Partners approve budget

Partners Western Copper Holdings (WTC-T) and Teck (TEK-T) have agreed to spend $4 million on engineering work at the San Nicolas copper-zinc deposit in Mexico’s Zacatecas state as part of a $6.6-million budget earmarked for base metals projects in the country.

Work at San Nicolas will include 10,000 metres of diamond drilling, pilot-plant testing and ore modeling. The partners expect to spend $700,000 on prefeasibility work, to be completed by July. The companies will then spend $3.3 million on a final feasibility study.

As for the remainder of the budget, the companies will spend $1.2 million exploring the El Salvador property, on which the San Nicolas deposit was found, and $1.4 million at the Villa de Ramos and other properties. About 40% of these budgets will be spent on drilling.

Results from recent infill drilling at San Nicolas have prompted Teck to increase the preliminary resource at the deposit. The resource is divided into two zones. The upper zone holds 78 million tonnes grading 0.5 gram gold and 28.7 grams silver per tonne, plus 1.4% copper and 2% zinc. The deposit is amenable to open-pit mining at a stripping ratio of 4.3-to-1, including the removal of 67 million tonnes of overburden. The lower zone hosts 22 million tonnes grading 0.1 gram gold, 6.1 grams silver, 1.3% copper and 0.4% zinc. It is open at depth to the southwest.

The El Salvador project is owned 55% by Teck and 45% by Western Copper. It covers 225 sq. km about 65 km southeast of the city of Zacatecas. The San Nicolas deposit lies in the western portion of the project, on claims optioned from Mexican miner Luismin.

Luisman is carried through to the completion of a feasibility study, at which time it can either participate at 25% by arranging its share of production financing or dilute to a carried interest of 15%. The latter option would dilute the interests of Teck and Western Copper proportionately.

Teck can earn an additional 10% interest in San Nicolas if it arranges Western Copper’s share of production financing. Teck can buy a further 5% interest from Western Copper for a cash payment based on the project’s net present value at feasibility, at a 15% discount.

Western Copper acquired Villa de Ramos as part of a deal with Rio Tinto (RPT-N) subsidiary Kennecott. Rio Tinto retains a back-in right for a 51% interest. Initial exploration by Western Copper revealed several gravity anomalies, which have been targeted for follow-up work. The partners control 3,000 sq. km in the Zacatecas region.