Yukon-Spanish connection Curragh buys 20% of smelter

The creation of chairman and chief executive officer Clifford Frame, Curragh already vies with Cominco and Noranda as one of Canada’s largest zinc producers. It operates an open pit mine near Faro, Yukon. In addition to purchasing a 20% stake in Asturiana, a Spanish company, Curragh plans to implement a major mine building program which will boost annual zinc concentrate output from 600,000 tonnes to more than one million tonnes.

At this level, Curragh’s output will be close to matching that coming from Cominco and its massive Red Dog zinc mine in Alaska. In the 1990s, Red Dog will be the world’s largest zinc mine.

Curragh’s increased output is expected to come from the Faro operation and two new mines at Mt. Hundere in the Yukon and Cirque in northern British Columbia.

The alliance with Asturiana is a critical component of Frame’s long- term plan of building a fully- integrated international zinc mining company. Purchased from Banco Espanol de Credito (Banesto) for $140 million, the Asturiana interest “allows (Curragh) to integrate vertically in a tightening world marketplace,” Frame said.

By 1992, Curragh plans to feed Asturiana’s smelter with up to 150,000 tonnes of zinc metal per year from Faro and the two new mines. Both companies will jointly market zinc and lead concentrates in addition to by-product metals such as cadmium, germanium, lead matte, copper and precious metals.

As part of the deal, Asturiana will buy a 15% interest in Cirque for $10 million and a 5% interest in Curragh for an undisclosed sum within 18 months. Banesto, a Spanish bank, and Curragh have also entered into a shareholders agreement which stipulates that both companies will maintain a minimum 51% interest in Asturiana. Prior to the deal, Banesto held the majority interest in Asturiana.

A major challenge for both companies will be Cirque — probably Canada’s largest undeveloped zinc resource. Located north of Williston Lake in northeastern British Columbia, the deposit was discovered by Cyprus Anvil geologists in 1979. In 1985 Frame purchased the Faro zinc mine and other assets, including the Cirque interest, from Cyprus Anvil Mining, then an affiliate of financially-troubled Dome Petroleum.

Hosting reserves of 30 million tonnes grading 8.6% zinc and 3.5% lead, the isolated deposit will require a capital expenditure of approximately $130 million to place into production, Kurt Forgaard, president of Curragh, told The Northern Miner. “We expect to have our final feasibility completed by the end of summer,” he added.

Mt. Hundere was recently purchased from Canamax Resources for $10 million. Hillsborough Resources (TSE) holds a 20% interest whereas Curragh retains the remaining 80%. Hundere hosts reserves of 5.2 million tonnes grading 18.5% combined lead-zinc per tonne. “Both deposits have excellent potential and we’re working to bring both mines on stream,” Forgaard said.

Combining the Asturiana purchase with capital spending to build the two new mines, Curragh will likely require in excess of $300 million, The Northern Miner estimates. Although financing will consist of some combination of debt and equity, Forgaard noted that the company is not seeking to go public at this time. “At the moment, the price-earnings ratio is poor. I don’t know if many people would go public with these ratios. We’ve considered it, but now is not the time.”

Curragh’s largest public shareholder is Australian-based Giant Resources holding 46%. The remaining 54% is held by Frame’s Westray Mining Corp. through intermediate holding companies.

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