Deak, Kennecott team up on exploration near Kerr mine

Deak Resources (TSE) and Kennecott Canada, a unit of Utah-based Kennecott Corp., are teaming up to explore areas of mutual interest to the east of Deak’s Kerr gold mine near Kirkland Lake, Ont.

The companies have signed a letter of intent to become equal partners by pooling their contiguous properties adjoining the Kerr mine which has produced 11 million oz. gold since it went into production in 1938. Historically, production from the Kerr mine has been predicated on a talc-chlorite-carbonate alteration zone that has been identified on the joint venture properties and extends for a minimum strike length of 8,000 ft. Still relatively unexplored, the zone ranges in width from 200 to 700 ft. and is thought to dip steeply to the north.

As the boundary of the joint venture ground straddles the zone, Deak and Kennecott are betting that by pooling their assets they are maximizing their exposure to any possible repeats of the Kerr deposit.

Using the underground workings of the Kerr mine near Kirkland Lake, Ont., Deak is already preparing to drift out toward the joint venture ground on the 2,650-ft. elevation. Any areas that are not accessible via the underground drift will be explored from surface by Kennecott.

Under the proposed agreement which is subject to the approval of both boards, Deak and Kennecott will each spend $1 million by Dec. 31 and April 30, 1992, respectively. To maintain their respective 50% joint venture interests, they each must spend another $1 million by the end of 1993.

At Kennecott’s option, the program may consist of surface drilling or contributions to Deak’s ongoing underground program.

But if Kennecott fails to spend the second $1 million by June 30, 1993, its joint venture interest will be reduced to a 20% net profits stake. After it has fulfilled its commitments, Kennecott can increase its stake in the joint venture to 51% by spending another $1 million on exploration. However, this clause in the agreement doesn’t come into effect until a production decision is reached and the proposal allows Kennecott to increase its joint venture interest to 60% if Deak cannot come up with its share of financing.