Cominco finds success in Chile

The globetrotting company is now poised to see gold production from at least two deposits in an area known as the Maricunga gold district of northern Chile.

Cominco and its joint venture partner together hold an impressive package of deposits within a 300-sq-km block of concessions in the district. Cominco Resources’ interest ranges from 26% to 50% in the various prospects.

At one of them, the Marte project, mining operations are set to get under way this summer, while another, the Lobo, has quickly developed into a major deposit.

At least three million oz of gold are reported to be contained in the Lobo deposit, making it Cominco Resources’ largest gold resource.

In a recent in-house publication called Orbit, Cominco Resources’ president George Tikkanen said, “We want to be part of what will undoubtedly be a growing Chilean mining industry.”

Chile is Cominco’s main area of activity in Latin America.

The Maricunga deposits constitute an important long-term earnings base for the firm. Situated in northeastern Chile, the Maricunga district lies on the edge of the Atacama Desert, less than 50 km from the border of Argentina. In the Atacama region, some 4,200 m above sea level, the wind can scream through at speeds in excess of 100 km per hour. The barren landscape provides little natural shelter and the altitude makes the air thin, causing sickness for some people until they are acclimatized.

“Currently, more than 60% of our mineral assets are in Chile,” said Tikkanen. “Chile will play an important role in the company’s growth over the next few years.”

Because of its proximity to the surface, the Marte deposit is well- suited to low-cost open pit mining. The ore will be crushed in three stages at a daily rate of 9,000 tons and conveyed to leach pads 3 km away. Gold dissolved from the heaps with cyanide solution will be exported as bullion, probably to Europe. Overall operating costs are expected to be similar to comparable open pit heap leach operations in the western United States.

The Marte orebody is a porphyry- type deposit in volcanic rocks marked by pervasive hydrothermal alteration and a stockwork of fractures and fine veinlets. Mineable reserves have been calculated at 30 million tons grading 0.045 oz gold per ton. The anticipated capital cost for the Marte mine is $45 million(US).

“We look forward to at least 10 years of solid performance from Marte,” said Tikkanen.

Although Marte will be the first of Cominco Resources’ Chilean prospects to reach production, it is the Lobo deposit that has Tikkanen really excited. Cominco has a 50% interest in Lobo where a substantial tonnages of higher-grade mineralization may warrant conventional milling methods to optimize gold recovery.

“By the time the Lobo drilling, metallurgical testing and feasibility studies are completed, we will have learned some lessons from the Marte operation,” he said. “So we should be able to develop Lobo’s big reserves most effectively.”

The Lobo deposit is estimated to contain 50 million tons grading 0.045 oz gold per ton. It also hosts a higher grade core of at least 10 million tons grading 0.08 oz gold. The deposit is geologically similar to Marte.

Cominco is going after more than just gold in the Chilean Andes notes Tikkanen. “Our interest in Chile certainly extends to copper.”

In May this year the company submitted a bid for the right to develop the large Quebrada Blanca copper deposit situated 1,400 km north of Santiago.

Production from the deposit, with reserves of more than 65 million tonnes grading 1.5% copper, could exceed 40,000 tonnes of copper per year.

The bids are currently being adjudicated by the Chilean government-owned mining company ENAMI, and Tikkanen described Cominco’s bid as being “very competitive.”

While remaining generally bullish on Chile, Tikkanen admits “there are few certainties in this world,” and that tough judgment calls are required in country selection.

“Chile has a long and important mining history,” he said, “It has a great geological potential, reasonable infrastructure and people who understand the mining business.”

He noted that while Chile’s annual gold production is still relatively small (around 20 tonnes, compared with Canada’s 130 tonnes), “Important new gold discoveries are being made, especially large lower-grade deposits which were overlooked by earlier exploration efforts.

“Chile has had its political and economical problems in the past, but it has also had good economic growth in recent years.”

The country is currently undergoing a change from military rule back to a democratic civilian government. According to mining analyst Shearson Lehman Hutton, it is not expected that a change in political administration in Chile will cause problems to overseas investors.

“There is widespread understanding amongst Chilean politicians of the vital importance to the economy of the minerals industry and of the important role that foreign investment can play in this context,” said Shearson.

Of the $14.2 million spent worldwide on exploration by Cominco Resources in 1988, 60% was for work in the United States, 20% in Latin America and 20% in Europe and Turkey. Gold exploration accounted for 63% and base metals for 37%. This year’s exploration budget is reported at $10 million, excluding contributions from joint venture partners.

The company had cash and short term investments at Dec 31, 1988 of $25.8 million with 32.4 million shares issued and outstanding. It also recently completed a $22.3 million underwriting which involved the issuance of 8.1 million shares at $2.72 per share.

The company’s shares have traded at $3.30 recently on the Toronto Stock Exchange.

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