British Columbia’s beleaguered mining industry has had little to cheer about for much of the past decade as exploration dollars dried up and headed south. Advanced-stage development projects have been opposed at every turn by environmental groups and preservationists. All that could change. The province’s new Liberal government is in a position to send a positive message to the mining community.
A request for a new Project Approval Certificate (PAC) for the Tulsequah project, held by
The Tulsequah project is in a former mining camp alongside the Tulsequah River in a remote rugged corner of northwestern British Colmbia, 100 km south of the town of Atlin and 65 km northeast of Juneau, Alaska. The project, which is not road-accessible, covers two old underground mines, Tulsequah Chief and Big Bull, which were operated by Cominco between the 1951 and 1957. During those years, the mines produced a combined 936,000 tonnes of ore before closing as a result of depressed metal prices. The ore was transported across the Tulsequah River and processed in a leased milling facility at the nearby Polaris-Taku gold mine, which operated from 1937 to 1951. Polaris-Taku closed just as Cominco was starting up.
Underground workings at Tulsequah Chief were accessible by means of five horizontal adits. Redfern rehabilitated one of these adits, on the 5400 level, to provide access and infrastructure for underground exploration drilling in the period 1987-1994. Big Bull was historically mined on three levels using a shaft, and at the end of operations, the mineralization was mined to surface.
Redfern initially acquired a 40% interest in the Tulsequah project under a 1987 joint venture with Cominco by incurring $3 million in exploration expenditures. The junior later acquired Cominco’s remaining 60% interest in the Tulsequah Chief claims and a 100% interest in the Big Bull claims for a cash payment of $100,000 plus 1.1 million of its shares. Redfern has spent $27.5 million on the project to date.
As part of the purchase agreement, Redfern assumed responsibility for any environmental liabilities arising in connection with the properties and established a trust of $1.2 million to cover the cost of a remediation plan for past mining. The trust fund had grown to $1.8 million by the end of 2000.
Acid rock drainage originating from surface and underground mine wastes, related to the mining carried out in the 1950s, is contributing to the discharge of unacceptable levels of certain metals (primarily copper) into the Tulsequah River. A preliminary rehabilitation plan was outlined in a 1992 environmental assessment of the project by SRK Consulting, whose conclusions and recommendations were accepted in principle by the B.C. Ministry of Environment, Lands and Parks. The environment ministry agreed to delay implementation of the remediation plan pending review of Redfern’s application for a PAC. As part of the proposed operating plan, Redfern will apply for a reclamation permit, which will specify the remediation process over the mine’s life, closure and abandonment.
In late 1998, Environment Canada warned Redfern about violations to the Fisheries Act with respect to the unmitigated minewater drainage. Redfern conducted some interim mitigation at the Tulsequah site in 1999 and 2000 while waiting to proceed with full mine development.
Tulsequah and Big Bull are precious-metal-rich volcanogenic massive sulphide (VMS) deposits associated with felsic rocks of Mississippian age. These rocks are contained entirely in the lower assemblage of the Mount Eaton group. After completing 37,300 metres in 80 holes by 1994, and incorporating some 534 pre-1958 Cominco holes totalling 30,300 metres, Redfern estimated an indicated and inferred mineral resource of 8.9 million tonnes grading 6.61% zinc, 1.24% lead and 1.31% copper, plus 2.53 grams gold and 108 grams silver per tonne. The resource base includes 707,616 tonnes grading 8% zinc, 1.6% lead and 1.3% copper, plus 2.4 grams gold and 116 grams silver, which were left by Cominco when it shut down the mine in 1957. The resource remains open along strike and at depth.
In December 1995, Rescan Engineering completed a feasibility study which proposed a 2,470-tonne-per-day (900,000-tonne-per-year) underground mine and milling operation. In July 1997, an updated study incorporated the results of additional metallurgical tests and further refined the mining plan. Metallurgical work demonstrated that it was possible to separate a lead concentrate from the bulk copper-lead concentrate, substantially reducing lead penalty charges while adding revenue through the production of a salable lead concentrate.
