Lape Joa ~ ag foots gf A Special Report The Terrace Standard, Wednesday, June 26, 2002 - AS Money in minerals? Mineral exploration in B.C.’s north rejuvenated BUOYED BY rising gold prices and a new provin- cial government, mining companies are paying re- ‘Newed attention to the northwest. ~. Upwards of $7 million in exploration expenditures - aré_predicted for this year, about the same as last year, but industry obser- vers expect that figure to increase -in the years ahead. Leading the pack is Barrick Gold, the world’s predominant gold producer. ‘It became a player in the northwest late last year when it took over Home- stake, the owner of the Eskay gold mine north of here. Building on a Home- stake program last year to build up reserves, it’s planning to do more this year, says Barrick official Vincent Borg. “Last. year it was sur- face work. This year it is “following up,” said Borg. “We're starting a dril- ling program worth $2 mil- lion, that’s $2 million US, this month.” \ 'Fhere's also under- ground work going on at the mine to find new ore. All this represents a change for Barrick which had spent most of the past decade looking overseas for ore, said Borg. “Canada has been picked over in terms of ex- ploralion targets and prospects,” he aid. “In 1994 we began fo- cussing beyond North America and this is the first time in years we tured our attention back to Canada.” , A new provincial gov- ernment has alsa helped, said Borg. “The investment cli- mate cerlainly has im- proved” added Borg in saying a new attitude also applies to regulatory mat- ters. Borg described the Eskay mine as “warld class” in terms of its law cost operations. The overall plan is to increase Eskay’s reserves which now have three to four years remaining, One way to help that is to look farther afield from the Eskay site itself. Barrick now has an ar- rangement with a smaller company called Rimfire lo exploratory work on a property called RDN, It’s 40km southeast of Eskay and Barrick holds an option to earn a 75 per oy WORKERS AT the Kemess mine in northern B.C. spent count: less hours last winter assembling their latest heavy-duty truck. The gigantic truck is bigger than a house and can carry more than haifa million pounds. It's said to ba worth araund $3 million. cent interest in the proper- ty. “It’s in the planning stages, but we’re estima- ting $1.5 million Canadian over the next few years,” said Borg. Barrick’s Eskay Creek Royalties boos Solin bwd for clean burning gas THE PROVINCIAL government hopes to spark energy exploration north of here thanks to new royalties. Those royalties, released in January _ and confirmed in the February provincial budget, reduce various fees attached to coalbed methane exploration and deve- lopment. Coalbed methane is the natural gas found in coal deposits. It is clean burning and exiremely pure, requiring little or no processing. Jt’s considered more environmentally friendly than conventional natural gas. The geological area north of here called the Bowser Basin, and two other areas southeast of here contain coal and an estimated 16 trillion cubic feet of -eoalbed methane. Methane is contained is found in coal ‘seams where it is absorbed or attached to coal, indicate provincial data sheets on the gas. Pressure from rock and water within : the coal keeps it absorbed onto the coal. Generally speaking, bringing coalbed me- thane up to the surface requires pumping ip the water which keeps it absorbed in the coal. And that's where expenses come in over and above those for conventional wells, causing the province to bring in new ,royalties specific for coalbed me- thane. “The up front costs are huge before there is any production,” said provincial - energy minister Richard Neufeld speaking after’ the new royalty schedule was ‘Te- “It’s a matter of infrastructure. These kinds of things need a little more time.” The new royalty scheme takes into ac- count the extra money coal bed methane producers spend to handle water. Also created is a form of bank ac- count, allowing producers to save up their costs in excess of royalties and deduct those in future years. That recognizes the lower gas volumes common to start-up methane production wells. The province is alsc providing a $50,000 royalty credit for each coalbed methane well drilled before Feb. 29, 2004, These kinds. of financial benefits for producers aren’t considered subsidies, said Neufeld. “We're not getting any revenue from this now anyway,” he said, The key, added Neufeld, is that the in- centives are available for all exploration and development companies. And because of that, they can’t be considered subsidies which have been banned by the provincial government. “We're just setling the table. They have to invest their money,” Neufeld continued. As the situation now stands, there are no coalbed methane wells in production in B.C,, says the environment ministry. There are tests underway in the Peace River, already the home of a massive conventional gas industry, in the Fernie area and on Vancouver Island. Neufeld said there’s a bright future in B.C. for supplying natural and other forms diamond leased, FLY SOUTH of Stewart to near the Georgie River and the Portland Canal and “you'll come. across the Praxis’ property. It’s a large group of 300 ~ daims owned by a private company called CSS Ex- plorations and its