Cinola deposit on Queen Charlotts could produce 160,000 oz by 1989

Reno Calobrigo sells salami and cheese in Vancouver. Late last year he was also president of Consolidated Cinola, a Vancouver and nasdaq-listed exploration company which now, under a new name City Resources (Canada), has a potential gold mine under its wing that is about the size of the Kidston mine in Australia.

In 1969 a logger discovered a mineralized gold deposit on Graham Island, the northernmost island of the Queen Charlottes. Cinola acquired the property in the early 1970s, did considerable work and farmed out 50% to Energy Resources Group Inc. of Calgary. Together they raised and spent nearly $20 million, drilling 120,000 ft of core on the property, outlining some 44 million tonnes of geological reserves grading 1.8 g gold per tonne of which about 18 million tonnes was mineable at an average grade of 2.5 g per tonne. In 1984, Cinola agreed to buy back the full 100% interest in the property at a price of $5 million. Payments were to be made by the end of 1986.

But when the settlement date approached, Cinola didn’t have the money. The company’s investors had become increasingly disillusioned by reports of the concentration of mercury, arsenic and antimony in the deposit. This could mean it would be unprofitable to mine the ore in an environmentally sound way. Mr Calobrigo was in a pickle.

Ursel Doran, an exploration geologist responsible for property evaluation and acquisition for City Resources (Asia) followed the exploration results since day one. His company specializes in discovering large, shallow, low-grade gold deposits in the order of 20-100 million tonnes and has developed considerable in-house expertise on these so-called epithermal-type gold deposits.

In light of what he knows about these kinds of deposits, Mr Doran thought Cinola had simply misinterpreted the geology. If it were an epithermal gold deposit the unmanageable levels of mercury would be located only in a halo around the deposit, Mr Doran reasoned. So he convinced City’s management to negotiate for an interest in the property.

By mid-October last year, City agreed to pay $16 million for a 44% controlling interest in Cinola and recently gave it a new name — City Resources (Canada). Mr Calobrigo was relieved to make the deal.

Since taking control, City has contracted an independent consulting company in Vancouver, Norecol Environmental, to take their own samples of the deposit to test City’s idea. Their work concludes that the toxic levels of mercury, antimony and arsenic do in fact occur in a halo around the deposit and could be left undisturbed in any subsequent open pit mining plans.

City has contracted Dominique Francois-Bongarcon, a pre-eminent geostatistician at the University of Nice in France to produce a geological feasibility study of the deposit. He will model the ore using 5-ft blocks with 6 data points each. The study should be completed this year. At the end of this month City will select one of about five engineering companies which have submitted tenders for an engineering feasibility study of the project.

If all goes smoothly City will be making applications to the B.C. government late this year to mine the deposit at rates of 3,500-6,000 tonnes per day by 1989. With flotation and carbon-in-pulp recoveries of about 90% this could mean anywhere from 160,000 to 420,000 oz of the yellow metal would be recovered every year — making the Cinola deposit one of the biggest gold mines in the country.

“We see no reason to doubt it will be in full production in 1989,” Laurie Johnson, managing director of City tells The Northern Miner.

It will take about 12 months to build a mill and bring it onstream. Commissioning of the mill is anticipated by May, 1989. Maximum capital costs, estimated at $100 million, could potentially be recovered in about three years.

The company plans to take considerable efforts to pump tailings to a settlement area located in a river valley which already has a pulp mill and where Pacific salmon do not spawn.

Shares of City Resources Canada trade in Vancouver and on nasdaq at about $6. The company has also applied for a listing on the Toronto Stock Exchange.