The project has a 9-year life based on a fully diluted minable reserve of 7.6 million tonnes grading 6.63% zinc, 1.23% lead, 1.32% copper, 2.51 grams gold and 105 grams silver.
Under the proposed mine plan, a decline on the east side of the Tulsequah River would connect to a winze collared at the 180-metre level. The mine’s hoisting facilities would be sunk to a depth of 750 metres below sea level. A ramp driven in the non-acid-generating hangingwall will provide access to the deposit. The flotation processing plant, concentrate dewatering/drying and fuel storage area will be built 400 metres north of the 5400-level portal. The grinding and gravity circuits will be built underground, owing to the lack of a level surface area.
The mill is designed to produce four salable concentrates, including a zinc concentrate averaging 59%. A bulk copper-lead concentrate averaging 20% copper and 18% lead will be further treated to float half of the lead into separate lead concentrate, reducing the lead in the copper concentrate to about 10%. A pyrite flotation circuit will be incorporated to recover 99% of the pyrite, which will be mixed with cement and returned underground as part of a paste backfill system to remediate existing mine workings, eliminating the acid-generating potential of the waste rock and tailings. The residual tails will be further neutralized with limestone prior to disposal in a dry tailings impoundment.
Total recoveries are expected to average 96% for zinc, 91% for lead, 92% for copper, 87% for silver and 85% for gold. About 29% of the gold is recoverable to a high-grade gravity concentrate.
Average annual production of payable metals is forecast to be 52,620 tonnes zinc, 4,990 tonnes lead and 10,430 tonnes copper, plus 59,000 oz. gold and 2.4 million oz. silver.
Initial capital costs are estimated at $148 million, and the mine is expected to create about 260 full-time jobs. The project is subject to a royalty of 10 per dry ton mined.
The 1997 updated feasibility study used metal prices of US53 per lb. zinc, US25 per lb. lead, US90 per lb. copper, US$300 per oz. gold and US$5.80 per oz. silver. These prices project a 3.6-year payback and annual operating profits of $50 million. Zinc production accounted for half the project’s revenue. There are no details available on what impact today’s metal prices would have on the economic potential of the project. (The spot price of zinc is currently hovering at US35 per lb.)
Authority
Proceeding with mine development requires a PAC based on a successful environmental assessment review of the proposed operating plan. The PAC provides the requisite authority to apply for and obtain the specific operating permits required for construction, development and operation of the project. Redcorp’s wholly owned subsidiary initiated the mine permitting process in 1994 and received a PAC
in March 1998, three and a half years later. “It was an arduous and detailed assessment process,” says Redcorp President Terence Chandler. The company then proceeded to apply for and acquire some of the remaining key operating permits, and move toward decisions on mine financing and development.
One of the most critical aspects of the Tulsequah project is site access, and a related concern is transportation of concentrates to tidewater for shipping. While several options were investigated in detail, Redfern determined that a 162-km-long access road connecting the mine site to Atlin was the only feasible alternative. The road would be used to haul concentrate to an existing storage-and-handling facility at Skagway, Alaska, where it would be loaded into ocean-going vessels for shipment to smelters abroad. Bulk-supply commodities and other material could be backhauled to the mine site. Road access would be controlled through a 24-hour staffed security gate.
Redfern completed engineering and environmental studies along the proposed route to support the application for a Special Use Permit (SUP). The province’s Ministry of Forests granted Redfern an SUP in May 1999, with conditional requirements for specific additional studies and final design approvals prior to commencement of construction.
Land claims
The Taku River Tlingit First Nation objected to project approval in the spring of 1998 on the basis of their interpretation of aboriginal rights and title, plus concerns over the potential impact to traditional resources. Chandler says the Tlingit leaders have issues because treaty negotiations have not been settled with the government and the Tlingit have claimed this area under their traditional territory. “Their position with the government has been that they would prefer there be no development in the area until their land claims are settled,” says Chandler.
