Teck inks deal with Lorraine Copper

VANCOUVER — It’s been over a decade since Teck Resources (TSX: TCK.B; NYSE: TCK) first optioned the Lorraine copper-gold project in north-central B.C. from Lorraine Copper (TSXV: LCC), but now the major is set to relinquish its 51% interest in the property to its junior partner, provided certain conditions are met.

“It’s hard on us to be a listed junior with a project where nothing is happening, so Teck has put together their concept on how we can move the project forward, and it involved converting their direct interest into shares,” William Morton, president and CEO of Lorraine Copper, tells The Northern Miner at his company’s headquarters in Vancouver.

“The kicker is that we have to raise $2 million by end of February to close the deal, and even though the market is tough, we know there are still lumps of money out there that need to be invested, so we’re optimistic,” he adds.

Under the agreement announced last December, Teck could have 18.8 million shares, or a 33% stake, in Lorraine Copper once the junior completes the equity raise, along with a 2-to-1 stock consolidation.

“Taking big positions in juniors is a formula for smart business, and traditionally this is how Teck, Noranda and other companies operated,” Morton says. “Once the project got really serious — like with Equity Silver Mines and Endako, for example — Placer Dome made them wholly owned subsidiaries and took all the other shareholders out in a friendly transaction.”

Teck first optioned Lorraine in 2005, and poured $9-million worth of exploration into the ground exploring for copper-gold porphyry deposits similar to Imperial Metals’ Mount Polley deposit, or Galore Creek Mining’s Galore Creek deposit. 

In later programs, Teck performed geophysical surveys and drill-tested the bullseye anomalies at prospects outside the property’s shallow resource at the Lower, Upper Main and Bishop zones, which hold 6.4 million indicated tonnes at 0.6% copper and 0.2 gram gold, and 28.8 million inferred tonnes at 0.5% copper and 0.19 gram gold.

Morton says this broad-brush exploration tactic was a logical approach to “quickly identify a big system,” but he’s confident that Teck only scratched the surface. 

“There’s no question that induced polarization (IP) surveys are useful, but the mineralization is not necessarily restricted to one set of IP conditions — all parts of the anomaly need to be drill-tested,” he says, noting a 0.7% copper intercept over 180 metres at the Boundary prospect found along the dead flanks of an anomaly. “Teck did a great job on the project and they were just beginning to figure this out when market circumstances forced them to shelve it.”

In an emailed response, a Teck spokesperson said that at the end of the 11-year partnership, Lorraine “did not align with Teck’s current copper exploration portfolio, though it remains a promising property. Through this agreement, Teck has a residual interest in Lorraine, and exposure to any upside as the project advances.”

The biggest opportunity for Morton is to “double or triple” the resource at the Lower, Upper and Bishop zones — a northwest-trending cluster of porphyry deposits that link up at 200 to 300 metres depth, according to Teck’s deep IP survey in 2007.

“There are a number of holes left out of the resource that were well mineralized because the step-outs were too large, and you just couldn’t join the dots,” he says, pointing out a 159.2-metre drill hole intercept at 0.6% copper and 0.30 gram gold per tonne beneath the Lower Main zone that never got followed up.

“And that’s part of the opportunity we have here, because we can rapidly adjust the mineral resource as soon as we drill more holes and connect the dots.”

Morton mentions an opportunity to drill deeper at its regional targets, considering many of the historic drill holes never reached the deep IP targets. He offers the Too Good prospect as an example, which lights up in geophysics from 300 to 500 metres depth over an open-ended length of 2.5 km.

“Ourselves and the other previous operators saw no particular merit in drilling deep holes, so we shut down holes at less than 200 metres,” he says. “Then New Afton came along and demonstrated the viability of developing an underground mine, so we see this as our chance to explore deeper and test the anomalies that Teck spotted in their geophysics.”

New Afton, owned and operated by New Gold (TSX: NGD; NYSE: NGD), is an underground gold-copper porphyry mine located 10 km from Kamloops, B.C., which began commercial production in 2012.

The orebody there plunges more than 1 km deep and averages 100 metres wide and 350 metres tall, boasting total measured and indicated resources of 73 million tonnes at 0.75 gram gold and 0.9% copper, for a total 1.8 million oz. gold and 1.4 billion lb. copper.

“Something that has high tonnages can be painful for large companies, because these alkalic systems can morph all over the place, and you easily miss them,” Morton says. “It seems like we’ve passed the point in the industry where bigger is better, and we feel there’s a growing appetite for deposits that have good grade with lower throughput, and a lot smaller capital cost. That’s what makes Lorraine attractive to us.”

Morton says that once the company completes the financing, it would embark on a 3,500-metre drill program to expand the resource and turn the drill over to its most prospective regional targets, such as Too Good or Slide.

“For Teck to have a substantial position in our company is an endorsement to this project,” he says. “We’ve enjoyed working with them over the years and welcome them as a significant shareholder in the company.”

Lorraine Copper has traded within a 52-week range of 3¢ to 8¢ per share, and closed at 4¢ at press time. The company has 45.7 million shares outstanding for a $1.8-million market capitalization.