Copper mines staging comeback in British Columbia

Several shutdown copper mines in British Columbia will re-enter production this year, largely because their economics have been improved by higher copper prices and a weaker Canadian dollar.

The reopenings are especially welcome in interior communities such as Kamloops, where many residents make their living, directly or indirectly, from resource-based industries such as mining.

The planned re-opening, by Teck (TSE), of the Afton-Ajax copper-gold mine will mean jobs for 150 people, plus the generation of $30 million annually, largely in the Kamloops area.

Maintenance work is to begin shortly and Teck expects full production will resume by the end of September. The company’s wholly-owned operating subsidiary, Afton Operating Corp., has already concluded a collective agreement with the United Steelworkers of America, as well as concentrate sales agreements.

At the end of 1992, open-pit minable reserves from the Ajax property were reported as being 14.1 million tonnes averaging 0.46% copper. Mill capacity at the nearby Afton plant is 8,500 tonnes per day.

The town of McLeese Lake will be the major beneficiary of the restart of the copper mine of the same name. Owner Gibraltar Mines (TSE) suspended operations late last year but now plans to restart production under the terms of a recent agreement with the British Columbia government’s Job Protection Commission, which allows for a deferral of certain levies.

However, the company notes that its decision to resume mining and milling was primarily because of improved copper prices, the lower Canadian/U.S. dollar exchange rate and cost reductions.

The government agreement provides for a deferral in the payment of 50% of hydroelectricity rates for just over one year, and deferral of 50% of municipal taxes. These deferred payments are to be repaid by the end of 1998. For a temporary period, environmental bonding will be funded at a rate of $1 million per year, rather than the higher rate of $2.7 million. Work on recommissioning the mill and mobile equipment will begin immediately, with production of concentrate scheduled for October. A new tailings line and pumping system will be installed, which means the company will incur costs of about $10 million on capital projects and working capital before any cash flow is generated from the property.

The mine will have 277 employees — down from 280 last September when production was cut by 50%, but well above the 196 employees on site when operations ceased entirely last December.

Princeton Mining (TSE) is also gearing up to resume production shortly, at its Similco mine near Princeton in the south. The company says the price of copper in Canadian dollars increased by more than 40 cents per lb. since operations were suspended last November.

The decision to resume operations was also based on positive negotiations with the company’s main customer, Mitsubishi Materials, which is providing Similco with a US$3.6-million advance payment for startup costs. An added advantage is the support of the unionized workers who voted (by almost 90%) to ratify a 2-year extension of their existing collective agreement. On an annual basis, Similco’s open pits have produced an average of 55 million lb. copper, 25,000 oz. gold and 350,000 oz. silver over the past five years. An exploration program is under way in an effort to test the extent of potentially economic mineralization and prove up an open-pit deposit with at least a 5-year life.

Princeton has taken steps to protect the economics of the Similco operation through a price protection program involving about 30 million lb. copper over the first 12 months. Under this program, the company is assured a minimum of US$1 per lb. and receives 100% participation in any price over US$1.10. The improved outlook for copper is also proving beneficial to companies with advanced exploration- or development-stage projects in the province. Two of the highest-profile projects, Kemess and Fish Lake, are being advanced by mining entrepreneurs Robert Hunter and Robert Dickinson. The partners hope to find a major company interested in acquiring these huge copper-gold deposits and placing them into production.

So far, these talks with majors are in the preliminary stage. But a junior holding the minority (40%) interest in Kemess — namely, St. Philips Resources (VSE) — has caught the eye of Vengold (TSE), which plans to carry out a due diligence review before it moves to acquire an interest in the copper-gold deposit.

Meanwhile, New Canamin Resources (VSE) is hoping its copper discovery near Houston will become the province’s next major open-pit mine. The company discovered a new zone of mineralization, which is proving to be of better grade and larger than the original Main deposit, discovered in the 1960s. The combined resource in both zones on the Huckleberry property is reported to be in excess of 160 million tonnes containing 0.475% copper. Kilborn Engineering is carrying out a study on the feasibility of mining the deposits, with results expected in September.

Further north, near Stewart, American Bullion Minerals (VSE) has launched a $3.5-million exploration program of the Red Chris project. The junior acquired an 80% interest in this property in late 1993.

Exploration in the 1970s showed a reported reserve of 33 million tons grading 0.73% copper and 0.014 oz. gold per ton, within an overall reserve of 149 million tons. This year’s drilling will continue until late November. Company President John Brock says the program marks the return of an active junior mining company to British Columbia.

“With so much attention focused on mining ventures abroad, excellent projects here in Canada have been overlooked,” Brock says. “That’s why we were able to acquire Red Chris, which we believe to be one of the richest gold-copper porphyry deposits in British Columbia.”

He adds that government is more supportive of mining than it has been in the recent past. “The provincial government is showing a new attitude that should create a new sense of optimism throughout the industry.”