INDUSTRIAL MINERALS — Robex sells Upton barite deposit

East Coast drilling improves economics of eastern Quebec project Ten years of exploration at the Upton barite deposit near Montreal, Que., are beginning to bear fruit for owner Robex Resources (RBX-T).

Each of two unnamed companies has agreed to acquire a 50% interest in the deposit for a combined payment of $1.7 million. As part of the deal, Robex receives a $250,000 loan and retains a small royalty on any mined barite plus 25% of net revenues arising from related operations.

The agreement has yet to be approved by regulators and Robex’s directors.

The company’s recent marketing success is largely due to the strong correlation between petroleum exploration and barite demand. “Here in Canada we are quickly running short on supply,” says Robex director Stewart Robertson. “So all of a sudden Upton is very hot, especially with all the drilling occurring off Canada’s east coast.”

Because of its high specific gravity (4.5), barite is used almost exclusively as a weighing agent in drilling fluids used in oil and gas wells. This is especially true for holes drilled deeper than 2.1 km, where petroleum-reservoir pressure increases at a faster rate than hydraulic pressure.

In the U.S. last year, 700,000 tons of barite were sold, the value of which was estimated at $18 million. Of that total, more than 90% was used for drill-well fluids, mainly in the Gulf of Mexico. In Canada, 103,000 tonnes were sold, the value of which was $11.5 million. At least two-thirds of that total went to well drilling, paint and varnish products.

Four mines spread across Ontario, British Columbia and Nova Scotia provide Canada with 80% of its barite output. Half

of the operations are in B.C.,

and these are the only ones producing barite for petroleum drilling muds.

American operations, which in 1996 totalled 27 mines or processing sites, are nearly all in the southern states.

In eastern North America, there are reportedly no projects waiting to be developed — a situation that renders Upton a strategic source of barite for the now-producing Hibernia oilfields. It is estimated Hibernia will require at least 20,000 tons of barite annually, beginning this year. This estimate does not include potential demand from nearby petroleum projects.

The 20,000-ton figure is roughly equivalent to the total amount of barite imported into Canada last year from U.S. and overseas sources.

An independent feasibility study indicates that Upton could yield 26,500 tons of barite concentrate per year provided an

investment of $8 million is made, excluding the $2.5 million spent by Robex to date. Annual cash flow from operations, before taxes and expenses, is projected at $4 million.

Proven reserves are estimated at 950,000 tons grading 46.5% barite and 1.9% zinc. An additional 200,000 tons at unspecified grades occur along strike.

Mining would employ open-pit methods in the first 13.5 years of operations and underground methods over a few additional years. Environmental studies on the proposed operation are nearly complete, with startup projected for mid-1999.

An alternative market for Upton barite is paint fillers and rubber. Future demand in these and other industrial end-use markets is projected at 7,000-10,000 tons annually.

Proceeds from the Upton sale will be applied to Robex’s

Diangounte gold project in Mali, where preliminary exploration has revealed gold showings running as high as 33.1 grams gold per tonne. Percussion drilling will begin shortly.