1988 was a year filled with achievement for Cassiar Mining

Until that acquisition, Cassiar’s primary source of revenue was asbestos, admittedly one of the less glamorous commodities of the decade. But in recent years the same could also be said for copper which, for a period, under-performed most other commodities in the base metals sector.

With a little help from metal prices, O’Rourke, the company’s president, intimated that 1989 could be even better, partly because the Similco acquisition will generate revenue for the whole year rather than just six months. Also, with open pit mining coming to an end at the Cassiar asbestos mine in northern British Columbia, stripping will be at a minimum which will “eliminate a major cost,” he said.

As a result, mine earnings at Cassiar should be sharply higher and he suggested a “modest price increase” for asbestos is possible next year. This of course holds well for the company’s McDame underground project which is scheduled to come on stream in mid-1990. Open pit mining has been accelerated and portion of the ore is being stockpiled for the transition from open pit mining to underground block caving. McDame is expected to cost about $50 million but O’Rourke feels they can shave $5 million off that cost by improving the efficiency of the primary concentrator. By year-end approximately $8 million had been spent on the project and this will rise to $30 million by the end of 1989. O’Rourke recently visited an asbestos mine in Zimbabwe (formerly Rhodesia) with similar ground conditions to McDame and he confirmed that block caving appears to be the answer.

Other than a concentrate return obligation to Newmont, O’Rourke predicted that Similco would be debt free by the end of 1988 and would have a working capital of over $9 million. At the end of 1988, Cassiar’s bank loan was expected to be $16 million and he said that would be paid back this year out of cash flow from Cassiar. So the only debt they will have in 1990 is from McDame “which should be offset with a similar amount of cash,” he said.

Throughput at the Similco operation near Princeton, B.C. has been optimised from 20,000 to 25,000 tons per day; concentrate grades have dropped but the operation is producing more pounds of copper than ever-60 million compared to 52 million under Newmont “which is about $18 million in extra revenue,” he pointed out. Because of the higher milling rate gold output has also increased.

A preliminary drill program near the mine has indicated the presence of additional reserves in what could be a satellite orebody; these are common to most porphyry copper systems and in this case some respectable gold values have been noted, O’Rourke said, adding that follow-up drilling is planned. If sufficient tonnage is found this area could be incorporated into the existing mine plan at an early date.

Incidentally, half of the mine’s copper production has been sold forward for 1989 at an average price of $1(US) per lb. That forward sale was done in June when Cassiar closed the deal on the mine. The reasoning behind the forward selling was to lock in a profit and guarantee recovery of its acquisition costs. (And yes, Cassiar too was surprised at the strength of copper) Also, by selling only half of it they have the opportunity to capitalize on higher prices.

Operating costs at the Similkameen mine are expected to be higher this year because of new equipment purchases and increased stripping which won’t be capitalized. From experience, O’Rourke understands the cyclical nature of mining and the inevitability of another downturn. When it arrives, he wants the mine to be in a competitive position to weather the storm.

Cassiar hasn’t ruled out making an acquisition but the company is confining its search to projects with drill-indicated reserves, mainly for base metals and gold. It’s also seeking a joint venture partner for its dormant San Antonio gold mine at Bissett, Man. which he conceded “will not be a low cost producer.” Production costs at the mine are expected to be $250-$300 per oz., he said.

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