Copper, gold across 2,714 ft. — Deep hole returns values for

The first hole of the 1991 drilling program on the Fish Lake deposit owned by Taseko Mines (VSE) and Cominco (TSE) intersected 2,714 ft. from 32 ft. to 2,746 ft. grading 0.37% copper and 0.022 oz. gold per ton (1.05% copper equivalent). The hole bottomed in similar grade material at the maximum depth of the rig.

The Fish Lake deposit is about 75 miles southwest of Williams Lake, B.C., the main supply point, and about 75 miles northwest of Lilloet, B.C. The discovery of the Fish Lake deposit dates back to the 1960s, but little work has been done on the property since Cominco deemed it uneconomic in the early 1980s.

Cominco has the right to earn an 80% interest in the property from Taseko by bringing it into production.

Taseko brought a suit against Cominco, alleging the property was economic and that Cominco was in breach of the property agreement as a result. Management of Taseko changed in early 1991 with the private placement of 1.17 million shares at 65 cents each to the four former principals of Continental Gold; Robert Dickinson, Robert Hunter, Douglas Forster, and Jeffrey Franzen. The placement included warrants to purchase an additional 1.17 million shares at the same price. The warrants were subsequently exercised and additional market purchases have brought management’s holdings to 43% of the company’s 8.82 million shares (fully diluted).

The Dickinson-Hunter team proceeded to drop the suit against Cominco and hammered out an agreement to gain control of the property with the view of finding a buyer.

Taseko retains management of the property until May 31, 1994. The property then reverts to Cominco with Taseko retaining a 20% net profits interest. If Taseko can find a buyer for the property, the proceeds will be split between the two companies.

At a price of $60 million or under, Cominco will receive $20 million. At a value of $60-70 million, the major will receive $20 million plus 80% of the value exceeding $60 million.

If the property sells for more than $70 million, Cominco’s share is 40% of the proceeds to a maximum of $48 million.

Engineering work by the company has outlined a preliminary reserve of 526 million tons grading 0.20% copper and 0.011 oz. gold per ton at a cutoff grade of 0.20% copper equivalent.

The deposit is roughly cylindrical, measuring about 3,300 ft. in diameter and is located in a large hydrothermal system measuring over 13,000×13,000 ft. Although deeper holes have been drilled on the property, most of Cominco’s drilling was limited to a depth of about 600 ft.

Jeffrey Franzen, project director, noted that the pit has an ultimate depth of about 1,600 ft. and the company’s reserve and grade figures are based primarily on the Cominco numbers.

He added that the results of hole 91-01 are very significant in that the copper and gold grades increase almost twofold below 600 ft. Hole 91-01 averaged 0.25% copper and 0.013 oz. gold over the first 600 ft. The average grade jumped to 0.40% copper and 0.024 oz. gold from 600 ft. to touch down at 2,746 ft.

As a result, the overall grade of the deposit could be increased if the current drilling returns similar results.

Taseko’s initial program includes nine holes on two lines in a cross-pattern measuring about 2,600×2,600 ft.

In addition to increasing grade, Franzen said the tonnage of the deposit could be increased as well. Hole 91-01 extends 500 ft. below the ultimate pit floor at an average copper-equivalent grade of about 1.0%. If drilling results hold up, Franzen said the pit wall could be pushed back to reach deeper material.

Preliminary environmental studies have indicated there should be no major problems in permitting a mine. That, coupled with the property’s gentle topography and easy road access, makes it very desirable from the development point of view.

The metallurgy of the Fish Lake ore is of particular importance to the economics of the project.

Cominco is reported to have experienced very low gold recoveries, a major factor attributed to the company not proceeding with development. Franzen said Taseko has spent over $300,000 on metallurgical studies since taking over the project and has determined that gold recoveries will not be a problem.

About 70% of the gold is associated with chalcopyrite while the balance is associated with pyrite.

Taseko plans to use bulk flotation followed by a very fine regrind and secondary flotation to produce an 18% copper concentrate grading 1.0 oz. gold per ton. The company is projecting copper recoveries of 85-95% and gold recoveries of 70-80%.

Cominco appears to remain skeptical of the project’s potential. The company is reported to have recently sold all of the 300,000 shares of Taseko received under the new property agreement.

If a buyer is not found by November, Cominco will receive an additional 300,000 shares of the company followed by a further 400,000 on July 29, 1992. Taseko is in good financial condition with more than $2 million in the bank and Robert Dickinson, president of the company, said he did not expect to need additional financing for the foreseeable future.