Equinox plans production at Van Stone

Following a detailed evaluation of the Van Stone zinc property, Equinox Resources (TSE) has exercised its option to purchase the property and plans to bring it into production as soon as possible. The total purchase price is US$1.05 million, US$310,000 of which has been paid, with the balance payable in monthly instalments to Dec. 31.

The Van Stone deposit is near Coleville, Wash., 25 miles south of Cominco’s lead-zinc smelter at Trail, B.C. Operating as an open pit mine from 1952 to 1970, it produced 3.5 million tons of ore grading an average of 3.6% zinc and 0.4% lead. Following the depletion of the open pit, an underground deposit was defined to contain 6.5 million tons grading 0.57% lead and 3.55% zinc.

The Van Stone deposit is described as a Mississippi Valley type lead-zinc deposit modified by contact metamorphism from a nearby igneous stock. Mineralization occurs in a brecciated dolomite which has been moderately silicified.

In late 1989, Equinox undertook a detailed feasibility study based on existing data and a US$600,000 work program including underground infill drilling, detailed mine planning and environmental planning.

The deposit has been tested with a total of 199 surface and underground holes totalling 65,737 ft., as well as by 450 ft. of drifting on ore. Mining engineers, Beacon Hill Consultants, calculate diluted recoverable mining reserves at 2.4 million tons grading 5.93% zinc and 1.10% lead.

Visualized as cigar-shaped, the ore zone averages 250 ft. in height, 50 ft. in width, and is about 2,300 ft. long. This geometry lends itself well to bulk mining methods. The mine plan calls for a modified longhole stoping method of vertical end slicing to produce 360,000 tons of ore per year.

Metallurgical work has confirmed historical results with recoveries of 93% for lead to a 69% lead concentrate and 91.5% for zinc to a 57% zinc concentrate.

Ross Beaty, president of Equinox, said the existing mill was “well mothballed” and will require only minor modifications and reconditioning.

Beaty also indicated that permitting the mine and mill should not pose any problems because of its past production. The proposed mine development was recently declared environmentally non-significant by the Washington State Department of Ecology and was unopposed by the public.

Ongoing permitting includes engineering detailed requirements and reclamation plans to facilitate granting of waste discharge and air pollution permits.

Capital costs to bring the project into production are estimated at US$8.843 million. Based on production of 360,000 tons per year, operating costs are expected to total US$20.25 per ton comprised of US$11.30 for mining, US$6.02 for milling, surface costs of US$1.30, and general-administrative costs of US$1.63.

Because of the mine’s proximity to the Cominco smelter at Trail, it is quite likely that the concentrate produced by the mine will be sold to Cominco. The major company has indicated to Equinox that it would be willing to enter into a smelter contract — the terms of which would result in a net smelter return of about US$35.06 per ton of ore, given average prices for lead and zinc of US$0.30 and US$0.60 respectively.

Most sensitive to zinc prices, the project has a break-even operation cost at a zinc price of about US42 cents per lb. or US46.5 cents per lb., including capital payback. At US50 cents zinc, the project is seen as having an acceptable return.

Beaty believes zinc prices will average about US60 cents per lb. over the next five years but he does see the possibility of the price dropping to US$50 cents for a short period. He sees little likelihood of prices dropping back to US40 cents per lb.

The mill can be brought into full production within nine months of construction go-ahead utilizing development ore, while the mine can be brought into full production within 11 months.

With all the fundamentals in place, the only obstacle is raising the required capital. Beaty said he would prefer to keep any equity portion of a financing to a minimum, particularly in light of the depressed level of Equinox’ share price.

He noted that the company was “not at all promotional” and tended to let the stock price take care of itself. He said the preferred financing route would be to farm out an interest in the project in return for project financing. Beaty estimated 40% as a reasonable interest to give up in exchange for financing.

Such a deal would certainly look good from Equinox’ point of view, having spent only US$1.65 million on purchasing and developing the property to date. Equinox has about 8.5 million shares outstanding and was recently quoted at about $1.40 per share.

Equinox’ other projects include a 24% interest in the Buckhorn heap leach gold mine operated by Cominco Resources International (TSE) in Nevada, a 100% interest in the Zenda gold property which is seeking an operating permit from the state of California, and the highly prospective Rosebud property which LAC Minerals (TSE) is exploring in Nevada.