Echo Bay seeks junior partners for foreign exploration

By swimming with the “fast fish” of the junior mining sector, Echo Bay Mines (TSE) hopes to buoy up reserves, replacing some of its declining North American mine production with new mines in Asia, Africa and South America.

Over the past year, the major has formed “strategic alliances” with nine junior companies, giving it a position in emerging and established gold belts around the globe.

“As part of our growth strategy, we made a decision to get to know better, and sooner, the entrepreneurial mine-finders of the world, rather than sit back and wait for the telephone to ring,” Echo Bay President Robert Kraus told the crowd of about 30 mining analysts attending its recent presentation in Toronto.

Echo Bay’s initiative began in early 1994 with Baja Gold (TSE), in whose Paredones Amarillos gold project Echo Bay earned a 51% interest by spending US$4.5 million. The property is in Baja California Sur, Mexico, and Echo Bay has an option to earn an additional 9% stake, and possibly another 5%.

Among the other companies with whom Echo Bay has recently signed agreements are:

* Canarc Resources (TSE) — Once Canarc has spent US$3.5 million on the Baramita property in Guyana, Echo Bay can earn a half interest by spending an equal amount and delivering a bankable feasibility study.

* Cluff Resources — Echo Bay acquired 4.8% of the shares of this London-listed company, which is exploring for gold on its Geita licence in Tanzania.

* Etruscan Enterprises (VSE) — After contributing $500,000 to a feasibility study, Echo Bay can acquire 65.67% of Etruscan’s 67% interest in the Koma Bangou gold property in Niger.

* International Gold Resources (TSE) — Echo Bay can earn a half interest in several gold properties in Ghana and Burkina Faso by spending US$25 million by the end of 1998.

* Santa Elina Gold (TSE) — Echo Bay is carrying out a 3-year exploration program to earn a half interest in a 25,000-acre gold concession in western Brazil. The major also has rights to acquire the remaining 50%.

* Tombstone Explorations (TSE) — To earn a half interest in all Tombstone’s new concessions in Venezuela, Echo Bay must cover all initial expenditures of up to US$400,000 or US$1 million, depending on the size of the property.

* TVI Pacific (ASE) — Echo Bay can acquire a half interest in all but two of TVI’s present and future properties in the Philippines. It will also assume operatorship.

* Orvana Minerals (TSE) — By spending US$3.5 million by the end of 1996, Echo Bay can earn a 51% interest in the Bolivian gold property known as Pueblo Viejo.

In 1992, most of Echo Bay’s exploration budget of $7 million was spent in Canada and the U.S., whereas, this year, most of its $30-million-plus budget will be spent on foreign soil. Executive Vice-president Robert Armstrong describes the shift as a matter of necessity.

“The advantage of going international isn’t that the environmental laws are easier; it’s that you can [accomplish exploration work] a lot faster.” “International” is too general a term for Echo Bay’s objectives. The company targets only those countries whose regulatory regimes have proved to be hospitable to mining.

“It may be rather a subtle point, but boy, does it make a difference when you go into a country like Peru. When the government knows the laws and the country has [efficient workers], it’s a big bonus.”

Armstrong believes junior and medium-sized companies are generally more entrepreneurial than majors, and this accounts for their record of success in mineral plays around the world. Tombstone was in Venezuela three years before the “wave” of exploration activity hit, he said, and TVI Pacific was exploring in the Philippines two years before the other companies that are currently active there.

In seeking partners, Echo Bay gives preference to companies that demonstrate an ability to capitalize on changes and opportunities. Santa Elina, for example, acquired 10 million hectares of land in Brazil just before a law change would have made that impossible.

Armstrong added that Echo Bay has a policy of treating junior partners fairly. “We’re looking for a very symbiotic relationship. We can provide good technical knowledge, the ability to finance, the ability to build and the ability to operate.”

After a deal is signed, Echo Bay normally makes arrangements to have one of its geologists join the junior’s exploration team at the property. The company often lets its junior partners take a project to the prefeasibility stage, but normally takes over at the feasibility stage and controls construction and production.