MINING JOURNAL 12/03/1999 ISSUE

NEWS OF THE WEEK

EKATI DIAMOND MINE DEAL FOR DE BEERS(LAC GRAS CANADA) BHP Diamonds Inc. and De Beers Centenary (the international arm of De Beers of South Africa) have signed a memorandum of understanding (MoU) concerning the sale of a portion of the production of rough diamonds from the Ekati diamond mine in Canada’s Northwest. Agreement in principle has been reached for De Beers to purchase 35% of run-of-mine production over a three-year time period.

According to De Beers, the agreement will come into effect after the negotiation and execution of a definitive contract document and the agreement of a sample, against which the purchases will be evaluated. This process could be completed by mid-year and regular sales could begin shortly thereafter.

Production from Ekati began last October and is currently being sold through BHP Diamond’s marketing office in Antwerp. The president of the company, Jim Rothwell, says « the market response has been very positive and we have certainly made a successful market entry ». Commenting on the MoU, Mr Rothwell, said that the arrangement enables the company to implement the final component of its marketing programme. It intends to market the remaining 65% of Ekati production independently.

BHP has a 51% controlling interest in the mine, which is located in the Lac de area about 300 km northeast of Yellowknife. The balance of ownership is held by Dia Met Minerals Ltd (29%), and 10% each by the two geologists who made the discovery, Charles Fipke and Stewart Blusson. Speaking for Dia Met, its president, James Eccott, said that the company is « pleased to have developed a relationship with De Beers . . . this understanding will lead to assured sales for a significant portion of our production ».

The South African company, through its Central Selling Organisation, controls around 70% of the world’s rough diamond sales, and says that it is « delighted that BHP and its joint-venture partners have agreed to sell this proportion (35%) of Ekati production to De Beers ». It would doubtless have been even more pleased with a higher proportion, although a larger share could have raised problems in the US for BHP where there are unresolved anti-trust actions against De Beers.

The US$700 million Ekati project is expected to mine 78 Mt of ore and 508 Mt of waste over an initial 17 year mine life, producing 3.5-4.5 Mct/y of rough industrial and gem-quality diamonds - about 4% of current global production and 6% by value. According to Des Kilalea, an analyst with Fleming Martin Securities based in Johannesburg, Ekati rough-gem quality diamonds thus far have been commanding an average price of US$120/ct which is significantly higher than the average price of US$100/ct for diamonds from mines controlled by De Beers in South Africa and Botswana.

Over the past few years, De Beers’ hold on the rough diamond market has been under strain, with smuggled goods from Angola, substantial Russian sales and the decision in 1996 by the owners of the giant Argyle mine in Australia not to renew its sales contract with the CSO, all serving to undermine De Beers’ ‘single-channel’ marketing strategy and hence its ability to control prices. There had been considerable speculation about whether BHP would go it alone and the deal will have come as a relief to De Beers. It is probably also an acknowledgement that diamond producers, like it or not, must continue to depend on the South African company’s skills to maintain a stable diamond market.

PYHSALMI EXTENSION (OTOKUMPU OY FINLAND) The Finnish mining and metals group, Otokumpu Oy, has decided to deepen its Pyhsalmi copper-zinc-pyrite mine in Finland in order to extend the life of the operation by a further ten years. The investment required to deepen the mine from 1,050 m to at least 1,400 m is put at Mk300 million (US$55 million).

Investigations to go deeper began in 1996 and are continuing, but already they have outlined an additional 17 Mt of ore averaging 1.1% Cu, 2.1% Zn and 38% pyrite. These grades are significantly higher than those

for the ore currently being excavated. Last year, Pyhsalmi and its satellite mine at Mullikkorame extracted 1.5 Mt which yielded 9,500 t of copper in concentrates, 31,000 t of zinc in concentrates and 770,000 t of pyrite concentrates. The zinc concentrates provide raw material for Outokumpu’s Kokkola zinc plant whilst the copper concentrates are sent to the company’s Harjavalta smelter. The pyrite is sold in Finland and on world markets.

Pyhsalmi employs some 260 people. The deepening will provide employment for 60 workers over 2.5 years and secure employment for more than 200 well beyond 2010.

BHARAT ALUMINIUM COMPANY LTD (BALCO) PRIVATISATION DECISION

The Indian Government is pressing ahead with the privatisation of its state-owned mining and metals industry (MJ, February 26, 1998, p.137). An unnamed senior government official told Reuters this week that the government had decided to sell a 51% interest in Bharat Aluminium Co. Ltd (Balco) to a strategic investor through a global tender. A public offer will be made in the domestic market at a later date, to reduce the government’s interest to 26%. A divestment commission established to advise the government had earlier recommended the sale of an initial 40% interest to a strategic investor, increasing the proportion of private ownership to 74% within two years. Towards the end of last year, the government was reported to be deliberating on the size (40%-51%) of the initial sale (MJ, October 30, 1998, p.348). Balco has integrated production facilities at Korba, in the State of Madhya Pradesh, including a 100,000 t/y primary aluminium smelter. The company plans to spend US$225 million in the period to 2001/02, including development of new bauxite mines ; modernisation of its smelter, which uses Soderburg technology ; expansion of the power plant ; and the building of a cold rolling mill. This week, the managing director of Balco, Syamal Ghosh, pointed out that a strategic investor could bring in both fresh capital and modern technology.

CANADIAN AMBITIONS FOR INDIAN BAUXITE India is estimated to possess 10% of the world’s bauxite resources and the bauxite/alumina sector is regarded as an area offering substantial export opportunities (MJ, February 26, p.137). A number of new projects are under consideration and foreign investor interest is growing. Continental Resources Ltd of Montreal, Quebec, is one of the optimists. By mid-May, the company expects to have received positive results from a prefeasibility study undertaken by SNC-Lavalin relating to the development of the Gandhamardan bauxite deposit in Orissa State. The project envisages a bauxite-mining operation with an annual production of 3 Mt/y as a first phase. Subsequently a 1 Mt/y capacity alumina refinery and a 225,000 t/y aluminium smelter are contemplated, with provision for the construction of a thermal power station and attendant development of a local coal deposit to provide the fuel source. Bauxite occurrences on the Gandhamardan plateau were first reported in 1959 by India’s Directorate of Mines, which subsequently undertook a four-year exploration programme in 1975, with another federal agency, Mineral Exploration Corp., participating in the latter stages. In 1996, Continental negotiated with Orissa’s state -owned Orissa Mining Corp., and signed a memorandum of understanding to acquire an interest in the Gandhamardan deposit. In 1997, the two parties entered into a joint-venture agreement to develop the deposit (Continental 51%, OMC 49%) whereupon Continental assessed all previous work and carried out further tests. The jv partners appointed SNC-Lavalin to undertake the prefeasibility study in August last year. It is understood that the jv with OMC covers only the first phase of the project, the establishment of a mine, although OMC has an option to participate in subsequent phases should it so wish. Previous exploration of the deposit included the completion of 6,686 m of drilling in 219 holes at a 200 m spacing, with a 100 m interval in one small area. More than 5,000 drill samples were collected, plus a further 265 from pits and outcrops. The results demonstrated that the bauxite horizon possesses good continuity and extends for a distance of 9.8 km with an average width of 0.75 km and an average thickness

of 16.7 m. The principal ore mineral is gibbsite and a resource of 230 Mt has been estimated, with an indicated grade of 45.75% Al2O3, 2.23% SiO2, 23.23% Fe2O3 and 2.58% TiO2. The average overburden thickness is 5 m and a waste-to-ore ratio has been calculated of 0.3 :1. The bauxite is a weathered khondalite (a variety of granite gneiss) and the base of the horizon is well defined. Continental reports that the bauxite is generally soft and porous, and unconsolidated, amenable to mining by excavator and dozer, although locally the bauxite is a medium to hard rock. If the results of the SNC-Lavalin study are positive, Continental anticipates that a full feasibility study could commence in mid-year, with completion expected within 18 months. The company’s shares are listed but not currently t raded on the Montreal Stock Exchange. Following recent changes at board and corporate level, and an equity issue, it expects that its shares will be re-instated for trading « in the near future ».

WORLD COPPER : THE WAITING GAME The Lisbon-based International Copper Study Group (ICSG) announced this week that, despite mine closures, world mine output rose by 4.7% in 1998 to 12.1 Mt. In December, moreover, there was a month-on-month increase of 7%. The ICSG says that major reductions in output last year in the US, Peru and Zambia (which had been partly market driven) were more than offset by production growth in Chile, Argentina and Indonesia. World refined production of copper, however, grew by only 1.9% to reach 13.83 Mt, mainly because of a continuing low level of secondary refined output (1.8 Mt).

World copper consumption in 1998 is estimated to have increased by 2.4% to 13.4 Mt, and the ICSG estimates a provisional year-end copper surplus of 436,000 t, about 50,000 t less than at the end of 1997.

Nevertheless, on the world’s principal terminal market for copper, the London Metal Exchange, stocks have risen by more than 100,000 t thus far in 1999. They currently stand at 698,000 t, close to all-time highs, and the LME three-month copper price plunged this week to a fresh 12-year low of US$1,374/t (about US$0.62/lb).

Low prices are putting severe pressure on copper producers but there continues to be a marked reluctance to close down high-cost operations. Thus far, the sorry state of the market has claimed only one major casualty, Highland Valley in British Columbia, Canada, where operations are to cease indefinitely in May (MJ, January 22, p.33), and this week the most notable news from producers was an announcement from Grupo Mexico that it intends to boost 1999 production by 6.5% to 403,000 t in order to reduce unit costs (this issue, p.174).

Traders expect that in an oversupplied market prices will continue to fall and deem production cuts unlikely unless prices hit US$1,322/t (US$0.60/lb). The one sign of encouragement is the possibility that China will embark on a major buying exercise to take advantage of low prices.

Meanwhile, in the biggest producing country, Chile, there is a consensus amongst local analysts that no production cuts are imminent, with the closure of high-cost North American operations deemed far more likely, particularly in the US where producers do not have the benefit of a depreciating currency. Indeed, BHP said this week that it could not rule out further rationalisation in its North American copper sector where it closed its Pinto Valley operation in Arizona last year. BHP’s overall cash costs for its operations world-wide are estimated to average US$0.54/lb but in North America its cash costs are believed to be nearer US$0.83/lb.

In Chile, by contrast, where grades are relatively high, there is a preponderance of low-cost open pits, use of low-cost technology such as SX-EW is increasing, and cash operating costs are generally towards the low end of the cost curve. Codelco and Cyprus Amax Minerals cite cash costs as low as US$0.40/lb at their El Abra mine. Elsewhere, Rio Algom expects to produce copper at a cash cost of US$0.46/lb this year at its Cerro Colorado mine, Minorco’s Mantos Blancos units have combined cash costs around US$0. 56/lb, Phelps Dodge has cash costs of US$0.55/lb at Candelaria, Cominco and Teck have cash costs of about US$0.50/lb at Quebrada Blanca, and Falconbridge and Minorco expect cash costs of US$0.50/lb at Collahuasi.

There are certainly some Chilean copper producers incurring losses at current prices. Codelco’s Salvador division, for example, has cash costs of US$0.68/lb, but the state-owned company is expected to subsidise the operation rather than fire workers in a presidential election year. In terms of total costs which include depreciation and debt repayments, some of the lower-cost operations are incurring book losses. Exxon Corp.’s Disputada de Las Condes reportedly has cash costs of US$0.75/lb but total costs of nearer US$1.20/lb, and traders suspect that Exxon is willing to write off the loss on its taxes.

