of the Eskay Creek property on the grounds that assessment work was not filed against these claims. (McKenzie’s complaint may involve a technicality caused by certain staking gaps found within the TOK claims.) The disputed claims contain a sizable portion of the reserves at Eskay Creek which at last report totalled 1.55 million tons grading 1.34 oz. gold and 36.21 oz. silver per ton.

The technicality expected to be used as a legal argument in this case has already been successfully used in a previous case that is, however, still under appeal. As a result of that ruling, a number of other parties are challenging title to claims where staking gaps are known to exist. (The latest involves the Vault property near Vernon, B.C., being explored by Inco and Seven Mile High Group.)

Both Adrian and Eurus have stated, however, that they would each claim title to portions of this disputed ground (TOK 3-6) by virtue of having overstaked the ground before McKenzie. However, McKenzie is still attempting to acquire title to ground held by Adrian and Eurus.

It is possible that these unresolved legal matters could hold up development of the Eskay Creek deposit. Both Corona (TSE) and Placer Dome (TSE) have already acquired indirect interests in the project and are vying for more direct control.

Although the report could not be substantiated at presstime, The Northern Miner has learned that overstaking activity is now spreading into the Sulphurets camp, south of the Eskay Creek area.

The Northern Miner Volume 76 Number 17 July 2, 1990