owners are excited about what might be there. - “J's the same type of target, the similar setting, - 1o Eskay,” says CSS con- ~'$Itant Dave Kuran. "Jy 2000 there was air- borne geophysics and in 2001 mapping and peo- chem~-work,” he said. “This , year, 4,000 feet of drilling | is planned.” , Kuran gives credit for of gas io the North American market. the interest in the property to the provincial govern- ment’s mineral exploration surveying program. “In 1999 there was new mapping, new information indicating the area had a certain affinity to Eskay Creek,” he said. “With those. government surveys and new data we were able to take a closer look. We couldn’t afford that new dala on our own.” CSS plans to spend $750,000 on the property this year on top of $500,000 it had already in- vested in the project. Kuran says drilting will begin as soon as possible. a -. “Right now we're wait-. ing on the weather. The Prospectors dig for gold snowpack there, at 4,000 feet, is several metres yet and we need 80 per cent of that to disappear before we can do anything,” he said. CSS is waiting for the new provincial government to follow through on its commitment to ease up on paperwork requirements. “We're anticipating a more streamlined approach to permitting,” said Kuran. Overall, Kuran sald the key to good relations with any regulatory authority is building a good reputation. “You do that by doing ‘good work, by doing recla- mation, by working within the community. It. saves you problems down the road,” he said. foil) Airis h : i+ Ge fat go bE ‘Se@arcr aside, there’s anticipation of a return to a healthy mining exploration busi- ness in the northwest. “Gold has taken off a little bit and that has helped,” says provincial mines ministry geologist Paul Wojdak who is based in Smithers. He did add, however, that things may never get back to the point where northwest exploration dol- lar values hit triple figures in the late 1980s. «» Glory Days THIS HOVERCRAFT was once a fixture on the Iskut River in northern B.C. It serviced the Snip gold mine by providing a water-borne connection for people and material, The mine was also ser- Wojdak’s list of ex- ploration activity includes Teck-Cominco looking at a property called Home- stake Ridge near Stewart. It has the same basic geological structure as the gold-bearing Eskay proper- ty, he said, “There's plenty of old workings, old trenches in the area,” Wojdak conti- nued in adding they date to times prior to more so- phisticated exploration techniqes. viced by air until it closed In the 1990s. The long term plan was to bulld a road from the interior along the iskut River as @ way of boosting mineral exploration and to encourage the forest industry. Company eyes possibilities for open pit mining AN ONTARIO mining develop- ment company is in the middle of due diligence which could lead to the purchase of a coal property 150km as the crow flies northeast of Stewart. Fortune Minerals says there’s potential for an open pit develop- ment in the Mount Klappan area, taking out anthracite, a hard coal suitable for steel making, home heating in some parts of the world and burning in thermal-electric generating plants. The property is now owned by Coneco Canada Resources, but was first acquired by Gulf Canada Resources in 1981. Conoco bought out Guif in 2001, The Fortune deal is worth $3 million. It also involves a $1 a ton ray- - alty to Conoco should the property be developed. Fortune president Robin Goad from London, Ontario, said it is benefiting from. substantial ex- ploration and engineering. work done when Gulf had the property. “We believe it is a very attrac- tive asset, close to tidewater which means it can be taken any- where in the world,” he said. There is access to the Mount Klappan area, placing it 410km by road to Stewart but a proposed short cut would shorten the journey to 260km, the company estimates. Feasibility studies dating back to 1991 indicated there could be potential for an open pit operation taking out 1.7 million tonnes of an- thracite over a 21-year period from just one of four deposits, But Fortune's plan would be to start smali and build from there, Goad added. “We're a small company. Our vision would be very different, re- quiring a much smaller capital cost,” he said. Although the Mount Klappan area could also contain significant amounts of coal bed methane, si- mifar to natural gas, that is not the focus of Fortune's interest, he said. ‘Fortune’s owners have been in- terested in the Mount Klappan area for years, Goad continued, and things accelerated when Con- oco bought out Gulf in 2001. A new provincial government in, Victoria is also establishing a more business-friendly environment, he said. “When we began initial nego- tiations, it was pretty clear the Liberals were going ta win the election,” Goad said.: “What's happening. is Very con- sistent with what'we'd like to see.” Fortune is a small company Ils- ted on the Toronto Stock Exchange which does not yet have any operating properties. It does have an 80 per cent in- terest in a cobalt-gold-bismuth de- posit and a 100 per cent interest in a copper-silver deposit, both of which are‘in the Northwest Terri- tories. And it has a stake in a potential limestone quarry in southwest On- tario. The company spent $140,000 on “exploration In 1994, building up to $3.9 million in 1998.