RFC to re-open former zinc mine

Last November, Toronto-based RFC Resource Finance Corp. (VSE) negotiated an option to purchase the mine and its assets (unencumbered) from Pintlar Corp. of Coeur d’Alene, Idaho. According to Douglas Nicholson, RFC’s president, the option runs for 12 months from signing with a six-month extension and a total purchase price of about $1.45 million(US). “We will probably exercise it by fall,” he told The Northern Miner.

The property has been on the market for years and a number of major companies, including Cominco Ltd. (TSE), have shown interest. But the asking price at the time, rumored to be about $15 million, was too rich.

Nicholson, a geologist who was previously a mining analyst with a major brokerage firm, and his partner Carl Ashenhurst, formerly a senior executive with Noranda and currently RFC’s chairman, were instrumental in developing the highly successful Blackdome gold mine near Clinton, B.C.

Kerr Addison Mines (TSE) was also involved in Blackdome (as a shareholder) and the business relationship Nicholson and Ashenhurst developed with Kerr during that period has carried over to their latest project, which is larger and much more capital intensive than Blackdome.

At the moment, Kerr has a 44% interest in RFC and Nicholson doubts whether the company will reduce its equity position below 40%. RFC is raising $3-$4 million on a private placement basis and no doubt Kerr plans to participate in it. Although still quite preliminary, Nicholson has estimated it will cost about $25 million(US) to re-activate Pend Oreille at 2,400 tons per day so RFC will need some strong financial backers. Indeed, at some point in the future there might be a window for Cominco to back into the project. In any event, Cominco’s Trail smelter, about 54 road miles away, will likely be used to process any zinc and lead concentrates produced at the mine.

A surface drilling program was completed late last year to confirm and locate previously established reserves in the Yellowhead horizon of the Pend Oreille mine. These reserves total some 6.2 million tons (5.2 million tons of which are defined as “potential ore”) averaging 1.5% lead and 6.3% zinc. These reserves are located in the deepest portion of the mine. Despite some drilling problems (hole deviation), Glen Hogg, the company’s consulting geologist, described the program as an unqualified success. Six out of seven holes encountered significant mineralization. L. M. Kinney, the previous mine manager, told The Northern Miner during a recent mine tour that such a success rate was unusually high for a Mississippi Valley-type deposit. Kinney said that in his experience one hit out of four in the Yellowhead horizon was a good average.

Kinney is working on a consulting basis for RFC and the company was also lucky enough to secure the services of Jack Morton, who was a mine geologist at Pend Oreille with Pintlar Corp., formerly the Bunker Hill Company and now a wholly-owned subsidiary of Gulf Resources and Chemical Corp. Both these men are expected to play key roles in the ongoing project.

Underground workings are flooded to the 1,270 ft elevation, or about 870 ft below the portal, and dewatering could begin by month- end, said Hogg. About 450 million gallons will have to be pumped out and could cost upwards of $1 million — a major committment by any standard. (You can bet RFC will exercise its option before beginning this program.)

Mine water is chemically neutral, possibly because of the limestone host, and poses no threat to the nearby Pend Oreille River, the company emphasized. At a discharge rate of five million gallons per day, RFC estimates it will take about three months to dewater the east mine workings.

The workings are reported to be in good condition and Hogg said “the existing conveyor system from the 900-ft elevation to surface is believed operable with refurbishment.” This is the most cost effective method of hauling ore to surface although shaft access might be needed at a later date.

When dewatering is completed, drilling will be done from the main decline into the Yellowhead ore horizon which is 800-1,000 ft deeper than the Josephine mine workings. (Ramp access already exists to this area). This drill program is expected to start in the third quarter and Hogg said they hope to eventually mine 6-8% zinc in the Yellowhead by trackless methods.

He also noted that a large tailings disposal area remains permitted which will be adequate for any future operations. Power is available under an existing contract at the minimum industrial rate in perpetuity. And the economically depressed area is interested in any new jobs created by the mine, he added.

Refurbishment studies are under way for the milling operation which is still in reasonably good shape. A number of components would have to be replaced or upgraded including the flotation section.

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