For some operations such as Cerro Colorado, Quebrada Blanca, Candelaria and Collahuasi, total costs are US$0.70/lb or more, because the operations are relatively new and some companies are still paying back project financing costs.

AUSTRALIANS IN IRANIAN ILMENITE JV A Brisbane-based junior exploration company, Union Mining NL, has announced that it hopes to proceed with a joint-venture titanium project at Kahnooj in southern Iran. The project relates to an extensive placer deposit, and a hard-rock deposit, believed to be the source of the placer, located 5 km to the southeast. The alluvial deposits extend as a series of fans over an area measuring several kilometres in width and at least 5 km in length.

Union reports that evaluation of pitting and drilling of the alluvials undertaken within an area measuring 1.7 km by 2.5 km has provided an indicated and inferred resource of 153 Mt averaging 5% ilmenite and 4.5% titanomagnetite to a depth of 30 m. The indicated portion of the resource, from surface to a depth of 8 m, amounts to 40.9 Mt at the same grades. There is insufficient information for a resource estimate below 30 m but Union reports that limited drilling has shown that the placer extends to a depth of 170 m to the north and that it is at least 80 m thick to the south. At the hard-rock deposit, limited drilling has outlined an inferred resource of 200 Mt at 8.5% ilmenite and 8.5% titanomagnetite.

The joint venture company, Union Itok International AG, is owned 50% by Union Mining and 50% by Iranian interests. The Australian company refers to a joint statement issued in Tehran at the beginning of this month on the occasion of a two-day visit to Iran by an Australian delegation. In the statement, signed by Iran’s Agriculture Minister, Dr Issa Kalantari and Tim Fisher, Australia’s Deputy Prime Minister and Minister for Trade, both parties expressed pleasure at the establishment of the joint venture, and their hope that this would « lead to successful negotiations relating to the Kahnooj project, and to exploration of mineral resources in Kerman and East Azarbayjan Provinces ».

Union Mining says this implies willingness by the Iranian Government to award the Kahnooj project to Union Itok, provided that commercial agreement can be reached. A due diligence study has been completed and Union Itok has begun negotiations with the Mines and Metals Ministry on exploration and development. Once agreement has been reached a feasibility study will begin.

Separately, the jv expects to explore for copper and gold, and five exploration licence applications have been lodged covering 4,800 km2. Since these are larger than the allowable 40 km2 licence, agreement will be required with both the Geological Survey of Iran and National Iranian Copper Industries Co. (NICICO). In Kerman Province, the licence application areas are located within the same volcanic belt as NICICO’s world-class Sar Cheshmeh deposit, where there is a resource of 1,300 Mt at 0.67% Cu, 0.03% Mo, 0.27 g/t Au and 3.9 g/t Ag. In eastern Azarbayjan, the licence areas are in the volcanic belt that hosts the Sungun copper deposit which has an inferred resource of some 860 Mt at 0.6% Cu and 0.19% Mo, and where there are plans for a US$350 million investment under a barter-trade agreement with China.

The focus for gold exploration is on epithermal targets within the Dig Rostam fault belt, where three 40 km2 licence applications are, according to Union Mining, « at an advanced stage of being granted ». Sampling of a number of siliceous sinters has revealed pathfinder elements.

CANADIAN-TURKISH J.V TO BUILD MGO PLANT IN JORDAN AGRA Monenco, a wholly-owned subsidiary of AGRA Inc., one of Canada’s largest international engineering, construction and technology corporations, has entered into a joint venture with Attila Dogan

Construction and Installation Co. Inc. of Turkey to build a C$121 million magnesium oxide plant in Jordan. The partners have been awarded the contract by Jordan Magnesia Co. (Jormag), whose major shareholders include Dead Sea Industries and Arab Potash Co.

The plant will be located at Numeira and will rely on brine from the Dead Sea and locally available limestone. The turnkey project will be executed on a design-build basis, and will span initial design through to commissioning and start-up. It will involve heavy bulk material handling equipment, including stackers and reclaimers, a rotary limekiln, an ion-exchange system for removal of boron from the brine, thickeners, bagging systems and auxiliary equipment. Work is scheduled to begin this month with a completion target of 22 months.

LEADING INDICATORS Share Indices Mar 10 : % change (%) Year’s Max/Min FT Ordinary 3,806 2.1 88 3,925-2,913 US Dow Jones 9,773 5.4 100 9,773-7,742 FT Gold Mines 955 7.4 39 1,352-702 Australian All Mining 572 1.7 30 692-520 South African Gold 984 7.5 49 1,311-673 Toronto Met/Min 3,009 3.0 23 4,356-2,596 Nikkei Dow 15,480 9.2 65 16,756-13,071 Hang Seng 10,749 8.3 79 11,811-6,859 James Capel Indices Mar 10 year (100 on 1/1/89 except*100 on .1.90) Global Base Metal 106 2.8 28 141-93 Global Diversified Mining 114 3.9 39 144-94 Global Gold Ex S Africa 74 7.0 39 102-56 Global Gold 65 7.3 37 89-51 Global Mining 94 3.7 37 121-78 Smaller Mining Companies 44 3.4 18 61-40 North American Base Metal 139 2.5 31 177-122 North American Gold 83 7.6 35-118-64 Latin American Mining* 137 6.8 15 237-120 Latin American (Ex CVRD)* 109 4.8 24 170-90 Other Metals/Minerals 107 -0.1 38 133-91 Global Coal Mining 143 4.2 71 153-116 Rebased by Mining Journal Commodity Prices Mar 10 Gold (London) $292.75 2.0 37 $315-279.65 Copper (LME) $1,381.50 -0.1 0 $1,879-1,380 Aluminium (U.S. producers) $61.50c 0.0 36 $73-55 Brent Blend (dated) $11.50 6.5 38 $14.78-9.44

INDUSTRY IN ACTION

EXPLORATION

Hislop drilling shows gold for St Andrew The first phase of drilling in 1999 at St Andrew Goldfields Ltd’s Hislop gold property, located in the Timmins area of Ontario, has intersected gold mineralisation in the west of the property. The company believes that gold grades and mineralisation widths amenable to open-pit mining have been confirmed by the drilling. Better results are as follows :

Hole Interval Au (m) (g/t) H99-1 30.3-49.1 38.72 incl. 33.6-41.2 90.47 H99-2 32.9-61.6 2.89 incl. 41.6-54.3 4.44 H99-4 22.2-55.2 1.54 St Andrew reports that gold mineralisation at Hislop outcrops, and the company intends to expedite development of an open-pit operation, targeting three zones of gold mineralisation with a combined strike length of over 300 m. A second round of drilling is in progress, and infrastructure is reported to be in place. Metallurgical work will be undertaken to optimise extraction routes.

Casa Berardi grades Aurizon Mines Ltd has received assays from its continuing 50,000 m drilling programme at the Casa Berardi project in northwestern Quebec. The drilling is exploring within a 1 km radius of the West Mine area, and recent holes tested the continuity of mineralisation in Zone 113, with the following better results :

Hole Intercept Au (m) (g/t) S5A 9.6 8.2 S6A 18.8 7.9 S16 24.0 8.5 incl. 5.4 29.5 The company regards the results as confirming the dimensions of Zone 113, and is particularly encouraged by the results from hole S16, as this hole intersected the zone about 160 m vertically below previous intersections. The drilling programme is utilising four dill rigs, testing the potential of Zone 113 between 450 m and 700 m below surface. A total of ten rigs are operating in the West Mine area, undertaking exploration and definition drilling.

Kerboul‚ assays Canadian junior, Orezone Resources Inc., has received results from a 5,000 m reverse-circulation drilling programme at its Kerboul‚ gold property in Burkina Faso. The programme was intended as an orientation exercise to test several soil geochemical gold anomalies. The holes intersected a number of « wide, well-mineralised quartz stockwork zones », with better results as follows :

Hole Interval Au (m) (g/t) RCK99-58 42-98 2.51 incl. 46-62 4.69

RCK99-04 0-130 1.49 incl. 20-68 2.28 RCK99-41 0-50 1.87 RCK99-45 0.94 1.03 The stockwork zones occur within two sericitic schist corridors, which are highly-altered and strongly-oxidised. The system appears to be contained within the Inata fault zone, which may be up to 30 km in length. Kerboul‚ contains at least 10 km of this trend within its boundaries. The Kerboul‚ property is adjacent to the Inata prospect, on the Belahouro gold property, jointly held by BHP and Resolute. Orezone is earning a 90% interest in Kerboul‚, with the Government of Burkina Faso retaining a 10% carried interest.

Rapu Rapu results TVI Pacific Inc. has received assay results from Lafayette Mining NL, the operator of the Rapu Rapu polymetallic joint venture. The assays are from Lafayette’s current drilling programme on Rapu Rapu island in the Philippines, at the Ungay Malabago prospect. The programme is testing postulated extensions of mineralisation already discovered (MJ, January 22, p.37), and infill drilling previous borehole spacings.

Better results are as follows :

Hole Interval Au Cu Zn Ag (m) (g/t) (%) (%) (g/t) UMC013 37-59 3.85 2.01 2.69 40.9 UMC014 54-73 3.78 2.34 4.97 60.57 UMC015 51-70 3.60 1.87 2.97 42.04 The boreholes listed above were part of a series drilled to provide a complete cross-section of the mineralisation, intersecting the three known zones of mineralisation. Lafayette reports that substantially wider zones than expected were intercepted. Lafayette is earning a 75% interest in the property by spending US$3 million on exploration over a four-year period, as well as paying TVI Pacific US$150,000.

Thyssen drilling results Thyssen Mining Exploration Inc., previously Consolidated Trilogy Ventures Ltd, has recently completed a drilling programme at the Churqui copper-silver property near Vallenar, in Chile’s third region. The programme was designed to confirm the presence, grade and continuity of manto-style mineralisation, and also to interpret the regional geology. The company previously identified a resource of 243,000 t at 2.2% Cu at Churqui, as part of an in-house feasibility study (MJ, November 14, 1997, p.405). The company identified manto mineralisation in a total of 15 holes, with better results as follows :

Hole Interval Cu Ag (m) (%) (g/t) CH98-04 24-27 3.08 86.73 CH98-07 32-37 2.36 112.34 CH98-09 21.4-24.4 3.29 51.43 CH98-12 30-32 4.25 24.20 The manto varies in the boreholes from 0.5 m to 5 m in thickness, averaging 2 m, and is at between 15 m and 40 m from surface. The mineralisation appears open in several directions, and Thyssen intends to continue its exploration at Churqui.

New Lac de Gras Kennecott Canada Exploration has discovered a new kimberlite pipe in shallow water close to the south shore of Lac de Gras, according to its partner, Toronto-based Southern Era Resources Ltd. The licence area is adjacent to the southern border of the Ekati diamond mine property (this issue, p.169). Two shallow drill holes have been completed in the kimberlite, intersecting « volcaniclastic material », and core samples have been sent to Kennecott’s Thunder Bay laboratory for analysis.

The licence area in question is 60%-owned by Kennecott and 40%-owned by Southern Era.

