Kemess South deal “alive and well”, Witte says

Unforeseen delays in the permitting process for the Kemess South copper-gold project in north-central British Columbia have resulted in Royal Oak Mines (TSE) extending the closing date for the takeovers of El Condor Resources (VSE), St. Philips Resources (TSE) and Geddes Resources (TSE).

Shareholders of the three juniors were to have received cash and/or shares of Royal Oak no later than 10 days after court approval of the plan of arrangement. The deadline, with the consent of all parties, has been extended to Jan. 31, 1996.

In a conference call, Royal Oak President Margaret (Peggy) Witte was quick to emphasize that “the deal is not falling apart, the deal is alive and well.” She explained that when Royal Oak was conducting its due diligence review of the Kemess South project, the company had been led to believe a mine development certificate would be issued at any time. Royal Oak believed the environmental review of the project had been grandfathered under the Ministry of Energy, Lands and Parks.

The company recently learned, however, that the review of the project falls under the Canadian Environmental Assessment Act and must include an unresolved fisheries issue involving the relocation of nine pair of spawning bull trout from a small creek that runs through an area where the tailings dam is proposed. Royal Oak is required to find another suitable area where the fish can be relocated, or develop new spawning grounds. The issue is expected to be resolved in a matter of days.

In order to facilitate the certification process, Royal Oak felt it was necessary to extend the takeover date of El Condor, St. Philips and Geddes in order to bring “all the parties to the table”, including the provincial and federal governments.

A recent compensation package, granted to Royal Oak and Geddes by the provincial government for the expropriation of the Windy Craggy copper property, also was extended to Jan. 31. The package includes financial assistance for infrastructure development of the Kemess South project.

Royal Oak expects to hand government officials the project report by mid-November. The assessment review process includes an opportunity for the public to comment. It is anticipated the process will be essentially completed by the end of January.

In the meantime, Royal Oak is going ahead with engineering and development plans at Kemess South, including a bulk-sample test.

Minable reserves at Kemess South are estimated at 221 million tonnes grading 0.22% copper and 0.018 oz. gold per ton at a stripping ratio of 1.26-to-1. The capital cost of constructing a 44,000-ton-per-day operation, capable of producing 213,000 oz. gold and 58 million lb. copper over a 15-year mine life, is estimated at $350 million.

Once a mine development certificate is in hand, Royal Oak plans to begin construction early in the spring of 1996, with production slated to start late in the fourth quarter of 1997.