Metals trader Deak tries to win producer status

New York-based metals trader Deak International Inc. is gearing up for a two-pronged attempt to become a producing mining company. After amalgamating wholly- owned subsidiary Deak Ariadne, with Canadian explorers Seadrift International (ASE) and Wilco Mining (TSE), Deak is hoping that initial production will come from a couple of advanced base metal projects in Rouyn-Noranda, Que.

Shareholder approval for the merger comes just weeks after Deak International purchased Echo Bay Mining’s (TSE) 53.8% stake in Nuinsco Resources (TSE) for $6.6 million. Nuinsco’s principal asset is the Cameron Lake gold deposit in northwestern Ontario.

Nuinsco and the amalgamated company (called Deak International Resources Corp.) will continue to act as separate entities while attempting to get early production decisions at a number of key properties.

They include Seadrift International’s Aldermac and Hebecourt Twp. projects in Rouyn-Noranda which could be combined into a single mining operation, according to President Doug Hume.

Under the terms of the amalgamation issued and outstanding shares of Wilco Mining can be exchanged for shares in the new company on a two-for-25 basis. Seadrift shares can be converted on a one for two exchange ratio and Deak shareholders can exchange their shares for shares in the amalgamated company on a one-for-13 basis.

Financing arrangements are scheduled to be discussed when a number of Deak’s Australian shareholders visit Toronto this week. But when the amalgamation is complete, Deak International Resources will have over seven million shares outstanding.

“We have never taken on something as early on in the pipeline,” said Deak International President Arkadi Kuhlmann who was referring to the fact that the metal trader has never before been so directly involved in project development. Kuhlmann will act as chairman of the new company.

“Amalgamating with Seadrift and Wilco will tie us closer to the mining business and give us a better opportunity to find some good opportunities,” he said. The merger is also expected to give Seadrift and Wilco greater access to project financing then they would have had under current market conditions.

“We have been looking actively at ways of dealing with the assets in the new company,” said Hume who was recently named president of Deak International Resources. The most likely scenario is that Deak will take advantage of a hot base metals climate by making a major push toward production at Aldermac and Hebecourt twps.

Located about 10 miles west of Rouyn-Noranda, the former Aldermac mine was shut down by Noranda in 1974 when copper prices were in the 50 range. According to a report by Wright Engineers the property contains three zones with combined reserves of 1.15 million tons grading 1.54% copper, 4.43% zinc, 0.91 oz silver and 0.014 oz gold per ton. An additional 623,480 tons of mineralization grading 1.5% copper also lies within the old mine workings.

Wright has recommended that a prefeasibility study should be conducted to determine the viability of mining the massive sulphides at Aldermac.

Further east at Hebecourt Twp. Noranda milled about 103,000 tons of stockpiled ore between 1976 and 1977 after developing a small open pit on the property. Development was postponed due to low metal prices and a small reserve inventory of about 790,000 tons grading 2.7% copper was left behind.

Neither property could stand alone but together the two deposits combined could make a viable mining operation, said Hume.

Nuinsco Chairman Malcolm Slack is also preparing to table a pre-feasibility report on the Cameron Lake deposit which Echo Bay considered uneconomic at a price below $550(US) per oz.

As reported (N.M., Dec 19/88) Echo Bay’s projections were based on a 500-ton-per-day milling rate and a mineable reserve inventory which stands at 788,000 tons of grade 0.194 oz gold per ton.

“We have brought similar projects into production for substantially less (than Echo Bay is estimating,)” said Slack.

Deak International Resources has applied to have its shares listed for trading on the Toronto Stock Exchange.