High-grade platinum at Krutoi Log A recent drilling programme at Krutoi Log in the Urals has returned significant platinum assay values for London-based Eurasia Mining plc. The prospect is within the Soloviev Hill property, where Eurasia holds a 51% interest in a mining licence and a 75% interest in an exploration licence. The drilling intersected 1 m at 23.8 g/t Pt from 48 m to 49 m downhole, consisting of three parallel chromite bands, one of which contains visible platinum, according to the company. This type of mineralisation is apparently similar to that found at the nearby Godspodskaya shaft at Soloviev Hill, where mining was carried out in the 1930s.

Eurasia intends to start follow-up drilling later this year, as well as exploration within the layered ultramafic complex at Soloviev Hill. The company is also considering a small-scale trial mining programme at the property.

Newcrest’s overseas exploration cutbacks Australian gold producer Newcrest Mining Ltd plans to reduce exploration in the 1999/2000 fiscal year, to around A$40 million, A$18 million less than the expected spend in the current year. Exploration will be concentrated on areas surrounding existing and developing mines, and its overseas effort will be scaled down. Newcrest’s managing director, Gordon Galt, says that the company’s most prospective areas are around its mines at Telfer, New Celebration and Boddington in Western Australia, Cadia/Ridgeway in New South Wales and Gosowong in Indonesia.

Rio Tinto farms into Taca-Taca portion Rio Tinto Mining and Exploration Ltd has signed an agreement with Corriente Resources Inc. over a block of ground within Corriente’s Taca -Taca copper-gold property in Argentina. The 2 km x 2.5 km block has been targeted by Rio Tinto for the discovery of a near-surface copper oxide mineralisation zone in an area of the property called Cerro Cobre. Corriente geologists have identified oxide copper mineralisation along road-cuts in this area.

Rio Tinto can earn a 70% interest in the block by spending US$500,000 on exploration of the Cerro Cobre block by October 31, 1999, and US$10 million over a six-year period. In addition, Rio Tinto must pay Corriente US$1 million. Corriente is continuing its drilling programme on the rest of the Taca-Taca property, the remainder of which is 100%-owned by Corriente.

Seahawk discovers emeralds at Piteiras Seahawk Minerals Inc. states that a preliminary, four-hole, diamond-drilling programme at the Piteiras property in Minas Gerais, Brazil has intercepted emeralds in the drill core of one borehole. The programme had been designed to identify mafic and ultramafic horizons capable of hosting emeralds, and was successful in finding them in two of the boreholes. PD98-03 intersected 28.75 m of ultramafic rock, and PD98-04 intersected 15.81 m. The ultramafic unit has been correlated by soil and auger drilling to a strong chromium/nickel anomaly nearby, with a 1.1 km strike-length, and values up to 2,259 g/t.

Seahawk reports that the emeralds are strongly-coloured, well crystallised, and are disseminated within phlogopite schist. The schist is intruded by quartz and pegmatite veins along a strongly-sheared contact the underlying granite.

Kenor doubles Guinea resource Norwegian gold producer Kenor has increased its resource estimate for the L‚ro/Karta gold mine in Guinea (MJ November 6, 1998, p.365) by 100%, to 7.1Mt at a grade of 2.73 g/t Au, for 627,000 oz of gold. Trygvie Kroepolien, Kenor’s managing director, says that the Karta orebody is still open in three directions. Further exploration and development drilling operations are planned for the property and surrounding areas.

In addition, Kenor’s exploration effort in Ghana has defined an inferred resource of 270,000oz of gold at its Julie property in northern Ghana. Mineralisation is associated with a shear zone with 3.5 km strike length, and the resource includes only the top 30 m of oxidised material, with a width of between 5 m and 20 m.

DEVELOPMENT

Bulong produces first nickel Preston Resources NL has announced that the 9,000 t/y Bulong lateritic nickel-cobalt project in Western Australia has produced its first nickel metal from the high-pressure acid-leach and direct SX-EW process. The company had produced cobalt sulphides in the middle of February, and stocks are being accumulated in preparation for the commissioning of the cobalt refinery, planned for later this month.

Preston states that the recovery of nickel and cobalt from ore « remains high », and forecasts commercial production to start around the end of March. The project suffered a minor setback earlier this year, when plant operations were suspended after a mechanical seal failed, causing the plant to shut down unexpectedly (MJ, January 1/8, p.6).

Costa Rica gold project progress The Rio Chiquitao gold project in Costa Rica is on schedule and on budget, according to the owner, Denver-based Laguna Gold Co. The property produced gold and silver in the late 1980s, and Laguna hopes to build a mine capable of producing 10,000 oz of gold in 1999, 20,000 oz in 2000, and 21,600 oz in 2001. Definition of an additional year’s operation is anticipate d from planned development drilling. Construction of the crushing and processing plant, together with the heap-leach pads started in early January this year, and the company expects to start heap-leaching operations in April or May this year.

Quicay sale fails again The Peruvian Government did not attract any bidders for its rescheduled March 8 auction of the Quicay gold deposit, even after dropping the asking price by 15% from the previous failed auction last month (MJ, February 26, p.134). The government had decided that US$10 million was too much for the project, since potential buyers would have to pledge an additional US$10 million in investment, and asked US$8.5 million this time around. Enrique Olivares, spokesman for Centromin, Peru’s state miner a nd current owner of Quicay, says that potential bidders are wary of the world gold price at present. Mr Olivares is not sure whether the price for Quicay will be reduced again to attract buyers.

Wandoo South resource upgraded Normandy Mining Ltd reports that the resource calculation for the Wandoo South gold deposit in Western Australia has been upgraded by 32% to a total of 11.74 M oz of gold contained within 352 Mt at a grade of 1.04 g/t Au. The increase was due to a number of factors, including a 17% grade increase caused by a higher cut-off grade, inclusion of high-grade drilling intersections, and exclusion of lower-grade material. The previous resource figure was calculated in 1996, when 8.9 M oz contained in 311 Mt at 0.89 g/t was estimated to exist at Wandoo South. The Wandoo North area, containing the recently-acquired Hedges tenements, is not included in the Wandoo South resource.

Normandy has a 44.44% interest in the Wandoo project, and its joint venture partners are Newcrest Mining Ltd (22.22%), and Acacia Resources Ltd (33.33%).

Project switch at Bulyanhulu Sutton Resources has agreed with Placer Dome Technical Services Ltd (PDTS) to transfer PDTS’ project management responsibilities at the Bulyanhulu gold project (MJ, February 19, p.121) in Tanzania. Kilborn Engineering Pacific Ltd will assist Sutton in providing engineering services, and the transfer will take place over the coming weeks.

Michael Kenyon, Sutton’s president, says that PDTS has been « a very effective manager for engineering, procurement and construction activities to date at Bulyanhulu », but added that « recent events . . . have made it necessary to effect the change ». Barrick Gold Corp. has recently made an offer for Sutton.

El Limon vein extended Black Hawk Mining Inc. has extended the Talavera Sur mineralised vein at its El Limon gold mine in northwestern Nicaragua. The drilling comprised eight diamond drill-holes along Talavera Sur’s strike projection, and intersected a 200 m extension of the vein, confirming mineralisation interpretations. Better results include a 3.9 m intersection at 35 g/t Au and 19.48 g/t Ag from 112 m, and 3.5 m at 23.23 g/t Au and 13.78 g/t Ag from 131 m. Underground development of mine infrastructure to gain access to the mineralisation is in progress. Infill drilling is continuing at El Limon, and further extension-testing drilling is planned.

Placer confirms Sukhoi Log data Douglas Brown, Placer Dome’s development and planning officer in Irkutsk, says that the company has confirmed Russian geologists’ assessment of the Sukhoi Log gold deposit. Placer Dome is one of three gold producers interested in the upcoming tender of the deposit by Russian authorities. Sukhoi Log contains 33.3 M oz of gold at an average 3 g/t. Placer Dome, as well as Rio Tinto plc and Barrick Gold Corp., has been assessing the information it acquired late last year in order to decide the mining method and ore grade model, and is in the process of registering a Russian subsidiary in case only Russian companies are allowed to bid for the development rights to Sukhoi Log.

Brisas reserves increase Gold Reserve Inc. has increased the reserve estimate at its Brisas copper-gold property in southeast Venezuela. The company now calculates that the deposit contains mineable reserves of 223 Mt at a grade of 0.13% Cu and 0.78 g/t Au, for 5.6 M oz of gold and 260,000 t of copper. The calculation used a gold price of US$300/oz and copper price of US$0.80/lb. A year ago, Gold Reserve estimated that Brisas contained 177.5 Mt at a grade of 0.13% Cu and 0.8 g/t Au, using the same criteria. A prefeasibility study at Brisas last year reduced expected costs for development of the project (MJ, October 9, 1998, p.275).

In April, the company expects to receive the results from metallurgical testwork designed to evaluate the possibility of producing cathode copper on site.

Navan’s Spanish progress Navan Resources plc, developing the Aguas Te¤idas polymetallic property in southern Spain (MJ, May 1, 1998, p.339), has intersected high-grade zinc-copper-lead-silver mineralisation in underground infill drilling. A total of 11 drill-holes have been completed, all of which intersected massive sulphide mineralisation, indicating the presence of a « large, potentially high-grade » body of mineralisation. The programme is designed to delineate fully the mineralisation zones in the east of the deposit. Brian Calver, Navan’s chief executive, says that the drilling is important , as « it raises the possibility of mining at higher grades than envisaged in the initial mine plan ». The resource at Aguas Te¤idas, using a 5% Zn cut-off grade, has previously been estimated by Navan at 9.65 Mt at a grade of 8% Zn, 1.1% Cu, 2.2% Pb and 75 g/t Ag. This resource is contained within a massive sulphide envelope, estimated at around 40 Mt, which is open in one direction.

The company intends to continue drilling during this year, with underground development focusing on the areas defined by recent drilling. The intention is to collect a large bulk sample for processing at Navan’s existing Almagrera operation. Navan intends to produce 160,000 t of ore from development and trial mining operations this year, increasing to 600,000 t by 2001.

Gresik produces first copper cathode The new Gresik copper smelter in Indonesia has started production of copper cathode, according to operator Mitsubishi Materials Corp. The company intends to begin marketing the output in April. The plant is intended to produce 150,000 t of copper in its first year of operation, and to increase to its 200,000 t/y full capacity by 2001. Mitsubishi expects to sell 30% of Gresik’s output in Indonesia, and the rest to other Southeast Asian countries.

Gresik is 75%-owned by Mitsubishi, and 25%-owned by Freeport-McMoRan Copper and Gold Inc.

DRC opens gold and diamond exchange A new gold and diamond exchange has been launched in the Democratic Republic of the Congo by President Laurent Kabila. The Bourse Congolaise des MatiŠres Pr‚cieuses is intended eventually to handle all of the gold and diamond output of the troubled country. This would be no mean feat, considering the majority of the main production areas are not held by the government, but by rebel forces.

PRODUCTION

Arch considers mine sales Arch Coal Inc., the second largest coal producer in the US, is exploring the potential sale of three of its smaller mining operations in Central Appalachia, US. The Lone Mountain and Pardee mines, on the Kentucky-Virginia border, and Coal-Mac’s operations in eastern Kentucky, are under scrutiny. Coal -Mac’s West Virginia are not included in the potential sale. The operations’ combined coal output in 1998 was 5.3 Mt, mostly of low-sulphur or compliance-quality coal.