The Tlingit broke off negotiations with British Columbia in September 1998 and launched a legal challenge against the government, with support from the Sierra Legal Defense Fund, questioning the validity of the PAC. In a June 2000 decision, the province’s Supreme Court ruled in favour of the Tlingit and quashed the PAC. The court found that issues related to cultural and other impacts to the Tlingit were not adequately addressed in the last three months of the environmental review process.
As a remedy, the court referred the project to a re-consideration project committee that would address the Tlingit concerns, including potential land use and cultural impacts. Chandler says the project committee, which reconvened in September 2000, should have taken only three months to complete the review, but instead it dragged out for 17 months until it was finally halted by the province’s Court of Appeal. The project committee included representatives from the Taku River Tlingit, the main permitting agencies within the provincial and federal governments, the neighbouring jurisdictions of Yukon and Alaska, and the U.S federal government.
Appeal
The reconsideration process was set aside by the Court of Appeal in a 2-to-1 ruling delivered on Jan. 31, 2002. The appeal court refuted findings of the lower court and ordered that the Tulsequah project be remitted back to the responsible ministers for a new decision on a PAC, with the added requirement that the ministers consider the potential for infringement on aboriginal assertive rights and entitlement.
Says Chandler: “This is an element of major concern for the Crown here in B.C., because all of B.C. is under claim. The Tlingit do not have any established rights and entitlements other than on their reserve lands. We feel what the court asks to be done was really done the first time around. We are pretty confident we’re going to get our certificate back.”
In the meantime, Redcorp is completing a private placement of 2.8 million units priced at 15 each, plus 654,000 flow-through shares at 15 apiece. Each unit will consist of one share and a warrant allowing the holder to buy an additional share at 25 for 12 months or at 35 for the following six months.
Omineca Mountains
The $525,000 raised will be used to explore the wholly owned Hawk gold property in the Omineca Mountains of north-central British Columbia, 310 km northwest of Prince George. The 19-sq.-km property contains several high-grade quartz-vein gold showings, and a large zone of disseminated copper mineralization discovered by Amoco during a regional exploration program for copper-molybdenum porphyry deposits in the early 1970s. The gold potential of Hawk was apparently unrecognized by Amoco, which intersected disseminated copper in a biotite gneiss unit while drill-testing a copper geochemical and magnetic anomaly in the southern portion of the property. Drill results from four holes included 36.2 metres of 0.39% copper and 15.2 metres of 0.76% copper.
Cyprus Canada discovered high-grade gold mineralization at Hawk in 1990 while looking for copper-gold porphyries, around the time of the Mt. Milligan discovery. Cyprus completed an initial program of geological mapping, soil and rock sampling, ground magnetic surveys and hand-trenching, which outlined three areas of strongly anomalous gold and copper values in soil and rock. Prospecting uncovered several quartz veins carrying in excess of 10 grams gold. Surface sampling on the AD vein structure returned values of up to 96 grams gold in a chip sample taken across 3 metres. The AD zone consists of a dense quartz-vein stockwork system developed entirely in variably altered alkali granite near its contact with syenitic rocks to the south. Cyprus tested the AD showing with a limited drilling program of eight holes totalling 898 metres. Better results included 1.5 metres of 19.9 grams and 2.8 metres of 9.3 grams. Although several other veins returned samples of up to 30 grams, the AD zone was the only prospect drilled. At that time, there was no road access into Hawk. Since then, logging has opened up the area.
Redcorp restaked part of the Hawk project area and acquired a 100% interest in two key claim blocks by issuing 30,000 shares and providing advance royalty payments of $3,000 per year. Once the snow is out of the area, the company intends to do a bit more ground definition to outline some 10 anomalous target areas in preparation for late summer drilling.
Redcorp has quietly moved up to 30 in a 52-week trading range of 37-7. The junior has 24.5 million shares outstanding. The financing will add a further 3.6 million shares.
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