United Keno optimistic on high grade silver hunt

Last April at the annual meeting, United Keno Hill Mines president J.C. Cowan said that if the company was successful in increasing its grade of silver in ore milled to 100 oz, rather than the current 24 oz, it would be the equivalent of a $25-an-oz silver price. With the silver price then, (and still) hovering around the $5-6 per oz mark, those were brave words, and hopeful ones.

And in fact now, about eight months later, while Mr Cowan is not as optimistic about the chances of attaining a 100-oz grade, he insists there are very good possibilities of reaching 50-60 oz, more than double the present figure.

The basis for his optimism is the company’s ongoing, multi-million dollar program of exploration in and around its property in the Yukon, which the Keno president tells The Northern Miner in an interview is yielding some encouraging indications of high grade silver.

At the Silver King area, for instance, Keno has found a small ore shoot, with low tonnage indicated but with a “super grade” of around 60 oz per ton.

And in areas where there are old workings — the Bellekeno and Lucky Queen — there have also been encouraging developments.

At Bellekeno a zone has been hit where grades are also high, and which Mr Cowan says has the potential for some 2 million ounces of silver. He cautions, at the same time that the zone is incompletely explored as yet, with a lot more work left to do.

It’s early exploration days also at the former-producing Lucky Queen area (where silver grades in the 1930s were in the 90 oz per ton range), but the United Keno president believes it has the potential for being big.

The company is also looking for higher-grade replacement ore about a mile southwest of its presently-producing Husky mine, which Mr Cowan says will likely be shut down sometime in 1987, as reserves are depleted.

There are indications of an ore zone in the area, (known as the Husky Southwest) from previous drilling, and United Keno is considering sinking a shaft to go down and explore it further. “There could be 50,000 tons in the Husky Southwest,” he says.

Since about 1984, United Keno has been putting money into exploration on a much bigger scale than in previous years, and most of it has been coming from flow- through financing.

In 1983 for instance, the company spent only $400,000 on exploration. The next year that figure leaped to $7.5 million, and in 1985 and 1986, while somewhat reduced, it still rang in at $4.7 million and $4.6 million, respectively.

For 1987 the company is arranging for a private placement in the order of another $4.5 million in flow-through shares, and Mr Cowan believes United Keno offers an excellent example of the benefits of the flow-through mechanism.

In all likelihood, he says, the company would otherwise not have been able to raise the funds for such extensive exploration programs, especially in times of low metal prices.

“And although the programs have not added many tons to our reserves to date, the high grade silver zones discovered in these three new areas have the potential of adding several million oz to reserves when the zones are completely outlined. They will help keep the camp operating in the future, and due to the very high grade, hopefully operating at a profit.”

Meantime, even at the present low price of silver, United Keno has been coping well. In the first nine months of 1986 for example, the company managed to trim a loss of $4,500,000 in the similar period last year down to a $1,590,000 loss in the latest period.

And, as Mr Cowan is careful to point out, it achieved an operating profit in this year’s nine months of $720,000, against an operating loss of $1,850,000 in the similar 1985 period.

Thanks for that, he says must go to a combination of greater production, and considerable success at reducing costs. In the latest nine months a total of 1,280,000 oz silver was produced, (306,000 more than in last year’s period), and cash cost per oz, excluding exploration, depreciation and investment income, averaged $4.87 (US), compared with $7.55 in the same period in 1985.

The cost figure should have held up right through 1986, he adds, and operating profit too is expected to continue through the last quarter of the year.

So while United Keno is running “lean and mean,” it’s also looking for a healthy injection of silver fat from its current exploration efforts.