Arch’s president and chief executive, Steven Leer, says that the sale of these operations is not certain, but if it went ahead, proceeds would be used primarily to reduce debt.

Acacia keeps sights up Australian gold producer Acacia Resources Ltd intends to keep output in 1999 at least as high as in 1998. Production last year totalled 510,518 oz, an increase of 20% over 1997. Michael Folie, Acacia’s managing director, says that last year all targets were met or exceeded, and he foresees further increase from developments at Sunrise Dam and Boddington. Acacia discovered a new gold mineralisation zone at depth at Sunrise Dam last year (MJ, October 16, 1998, p.297). At Boddington, Acacia, together with joint-venture partners Newcrest Mining Ltd and Normandy Mining Ltd, bought adjoining land early last year (MJ, April 24, 1998, p.318).

Niger’s uranium losses The main uranium producer in Niger expects to make cutbacks this year, after large losses in 1998. Phillipe Viaud, Compagnie MiniŠre d’Akouta’s managing director, says that the situation is « quite worrying on the financial level, and big economy measures have to be taken ». The company produced around 2,000 t of uranium in 1998, but the fall in the price of uranium has hit the company hard. Niger, which in 1997 was the third largest uranium producer in the world, has also suffered, as the proceeds from uranium once represented 70% of its export earnings, but now represent only 10%.

Grupo Mexico’s copper output forecast Daniel Tellechea, Grupo Mexico’s chief financial officer, says that the company expects to increase copper production in 1999 by 6% over the 1998 production of 151,053 t. Mr Tellechea says that Grupo Mexico is trying to reduce production costs in the face of plummeting world prices for copper. Grupo Mexico’s investments in 1999 are expected to total between US$180 million and US$200 million.

More copper from Europe In Armenia, Manes and Vallex intends to increase blister copper production to 12,000 t/y by 2001. This represents a 400% increase over last year’s output, according to the plant’s chief, Valery Medzhlumyan. The plant was formerly known as Alaverdi, until Vallex, a Liechtenstein-based company, bought a majority shareholding in 1997. Vallex has restored the plant, which was closed in 1989 for environmental reasons (MJ, January 17, 1992, p.46).

Elsewhere, in Cyprus, Hellenic Copper Mines is on schedule to produce 6,500 t of copper this year at its Skouriotissa mine, and Constantine Xydas, Hellenic’s managing director, says plans are being considered for further expansions. The plant began operations in 1996 (MJ, July 5, 1996, p.6), and is planned to increase output to 8,000 t/y by 2000. Mr Xydas says that output of up to 12,000 t/y is being considered, although this would need additional equipment.

Kalgoorlie nickel smelter reopens WMC has lifted the force majeure on deliveries from its nickel smelter in Kalgoorlie. Titan Resources NL, a supplier of nickel concentrate to Kalgoorlie, says that it resumed deliveries of concentrate on March 8. WMC shut the smelter down on January 3, after a leak in a flash furnace. Maintenance work planned for 2001 was brought forward to take advantage of the unplanned stoppage, allowing a reline of the furnace MJ, January 25, p.18).

Hachinohe plans zinc boost Hachinohe Smelting, 58%-owned by Mitsui Mining and Smelting Co. Ltd, is planning to increase its output of refined zinc in 1999, starting April 1. Hachinohe expects to produce about 98,000 t in the year to March 3l, 1999, and is scheduled to boost that to 109,000 t for the following year. Production capacity at Hachinohe is 112,000 t/y. The balance of the ownership is held by Nippon Mining and Metals Co. Ltd (28%), Toho Zinc Co. Ltd (10%), and Nippon Soda Co. Ltd (4%).

Korea Zinc to lift production South Korea’s sole refined lead producer, Korea Zinc, expects to increase output to 200,000 t/y by 2000, from the current 135,000 t/y. Kim Yong-duk, Korea Zinc’s managing director, says that the construction of the expansion at its Onsan plant is expected to begin in the first half of this year, and is scheduled to be complete in the second half of 2000. The project is forecast to cost W37.8 billion (US$304 million).

Six-day suspension at Elura Pasminco suspended operations at its Elura lead-zinc mine in New South Wales for a six-day period between March 1 and March 7. The stoppage was a result of a fatal accident which occurred on March 1, when a miner was caught in a fall of ground. The mine produced 53,365 t of contained zinc in the year to June 30, 1998, together with 37,587 t of lead.

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West Cliff’s partial reprieve BHP has revised its plan to reduce output from its West Cliff coal mine in New South Wales, and now schedules a cut in production to 1.4 Mt/y. The original cut was planned to be to 1.2 Mt/y, but the company

found that the mine will be more economical at the higher rate. The decline in output will result in the loss of half of the mine’s workforce to 140 employees.

TECHNOLOGY TODAY

AQUARIUM SET TO REVOLUTIONISE DIAMOND SECURITY In its constant search to improve product security, De Beers has developed a fully-automated diamond recovery plant and sorthouse complex which will completely eliminate the final hand sorting of recovered stones. The first production facility using this innovative technology is currently being installed at Botswana’s Jwaneng mine and is due on stream in June 2000 at an estimated cost of P 360 million (US$77 million). It will process concentrates from Jwaneng’s main treat ment and recrush plants, along with some material from the other Debswana Diamond Co. mines at Orapa and Letlhakane.

As the most profitable mine in the De Beers stable, Jwaneng was selected for the first on-mine installation of the so-called ‘Aquarium’ pro ject technology, developed in De Beers’ Diamond Research Laboratory in Johannesburg where the term was coined. This derives from two complementary facilities, a completely automated recovery plant (CARP) and fully integrated sorting house (FISH). The project’s economic justification derives not only from its elimination of product theft by ending direct human involvement in sorting stones ready for shipment, but also from superior diamond recovery efficiency which should maximise profitability. CARP is equipped with magnetic rolls, concentrators (permrolls) and a new design of X-ray machine which features finer and more efficient sorting capabilities. FISH consists of several unit processes which prepare, clean, sort, size, weigh and package diamonds, doing away entirely with the traditional glove-box, hand-sorting process.

In addition, the Aquarium complex will enable the processing of Jwaneng’s old recovery dumps which have already been specially set aside and ensure that virtually no diamonds will be lost to tailings, presently unavoidable owing to inherent design inefficiencies in the existing recovery plant and sorthouse. It will also provide feedback of accurate information about diamond size and quantities within 24 hours, which will significantly enhance the ability of the operating personnel to detect any loss of efficiency in the main and recrush plants and dense media separation units.

Jwaneng Aquarium Project, Private Bag 02, Jwaneng Mine, Botswana, Tel : (+267) 384 619. E-mail : djwrl@db.za.

P&H SUPPLIES SHOVEL TO NEW LIGNITE MINE With the opening of the Red Hills mine in Mississippi, the state has become the 28th state in the US to produce coal. P&H MinePro© Services has supplied the mine owner, Mississippi Lignite Mining Co., with a specially modified P&H 2800XPB shovel to cope with the soft ground conditions at the mine. The shovel will have a P&H 4100 crawler fitted with 2.7m-wide shoes to lower the machine’s ground -bearing pressure and to increase manoeuvrability. For extended dumping range, the 28.3 m3 dipper is mounted on a dipper handle that is 1.2 m longer than standard.

The Red Hills mine is located in the northern part of Mississippi and is a joint venture between Philips Coal Co. and The North American Coal Co. When it is fully operational it will produce 2.9 Mt/y of lignite to power a nearby 440 MW power station scheduled to begin operating in 2000.

Louise Hermsen, P&H Mining Equipment. Tel : (+1 414) 671 7731. Email : lher@hii.com.

NO OIL FOR THIS PERISTALTIC PUMP The mining industry typically specifies peristaltic pumps for viscous and abrasive slurry handling, chemical reagent dosing and the transfer of delicate suspensions such as flocculant solutions. The Rotho peristaltic hose pump from Jindex offers improved technology by eliminating the need for lubricating fluid inside the

pump cavity. Thus it eliminates the possibility of contaminating valuable products in the event of hose failure.

The pump operates using a pair of rollers spaced 180o apart, or three rollers 120o apart. These rollers compress the pump hose, and as they rotate material is delivered to the pump outlet, while new material is drawn into the inlet as the hose regains its uncompressed shape.

Additional Rotho advantages include the elimination of seals or valves, and it is also self-priming and can run dry without damage. The hose effectively becomes the only wearing part and is cheap and easy to replace.

Jindex, PO Box 110, Frenchs Forest, NSW 1640, Australia. Tel : (+61 2) 9975 7900. Fax : 9975 7955. Email : jindex@enternet.com.au.

“ODDBALL” DRAGLINE PRESERVED IN LEEDS A 50-year-old walking dragline is to be preserved to form part of a heritage site on a restored coal mine near Leeds in the north of England. The Bucyrus-Erie 1150-B machine, nicknamed ‘Oddball’, was one of five imported into the UK during the 1940s and 1950s to work on coal and ironstone mines. Oddball has been unused for over ten years and, since its donation by RJB Mining and a grant from the Heritage Lottery fund to the St Aidan’s Trust (the UK organisation associated with Leeds City Council that has been set up to administer the restored site), has been earmarked for preservation.

So as not to interrupt coal mining, the machine had to be moved 50 m and slewed through 90o. Rather than completely refurbishing the whole machine, UK-based Beeby Plant Repairs and its electrical contractor have reactivated only the minimum number of motors required for the raising of the boom and walking. The boom was lifted with the help of two mobile cranes and the motors powered by the installation of two temporary onboard generators and a 2,000 kW trailer mounted unit. The whole unit was then moved via remote control from a specially built hand-held console.

Once restored, the site and machine will be opened to the public by the St Aidan’s Trust.

Beeby Plant Repairs, Hallcroft Industrial Estate, Retford, Notts. DN22 7SS, UK. Tel : (+44 1777) 708 973. Fax : 860 439.

NEW SUBMERSIBLE PUMP FROM INGERSOLL-DRESSER Ingersoll-Dresser Pump Co. has introduced a new solids-handling, waste-water pump which it hopes will set new industry standards for efficiency and reliability. The MSX pump features advanced hydraulics and motors ranging from 2.2 to 200 kW (3 to 300 hp) for wet-pit applications, with dry-pit motors available starting at 15 kW (20 hp). Models with motors greater than 15 kW feature a non-clog, closed-loop cooling system, designed to increase pump reliability for applications requiring the pump to operate in air.

The MSX is available in discharge sizes ranging from 76 to 508 mm, and the units, according to Ingersoll-Dresser, possess unique, high-quality silicon carbide mechanical seals highly resistant to thermal shock and corrosion.

Enquiries to : Ingersoll-Rand Pump Co., Marketing Services Unit, PO Box 2, Chorley New Road, Horwich, Bolton, Lancs BL6 6NJ, UK.

FOCUS AND COMMENT

TRENDS IN CANADIAN EXPLORATION Natural Resources Canada (NR Can) has recently released ‘Overview of Trends in Canadian Mineral Exploration’, a report prepared each year for presentation to Canada’s federal, provincial and territorial mines authorities. Completed in the latter part of 1998, the report examines exploration spending, diamond drilling, claim-staking and exploration highlights, and provides a regional outlook. There is also a historical

review of Canadian exploration, comment on Canada’s standing in the world exploration context and the globalisation of the mining industry. A breakdown of Canadian exploration spending is provided, by commodity and region, and total mining investments for the past two years are estimated based on company data.

