Curragh facing gap’ in Faro output

Curragh Resources (TSE) is facing the possibility of having to lay off at least some of the 400 miners employed at its Faro zinc-lead mine in the Yukon, unless it can come up with financing for development of new ore.

While the company attempts to raise the $40 million needed to develop Faro’s new Grum deposit, crews are currently mining the last ore in Faro’s original open pit and smaller Vangorda deposit.

“Presumably, we will run out of ore some time this year and there may be an ore gap while we concentrate on development of Grum,” said Chairman Clifford Frame.

With proven open pit reserves of 25.1 million tons grading 2.96% lead, 5.01% zinc, the Grum deposit contains enough ore to sustain the Faro operation well into the next century. But it will take four or five months to do the necessary pre-stripping work and Curragh faces a production delay unless the heavy overburden is removed before the Faro pit and Vangorda are depleted. According to sources in Whitehorse, Curragh has shipped earth removal equipment including a crawler-mounted shovel and four 200-ton Caterpillar haulage trucks on to the Grum site where it waits to begin pre-stripping work. But nothing will happen until Curragh obtains project financing either by selling its 20% interest in Spanish smelting company Asturiana de Zinc or a portion of Curragh’s new Westray coal mine in Nova Scotia.

Frame has said he isn’t sure when negotiations with Asturiana and its major shareholder Banco Espanol de Credito will end and Westray will only be offered for sale as a last resort.

An employee representative said there is no feeling of panic yet among Faro workers even though the company has indicated that the workforce won’t be maintained at current levels if there is no ore for the crusher. “Obviously, if we don’t get in there fairly quickly (to strip Grum), we could face an ore gap by the end of this year,” said Ted Perry, director of human resources at Curragh’s Whitehorse office.

One of only two producing mines in the Yukon, (the other is Curragh’s new Sa Dena Hes zinc-lead operation), Faro represents about 30% of the Yukon economy and any closure would be a disaster for the local area.

However, a union representative interviewed by The Northern Miner said he is encouraged that zinc prices have risen to 55 cents on the London Metals Exchange from a low of US42 cents per lb.

“I don’t believe there is any immediate danger of the mine shutting down,” said Kerry Tschritter, president of the United Steelworkers Local 1051 which represents 350 employees and about 60 contract workers at Faro. As investors wait for Curragh to reach an agreement with Asturiana, the shares have slipped back to a low of $3 from their 52-week high of $8.13.