Cominco options Kutcho deposit

While it’s no secret Cominco (TSE) has been eyeing offshore mining opportunities, the Vancouver-based major is also looking in its own backyard for projects with mine-making potential.

This company recently announced plans to explore and evaluate the Kutcho Creek property near Dease Lake, B.C., under the terms of an option agreement with that project’s owner, American Reserve Mining (VSE).

The property hosts the Kutcho and Esso West massive sulphide deposits which are reported to have a combined minable reserve of 14.3 million tonnes grading 1.76% copper, 2.54% zinc, 35 grams (1.02 oz.) silver and 0.37 grams (0.01 oz.) gold per tonne. The bulk of reserves, about 80%, are contained in the Kutcho deposit.

More than $25 million has already been spent on the property which is still considered to have good potential for reserve expansion.

The agreement allows Cominco to earn a 662/3% of the project by spending $6.7 million on exploration and development, or produce a feasibility study by the end of 1997. Cominco must also make cash payments totalling $150,000, and carry out a minimum $100,000 work program this year.

Once the option is exercised, the two companies will share costs reflecting their respective interests in the project. But last summer’s original agreement-in-principle was revised so that if a production decision is made, Cominco would attempt to arrange project financing on behalf of both companies.

American Reserve acquired its interest in the project from a unit of Homestake Mining (NYSE), which is now its largest shareholder. Last March, the junior released details of a preliminary study which estimated $130 million would be required for a 4,400-tonne-per-day underground mining operation.

Annual production was estimated at 100,000 tons of copper concentrate grading 26% copper (with gold and silver credits) and 62,000 tons of zinc concentrate grading 55% zinc over a 9.3-year mine life. These estimates are based on metallurgical test work to date, however more metallurgical work is planned. “We think the (concentrate) grades can be enhanced by using column cell technology,” said American Reserve President Carl Zuber.

The report also showed that underground mining methods would be a better option from an economic and environmental standpoint than open pit production which would displace about 82 million tonnes of potentially acid-generating waste.

A subsidiary of Sumitomo Metal Mining is owner of part of the minable reserves quoted above, as the main Kutcho lens straddles a boundary between American Reserve’s property and adjoining ground held by Sumitomo. But Zuber declined to comment on how much of the reserves are owned by Sumitomo. The Kutcho Creek property can be reached by road in summer from Dease Lake. An airstrip is also being built to service the property.