Exploration estimates based on company spending intentions, compiled at the beginning of 1998, give a total spend last year of C$767 million by 548 companies, comprising C$312 million by the junior sector and C$456 million by 133 senior companies. Around 140 companies intended to spend C$1 million or more, accounting for 87% of expenditures. The result would indicate that total 1998 expenditures may be only 5% lower than in 1997. However, NR Can expects that final results will show a 16% fall in the number of junior operators.

Statistical analysis The 1998 estimates are necessarily predictive although NR Can has undertaken an interesting exercise examining the exploration outlook based on statistical analysis of historical data. These data indicate that the level of spending in a given year can be linked to the previous year’s metal prices. Changes in exploration expenditure are likely to lag changes in metal prices because exploration activity in a given year is the result of budget decisions made in the preceding year based on metal prices and profits in that year.

To capture this relationship in its estimating equation, NR Can has used a metal price index (based on the prices of gold, silver, copper, zinc, lead and nickel) lagged one year. Using data for the years 1969-97, the statistical equation predicts that senior companies will have spent about C$460 million on exploration in 1998, and junior companies about C$255 million. For all companies, a total of C$720 million is predicted.

In 1997, for which actual figures are now available, NR Can estimates that a total of 652 companies spent C$804 million on exploration (compared with 629 companies with a total spend of C$895 million in 1996). The 1997 total (excluding individual prospectors) comprises C$291 million spent by 494 junior companies and C$506 million by 158 seniors. Exploration expenditure in Canada, on average, represents about 15% of total mining investment. In 1997 this amounted to about C$4.7 billion, but is forecast to have been nearer C$4.4 billion in 1998.

The Northwest Territories was the most favoured destination for grass-roots exploration last year, followed by Quebec, Ontario, British Columbia, Newfoundland and Labrador. By comparison with 1997, it is expected that grassroots exploration expenditures in 1998 will have declined in most provinces and territories, except in Alberta, Quebec and Manitoba.

Regional successes NR Can says that the period 1994-96 appears to have been one of the most successful three-year discovery periods since the 1970s, although post-1996 discoveries point to a good discovery success rate for the coming years. Among the most significant recent discoveries, the Voisey’s Bay nickel deposit in Labrador stands out, with 116 Mt of mineralisation having been identified on the property by the end of 1997.

There have also been significant, albeit less spectacular, nickel finds in the Sudbury Basin in northern Ontario. These include Falconbridge’s high -grade Onaping Deep deposit and its Norman West deposit, and Inco’s discovery of two new deposits near its Copper Cliff South mine, one (Kelly Lake) being located at a depth of 1,390 m. In Manitoba, Falconbridge is drilling its Williams Lake deposit along the southwest extension of the Thompson Nickel Belt, and Canmine Resources Corp. has discovered a nickel-copper deposit at Maskwa in the Bird River region in the southeast.

In Quebec, « aggressive exploration » is being conducted in the Ungava Nickel Belt, where Falconbridge has developed its Raglan nickel property. Elsewhere in the province, Noranda has discovered the deep Porphyry Mountain copper-molybdenum deposit at its Gaspe copper operation, and has outlined some 200 Mt at 0.73% Cu and 0.08% Mo (a copper-equivalent grade of 1%) at 1,000-1,700 m depth.

In western Ontario, Avalon Ventures Ltd is exploring the Separation Rapids pegmatite deposit 60 km north of Kenora. The ‘Big Whopper’ pegmatite on the property has been traced along strike for 1.2 km and ranges from 15-80 m in thickness. NRCan reports that there are at least 7 Mt containing 30-60% petalite (an aluminium-lithium silicate) plus 25-30% rubidium-rich potassium feldspar.

Uranium exploration continues to figure prominently in Saskatchewan’s Athabasca Basin, and nine or more new mines, including two based on the world-class deposits at Cigar Lake and McArthur River, are under development or awaiting final approval.

In the Fort … la Corne district of the province, diamonds are the focus, with some 80 kimberlites having been discovered, about 50% of which are diamondiferous but low in grade. The main diamond focus is in NWT, with further promising new kimberlite finds in the vicinity of the new Ekati mine (this issue, p.169). Advanced projects include Diavik, Jericho and the AK-5034 deposit. At Snap Lake, Winspear Resources Ltd and Aber Resources have discovered a significant diamondiferous kimberlite dyke. In Alberta, the Buffalo Hills joint venture between Ashton Mining Canada Inc., Alberta Energy Corp. and Pure Gold Resources Inc. has discovered 23 kimberlites since early 1997 but most are of relatively low grade. Further geophysical targets remain to be drilled.

In the Yukon, the main interest is in the polymetallic deposits of Kudz Ze Kayah, Wolverine and Wolf (Cu-Zn-Pb-Ag-Au) and Fyre Lake (Cu-Co-Au).

Gold exploration is being undertaken in various parts of Canada, amongst the most notable projects being WMC International Ltd’ s Maliadine West deposit in NWT, which NR Can reports could produce as much as 0.4 M oz/y for at least ten years.

Drilling as an indicator Drilling statistics constitute a valuable indicator of exploration activity levels, but complete data can take time to collect. Figures presented in the report by NR Can are for the period 1986-96. In 1986, 3.6 Mmetres of diamond drilling were completed at a cost of C$249 million, equivalent to C$69/m. In 1996, 3.9 Mm were drilled at a cost of C$325 million, or C$83/m. The government’s flow -through share funding scheme, introduced in the late 1980s to encourage exploration, was responsible for the record drilling in 1987 and 1988 when drilling activity in each of these years was well over 6 Mm. The low point for diamond drilling was in 1992 and 1993, with the total falling below 2 Mm in both years.

Another indicator of exploration activity is the level of claim-staking. There was a record 44 Mha of new areas staked in 1997, of which some 85% was in Alberta where diamond exploration was the chief attraction. The largest previous total of new areas staked was 33 Mha in 1992.

Newfoundland and Labrador, Ontario and New Brunswick recorded the greatest exploration expenditures per hectare.

THE NISGA’A TREATY IMPLICATIONS FOR BC MINING The Nisga’a are a First Nations group of approximately 6,000 people who claim the Nass River Valley of northwestern British Columbia as their traditional territory. About 2,500 Nisga’a live in the valley, located to the northwest of Terrace. The remainder live elsewhere, the majority in Terrace, Prince Rupert and Vancouver. Last August, representatives of the Nisga’a Tribal Council, the Province of British Columbia and the Government of Canada initialled the Nisga’a Final Treaty Agreement.

The Treaty must be ratified by all three parties. In early November, the Nisga’a people voted to ratify the agreement. British Columbia and Canada will introduce settlement legislation to approve the agreement. For BC, this will be subject to a debate and a vote in the Legislative Assembly and, for Canada, debate and vote in the House of Commons. Once ratified, the Nisga’a Treaty will become BC’s first aboriginal treaty since 1899.

Stuart Mackenzie* of the Vancouver-based law firm, Stikeman, Elliott, which represented the BC Government in negotiations in respect of some aspects of the Treaty, has set out an overview of the Treaty and its implications for the mining industry.

Overview The Treaty is intended to represent the full and final settlement of the Nisga’a peo ple’s claim for aboriginal rights including their aboriginal title to the land. A Nisga’a central government, the Nisga’a Lisims Government (NLG), will be established which will have fee-simple ownership of, and self-government over, approximately 2,000 km2 of ‘Nisga’a Lands’. The Treaty also provides for cash payments over time of approximately C$256 million (US$170 million).

The NLG will have the power to make laws governing matters such as culture and language, public works, regulation of traffic and transportation, and land use. These law-making powers will be concurrent with those of the federal and provincial governments. Also, the Nisga’a can establish a police force and a court which will have jurisdiction over Nisga’a laws on Nisga’a Lands.

Surrounding the Nisga’a Lands, and covering 4 -5 times the area, will be the Nass Wildlife Area (NWA). Nisga’a citizens will have the right to harvest wildlife throughout the NWA as long as the exercise of that entitlement does not interfere with other authorised uses of Crown land, including mining claims.

The NWA will be regulated, in part, by a Wildlife Committee consisting of four representatives of the Nisga’a Nation, four representatives of the provincial government and one representative of the federal government. The NLG will propose an annual management plan for the NWA which will be reviewed by the Wildlife Committee and then sent to the BC Government for ministerial approval.

Resource ownership Ownership of minerals in BC can be somewhat complicated. Some Crown grants of lands have included title to minerals (for example, lands granted to railways or certain land granted as agricultural lands). However, the general rule has been that minerals are owned by the Provincial Crown and, where the latter has granted ownership of land, the minerals have been excluded from the grant and reserved to the Provincial Crown. This is particularly true of gold and silver which belong to the Provincial Crown by virtue of the royal prerogative.

This general rule must now be read as being subject to the decision of the Supreme Court of Canada in Delgamuukw v. British Columbia ((1997) 153 DLR (4th) 193). In that case, the majority of the Court declared that « aboriginal title encompasses the right to exclusive use and occupation of the land » and that Aboriginal title includes mineral rights. The effect of that declaration has been acknowledged in the Treaty.

This includes ownership of all mineral resources on or under Nisga’a Lands including : gold and silver ; base metals ; coal, petroleum and gas ; industrial materials such as sand, gravel, rock, limestone and marble ; geothermal resources ; and rocks and other materials from tailings, dumps and previously mined deposits.

Claims and mining leases The Treaty represents a significant departure from the historical approach to Provincial Crown ownership of minerals, and how exploration and mining activities will be regulated on Nisga’a Lands is not yet clear. Mineral claims which are in force on the date the Treaty comes into effect will continue to be administered by the province, although the claim holders will now need to deal with the Nisga’a as the private land -owner. For example, if a claim holder wishes to dig a trench using a backhoe, he must first serve notice on the Nisga’a as the owner of the private land.

As for future mining titles, the Treaty provides for the NLG and the provincial government to enter into agreements providing for « the application on Nisga’a Lands of provincial administrative systems relating to : claim staking ; recording and inspecting of subsurface exploration and development ; the collection of

fees, rents, royalties and other charges by British Columbia on behalf of Nisga’a Lisims Government ; and other similar matters ».

It remains to be seen whether the BC staking system will continue to apply to Nisga’a Lands and what the requirements will be as to matters such as work commitments and reporting obligations.

The Treaty grants to the NLG the « exclusive authority to determine, collect and administer any fees, rents, royalties or other charges in respect of mineral resources on or under Nisga’a Lands », and it is envisaged that these will be collected by the BC Government on behalf of the NLG, with the arrangements to be agreed at some time in the future.

The NLG will have authority for environmental assessment and protection on Nisga’a Lands. However, it will exercise this power concurrently with the federal and provincial governments and, in the event of a conflict, the federal and provincial laws will prevail.

Commentary In operating on Nisga’a Lands, Mr Mackenzie says that mining companies will need to learn how to deal with a new level of government and, quite possibly, new rules, as much remains unresolved. Will the NLG agree to apply current administrative procedures to claim staking, or will new procedures be developed ? Will exploration companies continue to face annual work and reporting commitments, or will the NLG dispense with these requirements ? Will it impose ‘local hiring’ obligations, and will it assert ownership of minerals once extracted from the ground ? If so, will mining companies receive their income in the form of a ‘mining fee’ or will the NLG obtain its revenues through royalties and charges ? What regulations will apply to any mining project located partly on Nisga’a Lands and partly on adjacent land owned by the Provincial Crown ?

Arguably, the most efficient approach would be for the NLG to contract the Provincial Ministry of Energy and Mines to issue and administer mining titles, on behalf of the NLG, using the current system. Although the present system has its drawbacks, Mr Mackenzie points out that it has the advantage of being familiar to exploration and mining companies active in British Columbia.

This approach would also make it easier to co-ordinate and harmonise the administration of any mining project located partly on Nisga’a Lands and partly on any adjacent land owned by the Crown or, following further treaties, other First Nations. As an alternative to adopting the current system, the Nisga’a may wish to put out to tender the exploration rights for the entire Nisga’a Lands (except for the area under existing mineral claims).

One matter, which may be of some concern to mining companies, is the creation and management of the Nisga’a Wildlife Area. Mining companies, as well as other interested parties, will have no direct representation on the Wildlife Committee which reviews the annual management plan to be put forward by the NLG. Instead, they must rely on the provincial government to see that their concerns are addressed.

Conclusion As the first concluded land-claims treaty in BC since 1899, the Treaty is seen by government and industry as an important precedent. Although its terms may be controversial, it is likely to provide some form of benchmark for future land claim settlements.

The BC Government has stated that no more than 5% of the total land base of the province will be available to satisfy the land claims of First Nations. However, even if the current provincial administrative system is applied to Nisga’a Lands, there is no guarantee that other First Nations will adopt the provincial model. In the future, mining and exploration companies operating in British Columbia could, conceivably, be faced with operating under two, five, ten or more different mining administration systems.

*Member of the Global Mining Group of Stikeman, Elliott. Tel : (+1 604) 631 1300.

NEAR FUTURE CUTS IN PRODUCTION: COMMENTS The gloomy prospects for world growth during 1999, and such growth as is predicted being concentrated in sectors where metals and minerals consumption is proportionately low, have concentrated the attention of the mining industry on possible cuts in production, and when and where they are likely to fall. Such cuts, in reaction to the current low levels of commodity prices, are seen as the most likely means by which those prices might be stimulated in the immediate future. These themes were covered in some detail in a paper published at the end of last month by the chief economist of Rio Tinto, David Humphreys.

Mr Humphreys calculates that the prices of metals traded on the London Metal Exchange fell collectively by 21% in 1998, the largest drop since 1981. However, he makes the point that, whereas the falls in 1981 came during a period of significant decline in metals consumption, demand during the current price downturn has been relatively firm. Weaker consumption in Asia (with the notable exception of China) has been largely offset by continued growth in Europe and the US. Over the course of 1998, demand for aluminium and iron ore was weaker, but that for both copper and traded thermal coal was stronger.

Mr Humphreys attributes the apparent overreaction implied by the large price falls to the fact that they are based in part on worsening expectations for future growth, compounded by the liquidity of modern markets. He cites as an example the consensus forecast for the Japanese economy in 1998, falling from annual growth of 2.5% forecast at the start of 1997, to a contraction of 2.5% by the end of 1998. This general pessimism was arguably borne out towards the end of the year, when metal stocks started to move « decisively » upwards.

A significant improvement in global growth in 1999 looks « improbable », although the efforts of the authorities in the shape of lower interest rates (in Europe and North America) and increased public spending (Japan and China) may have averted « economic meltdown ». Mr Humphreys therefore turns to producer behaviour for future price direction, but he produces mixed signals regarding timing. He notes that the mining industry is much leaner entering the current downturn than in previous cycles. The industry did not become ‘fat’ during the high prices in the early part of this decade : the US copper mining industry, for example, was producing 30% more metal in 1997 compared with 1989, but with the same number of employees. Producer stock-levels have also become thinner, currently around 2% of consumption, compared with 7-8% at the start of the 1980s. More of the industry is now in the private sector, where shareholders are less tolerant than state owners of unprofitable production. Mr Humphreys points out that these factors indicate that there should be a much shorter response-time between price falls and producer cuts.

In practice, however, the high fixed costs involved in metals production, plus the social and environmental consequences of capacity closures, continue to weigh heavily against rapid decisions. Furthermore, many producers have been protected by currency depreciations against the US dollar : it is no coincidence that most of the significant cut s made thus far (in copper and nickel) have been in North America. There has been little response in aluminium, partly because input costs (raw materials and power) are generally linked to prices, and lower prices can thus be passed partly on to suppliers.

Based on current production plans, Mr Humphreys forecasts surpluses in the main base metals in 1999. However, he notes both the compression of price ranges for non-ferrous metals, and a halt in the decline in steel prices in Europe and Asia as signs « that some sort of floor is close ». He also points to the withdrawal of some investment funds from short positions in base metals markets as potentially significant. Mr Humphreys concludes that 1999 will probably not yield the eagerly awaited ‘bounce’ in prices, but « it will be a critical year in determining when that bounce will occur ».

METAL MARKETS

ZINC

Concentrate shortfall looms ? Despite the weak metal prices and the sense of doom and gloom in the mining industry, miners, and some analysts, at last week’s American Zinc Association conference were largely optimistic for zinc in the next few years. However, most agreed that the metal’s pos ition is precarious as it is very much dependent on the continued strength of the US economy, growth in Europe and gradual recovery in Asia. Any setback in these areas will have a negative impact.

Most miners said that they felt that the zinc price has now bottomed. With the market broadly in balance and global demand remaining fairly subdued most expect the price to stay around current levels for much of this year before recovering in 2000. David Goldman, Noranda’s chief operating officer told Mining Jou rnal that while new zinc mines such as Century and Lisheen, and capacity expansions are coming on stream over next few years, this additional capacity will be needed to offset losses of capacity when a number of operations such as Cominco’s Polaris and Sul livan operations, and Noranda’s Heath Steele mines close early in the next decade due to exhaustion.

According to Huw Roberts, Brook Hunt’s managing director, reserve depletion is a very significant problem facing the zinc mining industry. He warns that unless new projects are advanced quickly, there will be a significant shortfall in zinc output.

In 1997, (the latest year for which figures are available) Brook Hunt says that, allowing for the recovery of metal in ore to concentrate, proven and probable reserves stood at around 66 Mt (zinc content), equivalent to no more than twelve years of production and 10% below the level in 1990. The net result of this is that by 2005 around 1 Mt of annual mine capacity may be lost through closure caused by reserve depletion. This, says Mr Roberts, means that allowing for additions to mine capacity, including projects such as Century, Lisheen. Francisco Madero and even Antamina, by 2005 there is the potential for a shortfall of over 500,000 t of zinc which will have to be met. In the short term, Brook Hunt expects the zinc price to average around US$1,100/t in 1999.

While Brook Hunt’s long -term outlook for zinc mining seems encouraging, CRU’s shorter -term outlook is not. Geoff Mason, manager of CRU’s lead -zinc section, noted that in 1998 LME zinc stocks fell throughout the year and the market was in deficit, but prices also fell. Mr Mason attributed the drop in prices to overall sentiment in metal markets which overrode the metals fundamentals. This year, he does not expect prices to improve, although he says the reasons behind price weakness in 1999 will be different to those in 1998. CRU expects a cyclical slowdown in the US economy which, together with further weakness in Asia and other developing countries, will be sufficient to push the zinc market into surplus. As result of these factors and a strong US dollar, the London-based consultancy expects the zinc price to average around US$900/t in 1999 touching bottom at close to US$837/t later in the year.

Zinc warning Giving the keynote speech at last week’s American Zinc Association conference, David Goldman, chief operating officer of Noranda, called on the zinc industry to form one unified zinc organisation that encompasses all functional areas and regional groups governed by one board of directors. He said that in order to ensure and build zinc’s market share the turf battles, duplicated work and endless informational meetings of the various zinc associations must be stopped.

Mr Goldman said that the zinc industry is focusing too heavily on the production of metal and relying on the assumption that zinc demand will continue to grow as it has done for the past 40 years. However, he said that unless more attention is paid to the development of new products, and marketing, zinc might become nothing more than a niche product, useful only for the galvanising of steel. While many people might view such a statement as crazy, he gave the example of the copper and brass industry 20 years ago

when it supplied the metal for the majority of radiators used in the automotive industry. At that time, car manufacturers wanted a lighter and less expensive material suited to automated assembly, and the aluminium industry responded to this need.

Within ten years, said Mr Goldman, virtually all radiators used in cars were made from aluminium. He warned that zinc faces a similar threat, from the replacement of galvanised steel-sheet body panels in cars by aluminium. He said that the zinc industry needs to work closely with the steel industry in combatting aluminium’s inroads into its markets. He noted that the deal between Alcan and General Motors (MJ, November 13, p.392) has allowed Alcan to overcome aluminium’s competitive weakness with galvanised steel sheet by removing the effect of LME price volatility ; it is a model that the zinc industry should consider using itself.

Mr Goldman said that the time has come when zinc producers must apply the same long-range thinking that is used in evaluating a new mine or smelter to ensure a future home for its zinc production.

COPPER STRANGLED This week, the impact of option trading strategies was felt once again by metal prices on the LME. Most of the activity was related to copper. According to analysts, last week North American funds bought approximately 25,000 t of May and June 1999 options with strike prices of US$1,350/t (puts) and US$1,450/t (calls). (The strategy of buying put and call options with different strike prices and the same expiry date is known as a strangle, and is put in place in anticipation of volatility in the underlying futures contract when the direction of movement is uncertain.) Such positions feed through into the underlying market because, as prices move up or down, the option grantors are forced to delta hedge, buying or selling futures accordingly, which in turn can accentuate price movements. While options business had an impact, liquidation of long positions early in the week helped to force the three-month copper price to touch a fresh twelve-year low of US$1,373/t. This was despite drawdowns of copper stocks in LME warehouses in Singapore related to arbitrage trading in China. Prices have subsequently recovered and moved above US$1,400/t but traders expect them to remain volatile, particularly if the price moves closer to the strike prices of the large option positions.

Option business in nickel has also been brisk this week, which together with aggressive bank buying and associated short covering helped move the price on Wednesday to US$5,040/t, up US$135/t from Tuesday’s kerb close. This strength was despite the news that the Bulong nickel operation had produced its first nickel (this issue, p.173) and that WMC had started shipping concentrates to its Kalgoorlie smelter which had been forced to close earlier in the year owing to a smelter leak (this issue, p.174).

Aluminium prices continue to be depressed by the growing surplus, but managed to move away from recent five-year lows towards US$1,180/t. According to the International Primary Aluminium Institute, producer stockpiles had risen to 3.182 Mt at the end of January, the highest level since June 1998. The head of Pechiney’s aluminium division, Philipe Varin, says that although demand for aluminium in 1999 may rise by 300,000 t from 1998, supply will increase by between 600,000 t and 700,000 t. As a result, a supply surplus of 400,000-500,000 t will limit the ability of the price to rally this year.

LME PRICES & STOCKS

LME PRICES Prices (a.m.) Mar 11 Mar 4 Tonne basis Buyers Sellers Buyers Sellers COPPER Grade A $/t Cash $1,384.5 $1,385 $1,360 $1,360.5 Three months $1,410.5 $1,411.5 $1,386 $1,386.5 TIN $/t Cash $5,340 $5,345 $5,375 $5,380

Three months $5,240 $5,245 $5,320 $5,325 LEAD $/t Cash $502 $503 $523.5 $524 Three months $505 $506 $522.5 $523 ZINC Special high grade($/t)

Cash $1,036 $1,037 $1,046 $1,047 Three months $1,045 $1,046 $1,053.5 $1,054 ALUMINIUM Higher grade Cash $1,159 $1,160 $1,141 $1,141.5 Three months $1,180 $1,181 $1,162.5 $1,163 ALUMINIUM Alloy ($/t)

Cash $1,032 $1,035 $1,003 $1,005 Three months $1,053 $1,054 $1,026 $1,026.5 NICKEL ($/lb)

Cash $4,960 $4,970 $5,010 $5,020 Three months $5,030 $5,035 $5,070 $5,075

LME STOCKS ON MARCH 10 AND MARCH 3 (TONNES) LME warehouse stocks (tonnes) March 10 March 3 Copper Grade A cathodes 698,550 703,550 TIN 8,770 8,920 LEAD 105,725 107,525 ZINC SHG 309,250 309,150 ALUMINIUM HG 813,325 815,275 ALUMINIUM Alloy 84,260 87,000 NICKEL 59,628 60,870

LONDON PRICES (METALS, ORES & OXIDES) Metals March 11 Aluminium (US producer) $61.00-62.00 c/lb d/d Antimony $1,350-$1,430/t cif Arsenic (Rotterdam 99%) $0.38-$0.48/lb Bismuth $3.10-$3.30/lb cif Cadmium (99.99%) $0.20-$0.25/lb cif Cadmium (99.95%) $0.18-$0.23/lb cif Chrome (UK 99%) $9.00-$10.00/lb Cobalt (99.8%) $18.00-$19.00/lb net Cobalt (99.3%) $16.50-$18.00/lb net Germanium $800-$820/kg Gold $280.86 ($293.80)/oz Indium $190-$210/kg Iridium (J Matthey price) $415/oz Magnesium (Norsk Hydro Euro. prod.) E2.94/kg* Magnesium (US Free market, 99.8%) $1,850-$2,400/t* Manganese metal (99.7%) $1,080-$1,140/t Mercury (99.99%) $135-$148/flask Nickel $2.25-$2.26/lb Osmium $400-$450/oz Palladium J Matthey price) $353.00/oz

Palladium (Free market) $368.00-$370.00/oz Platinum (J Matthey price) $371.00/oz Platinum (Free market) $345.00-$350.00/oz Rhodium (J Matthey price) $890/oz Ruthenium (J Matthey price) $40/oz Selenium $1.40-$1.80/lb cif Silver $5.32/oz Tellurium (UK lump & powder 99.95%) $5.00-$7.00/lb net Tin (Kuala Lumpur) RM19.84/kg Ore & Oxides March 11 Antimony (60%) $8.50-$9.00/t unit, cif nom* Beryl (10% BeO) $75-$80/s ton unit BeO cif* Chrome (Transvaal, Friable 40%) $60-$64/t, fob* Chrome (Turkish, concentrates 48%) $75-$85/t fob* Columbite (min. 65% comb. Oxides) $2.80-$3.20/lb cif* Ilmenite (54% TiO2) A$95-A$110/t fob Lithium ores (Petalite 4.2% Li2O) $250/t fob* Lithium ores (Spodumene>7.25% Li2O) $385-$395/t fob* Manganese ore (48-50% Mn, Manganese ore (max. 0.1% P) $1.99-$2.08/t unit fob* Molybdenum (oxide conc 55-57%) $3.00-$3.30/lb

Rutile (Aust. 95-97% TiO2) A$725-A$775/t fob (bulk) Tantalum oxide (60% cif N. Euro port) $26-$32/lb Uranium (Nuexco unrestricted/restricted U3O8) $8.85/$9.20/lb Vanadium (98% V2O5) $2.35-$2.55/lb cif Wolframite (65%) $40-$45/t unit Zircon sand (standard 66-67% ZrO2) A$500-A$600/t fob (bulk) Source : Metal Bulletin

MEETINGS The following is a selection of recently announced meetings and conferences that may be of interest to Mining Journal readers. A fuller listing may be obtained by visiting the Mining Journal website at http ://mining-journal.com

April 27-28, Coal Trade ‘99, Sydney, Australia. Andrew Crooks, AIC Worldwide, Level 7, 66 Hunter St, Sydney, NSW 2000, Australia. Tel : (+61 2) 9210 5717. Fax : 9223 8216. E-mail : crooks@aicconf.com.au May 3-5, Ninth US-European Coal Conference, Lisbon, Portugal. Coal Exporters Association, 1130 17th Street NW, Washington, DC 20036, US. Tel : (+1 202) 463 2639. Fax : 833 9636. E-mail : cea@nma.org May 7-9, 1999 IAEG Annual Conference - Diamonds, Bundoran, Ireland. Mark Cruise, Minorco Services (Irl) Ltd, The Lisheen Mine, Killoran, Moyne, Co. Tipperary, Ireland. Tel : (+353) 504 45122. Fax : 504 45019. Website : www.iaeg.org May 9-11, Fluorspar ‘99, San Luis Potosi, Mexico. Industrial Minerals Information Ltd, Park House, Park Terrace, Worcester Park, Surrey KT4 7HY, England. Tel : (+44 171) 827 9977. Fax : (+44 181) 337 8943. E-mail : conferences@metalbulletin.plc.uk. Website : www.mineralnet.co.uk May 10-11, African Business and Development Forum, Marrakesh, Morocco. Katherine Filby, Dow Jones, 10 Fleet Place, Limeburner Lane, London EC4M 7RB, UK. Tel (+44 171) 832 9311. Fax :832 8243. E-mail : Katherine.filby@cor.dowjones.com May 31-June 1, Zinc-Lead-Silver beyond 2000, Sydney, Australia. AJM Conferences, GPO Box 2728, Sydney, NSW 2001, Australia. Tel : (61 2), 9290 1133. E-mail : enquiries@ibcoz.com.au .Website : www.ibcoz.com.au

June 1-3, Global Mining Conference, San Francisco, US. Dilys Rees, PricewaterhouseCoopers LLP, 1111 West Hastings St., Vancouver, British Columbia, Canada, V6E 3R2. Tel : (+1 604) 806 7825. Fax :806 7806. E-mail : dilys.rees@ca.pwcglobal.com. Website : www.pwcglobal.com/mining-conf June 2-3, North East Investment in Mining Conference, New York, US. Martin Rothman, International Investment Conferences, 6310 Sunset Drive, Miami, FL 33143-4823, US. Tel : (+1 305) 669 1963. Fax :669 7350. E-mail : iiconf@iiconf.com. http ://www.iiconf.com June 6-9, 37th US Rock Mechanics Symposium, Vail Rock ‘99, Vail, US. Expomasters, 7632 E. Costilla Ave, Englewood, CO 80112, US. Tel : (+1 303) 771 2000. Fax 843 6212. Email mcramer@expomasters.com. http :///www.tmn.com/~arma June 9-15, Minetime ‘99*, Geospectra’99, METEC’99, GIFA’99 and Thermprocess’99, D • sseldorf, Germany. Messe D• sseldorf, Postfach 101006, D-4001 D• sseldorf, Germany. T el : (+49 211) 456001 Fax 4560668. http ://www.tradefair.de. June 14-15, Financial Times World Gold Conference, London, UK. FT Conferences, Number One, Southwark Bridge, London SE1 9HL, UK. Tel :(+44 171) 873 3375. Fax 873 3067. E-mail: monique.arkesteijn@ft.com.

June 14-16, 5th International Symposium on Mine Mechanization and Automation - Mining in the 21st Century, Sudbury, Ontario, Canada. Dr Nick Vagenas, School of Engineering, Laurentian University, Sudbury, Ontario, Canada P3E 2C6. Tel : (+1 705) 675 1151. Fax : 675 4862. Email : nvagenas@nickel.laurentian.ca.

PUBLICATIONS

AMERICAN MINES HANDBOOK The 10th and latest edition of the ‘American Mines Handbook’ lists details of around 1,000 precious and base metal mining companies based in the US. Company entries are arranged alphabetically, and include office addresses and contact numbers, director and key personnel information, property locations and descriptions, exploration and development details, production and reserve figures, and share and financial information.

The Handbook also includes a country index with over 100 entries, allowing identification of companies working in specific areas of the world. It is available for US$54. Contact : Diane Giancola, Editor, 1450 Don Mills Road, Don Mills, Ontario, Canada M3B 2X7.

Tel : (+1 416) 510 6773. Fax : 442 2272. Email : dgiancola@corporate.southam.ca.

NEWS ABOUT MINING COMPANIES

DE BEERS DOWN AND STILL CAUTIOUS The chairman of the De Beers group, Nicky Oppenheimer, this week summed up 1998 rather understatedly as « not an easy year ». A 28% fall in sales, to US$3.35 billion (MJ, December 18, 1998, p.485), by the Central Selling Organisation (CSO), the ‘single channel’ marketing system through which the group exerts near control of the world market for rough diamonds, cut deeply into De Beers’ corporate profits. The combined income statement for De Beers Consolidated Mines Ltd, the South African arm, and De Beers Centenary AG, the international arm, shows a 31% fall in the diamond account, to US$585 million. Investment income was roughly maintained at US$229 million, mostly higher dividend receipts from the major holding in Anglo American Corp. of South Africa in rand terms, offset by the fall in value of the currency against the US dollar. Prospecting and research expenditure was only slightly reduced, at US$140 million, and overall, attributable earnings from De Beers’ own busi nesses fell by 40%, to US$374 million.

The pain was exacerbated by the difficult trading conditions in other commodity markets, which has adversely affected the profits of several of De Beers main associates, such as Minorco SA (MJ, September 4, 1998, p.189). Retained earnings from the current operations of associates fell by 32%, to US$276

million, and exceptional earnings from associates comprised a loss of US$33 million compared with an exceptional gain of US$205 million in 1997, these items stemming mainly from the restructuring of the wider Anglo American group. Net earnings fell by 50%, to US$617 million, although the fall was 39%, to US$639 million, if exceptional items are ignored. Mr Oppenheimer described the resulting 22% cut in the dividend, to US$0.802/linked unit, as « prudent ».

The cut in CSO sales was a deliberate policy to reduce the stocks of rough diamonds held by the cutting and polishing industry, which had risen to alarmingly high levels (MJ, March 6, 1998, p.195). This necessitated reintroduction of the quota system, whereby mines selling their output through the CSO are restricted to delivering (currently) 74% of their normal output. Mr Ralfe said this week that these efforts succeeded in reducing cutting-centre stocks from about US$5 billion to US$4 billion over the course of 1998. However, one consequence of reduced CSO sales was that De Beers own diamond stockpile rose to US$4.8 billion from US$4.4 billion over the course of the year.

Furthermore, Mr Ralfe said that it makes economic sense for some mines to maintain output at 100% of capacity, while delivering 74% to the CSO, and stockpiling the balance. He said that the De Beers diamond stocks figure does not include diamonds stockpiled in this way by De Beers’ major joint ventures with the Namibian and Botswanan Governments, because those joint-venture companies are not consolidated in De Beers’ accounts.

The cut in CSO sales necessitated by the high stock levels was much sharper than the estimated 3% reduction in global retail demand for diamonds in 1998. Falls of 35% in Southeast Asia and 19% in Japan were compensated by growth of 9% in the US and 4% in Europe. The overal l retail decline was less than the fall of 5% suffered in 1997, and De Beers reports a general improvement in sentiment in the cutting industry during the first few months of 1999, a combination of the fall in stocks ; the strong Christmas sales in the US ; a reduction in non-CSO supply from Angola and the Democratic Republic of Congo where wars are still raging ; and the renewal of the sales contract between the CSO and Russia for three years (MJ, November 6, 1998, p.361).

The improvement prompted the CSO to increase the first two ‘sights’ of 1999 (of the usual ten). The results were better than expected, and stronger than the corresponding sights in 1998, but De Beers warns that the recovery is « too recent to justify confidence that the market is over its difficulties ». Mr Ralfe said that the main problem remains the Japanese economy, and De Beers judges that it will be « difficult for the CSO to increase its sales significantly unless there is an improvement in the Japanese and Southeast Asian retail markets ».

The CSO’s position was strengthened slightly this week by the conclusion of a marketing deal with Brok en Hill Proprietary Co. Ltd (BHP) of Australia for 35% of the output of the new Ekati mine in Canada’s Northwest Territories (this issue, p.169). Mr Ralfe said that the CSO would have liked a higher proportion, but that it understood the position of BHP, although he noted that the terms the CSO offered would have been better had the proportion been higher.

Mr Ralfe said that the deal partly reflects BHP’s appreciation of the worldwide marketing campaign maintained by De Beers for diamonds as a generic product. He said that the marketing budget in 1999 would be about US$170 million, down from the usual level of about US$200 million, but will include a major advertising programme aimed at capitalising on the millennium celebrations. The latter will be led by the sale of a limited edition of 2,000 1-2 ct diamonds of exceptional quality, individually numbered using the brand-mark technology De Beers has been developing (MJ, March 6, 1998, p.192).

RJB LOOKS AHEAD AFTER DIFFICULT YEAR The chief executive of RJB Mining, Richard Budge, last week described 1998 as a « challenging year for the company in all it markets ». The UK’s largest coal producer sold 25.9 Mt in the year to December 31, 1998, 17% less than in 1997. Some 87% of the 1998 total was sold to electricity generators. RJB described trading conditions as difficult, particularly in the second half of the year. Lower sales were accompanied by reduced unit prices, and turnover fell by 27%, to œ822.5 million.

RJB had expected a reduction in volume and price for « some time », but the extent and effect was « exacerbated by the prolonged period of uncertainty » leading up to the publication of the UK Government’s White Paper on ‘The Review of Energy Sources for Power Generation’ in October 1998 (MJ, October 16, 1998, p.294. Towards the end of the year, RJB secured long-term contracts with PowerGen and Eastern Electricity, two of its three major customers, albeit at « significantly reduced volumes and at lower prices » than before.

Eastern is to take up to nearly 50 Mt over the period to 2009, including

25.1 Mt for about œ800 million over the first five years (to March 2003). PowerGen is to buy up to 35 Mt for œ1 billion over the period to March 2003. Despite the less advantageous terms, the contracts provide some stability in demand for RJB, and the company now looks ahead « to a more secure future ». A three-year contract with the third major customer, National Power, was agreed in March 1998. Negotiations regarding further sales to National Power are under way.

Profit before tax and exceptional items was œ50.0 million in 1998, a fall of 71%. Net profit after tax was œ57.8 million, including a net exceptional gain of œ24.5 million mainly as a result of a tax credit following discussion with the Inland Revenue regarding the treatment of the 1997 accounts. This compares with a net profit of œ114.9 million (restated) in 1997. The restatement of the 1997 net profit from œ115.8 million was largely the result of the adoption of a new UK accounting standard, FRS12, which requires that full provision be made for the decommissioning and restoration of a mine site as soon as it has been developed, rather than built up gradually over the production life of the site as in the past.

RJB produced 19.8 Mt of coal from underground during 1998, a fall of 22% from the preceding year, and 5.8 Mt from opencast sites, 11% less. The reduced coal requirement was addressed by decreasing the number of working areas underground, concentrating development and realising cost savings from a smaller infrastructure. Underground unit operating costs were reduced by 2% in 1998. Opencast operating costs were « significantly less » than those for underground, but RJB reports that obtaining planning approval for opencast mining remains difficult. The company received approvals during 1998 for 3.5 Mt of mineable coal, resulting in a total approved reserve tonnage of 19.8 Mt at the end of the year.

The pre-tax profit for 1998 includes a charge of œ4.0 million for a write-down in the carrying value of RJB’s 17.8% investment in CIM Resources Ltd of Australia to reflect the market value. RJB notes that the investment has enabled the company to monitor coal markets in the Asia-Pacific region, and expects further investment opportunities to arise in this region. Towards the end of last month, CIM’s share price rose steeply amidst speculation that RJB might make a full bid.

HOMESTAKE WOOS ARGENTINA GOLD Homestake Mining Co. of San Francisco has agreed a friendly takeover of Argentina Gold Corp., owner of a 60% interest in the Veladero gold project in the Argentinian Andes. Under the deal announced this Monday, shareholders will receive 0.545 shares in Homestake for each share in Argentina Gold, valuing the target at US$5.08/share, equivalent to a total of about US$195 million based on Homestake’s closing price at the end of last week. This was a premium of more than 60% over the market price of shares in Argentina Gold of C$4.80 at that time. Argentina Gold immediately rose to C$6.90/share on Monday, following news of the deal.

Homestake’s offer is also substantially higher that the hostile bid for Argentina Gold made by Barrick Gold Corp. of Canada, which expired unsuccessfully last month (MJ, February 12, p.109). Barrick finally offered C$5.00/share in cash, valuing the target at about US$120 million. Barrick holds a 9.9% interest in Argentina gold, plus the 40% balance of ownership in the Veladero project, which lies close to Barrick’s own operations across the border in Chile.

Argentina Gold has announced resources at Veladero containing 5 M oz of gold and 150 M oz of silver. Homestake is thus acquiring attributable resources of about 4.6 M oz of gold and equivalent for around US$40/oz, although the chief executive, Jack Thompson, indicated this week that the company believes Veladero to have « exceptional upside potential ». Homestake will issue a total of about 21 million new

shares if the deal is approved, expected within the next two months, equivalent to 8.8% of its current total issued.

NORDDEUTSCHE DISPOSALS COMPLETED Dresdner Bank AG of Germany has acquired a 20% interest in Norddeutsche Affinerie (NA), the largest copper smelter in Europe, through the purchase of the residual 10% holdings of two of the original owners. Dresdner paid e10.10/share (DM19.75/share) to Inmet Mining Corp. of Canada and MIM Holdings Ltd of Australia for a total of 6.4 million shares.

A spokeswoman for the bank said that it plans to sell the shares on to investors « in the foreseeable future ». NA was owned 35% each by Inmet and MIM, and 30% by Degussa AG of Germany until the middle of last year, when a secondary public offering of 70% of the shares was made at DM25/share (MJ, July 10, 1998, p.35). Degussa has indicated that it intends to retain its 10% interest.

Last month, NA reported a pre-tax profit of DM11 million for the three months to December 31, 1998, the first quarter of its current financial year, from sales revenue of DM459 million. Sales were down 15% compared with the corresponding quarter in 1997/98, and profit was 68% lower. Full utilisation of the company’s smelting capacity during the quarter resulted in output of 190,000 t of copper, but this was against a background of primary copper prices falling to near 12-year lows. Copper-rod production was 20% lower, at 63,000 t, and continuously-cast products fell by 13% to 34,000 t, owing to lower orders. NA noted that part of the weakening in demand was seasonal. Ironically, the company also reported tightness in the copper scrap market, from which NA derives significant smelter feed, which raised scrap prices and eroded profits.

ROUNDING OFF INMET’S YEAR OF CHANGE Toronto-based Inmet Mining Corp. will receive proceeds of about C$53.5 million on the sale of its 10% in NA, and expects to record a net gain of C$4 million over the carrying value of the shares in its future accounts. The chief executive, Bill James, said that the sale represents a « continuation of Inmet’s restructuring programme, with its focus on our core mining assets ».

Inmet made a net profit of C$31.0 million in 1998, compared with a loss of C$185.5 million in 1997. The previous year included property write-downs totalling C$193.7 million. Income from mining operations in 1998 amounted to C$19.1 million, a fall of 14%, as the contribution from the 49%-owned • ayeli copper mine in Turkey fell to C$9.1 million from C$21.7 million in 1997. Lower copper prices, plus a two-month strike in the fourth quarter (MJ, October 23, 1998, p.322), were the main problems at • ayeli. T he greatest improvement came at the wholly-owned Troilus gold mine in Quebec, which contributed C$11.6 million to earnings from operations compared with a loss of C$79,000 in 1997. This was partly as a result of cost control and the weakness in the Canadian dollar, but mainly a fall in non-cash costs.

However, by reining in exploration expenditure (down 20% to C$13.4 million) and receiving an income tax rebate of C$3.0 million compared with a charge of C$6.8 million in 1997, Inmet was able to turn an operating loss (before write-downs and gains on asset disposals) of C$5.3 million in 1997 into a profit of C$2.7 million in 1998.

Net gains from asset disposals (after deducting carrying values) totalled C$49.5 million in 1998, including the original sale of shares (25%) in NA (about C$31 million) ; a 50% interest in the Antamina zinc project in Peru (C$7.5 million) ; and shares in Teck Corp. (C$10.9 million). These disposals in mid-year were followed by the sale of wholly-owned Wolfram Bergbau und Hütten GmbH, an Austrian tungsten producer, later in the year, for a net gain of C$400,000 (MJ, October 2, 1998, p.250).

Cash flow from continuing operations totalled C$5.5 million, compared with the net outflow of an almost identical amount in 1997. However, cash from operations was dwarfed by the C$313.9 million in actual cash received in 1998 from the asset disposals (C$156 million from NA, C$68 million from Antamina, C$39 million from the Teck shares and C$50 million from WBH). This cash, plus much of Inmet’s existing cash reserves, was distributed to shareholders in the form of a C$369.6 million share buy-back scheme (MJ,

September 11, 1998, p.210), and Inmet’s cash reserves fell by C$120.5 million during the course of 1998 to finish the year at C$173.1 million.

Earnings and cash flow from a shareholder’s point of view were, of course, enhanced by the reduction in shares issued, which fell to 38.3 million after the buy-back compared with 103.4 million before.

VENEZOLANA DE GUAYANA (CVG), The president of the Venezuelan state industrial holding company, Corporacion Venezolana de Guayana (CVG), has announced plans for CVG to raise US$450 million in international debt markets. Clemente Scotto said that about US$250 million would be invested in CVG’s hydroelectric power arm, Edelca, and the balance of US$200 million is needed to upgrade CVG’s 70% -owned integrated aluminium business after the failure of last year’s privatisation attempts.

PACIFIC RIM MINING CORP. AND LOWELL MINERAL EXPLORATION LTDA

An exploration agreement has been made between Toronto-listed Pacific Rim Mining Corp. and Lowell Mineral Exploration Ltda, a privately-owned Chilean company. Under the agreement, Pacific Rim has issued non-transferable share purchase warrants exercisable for up to 722,825 common shares at C$1.38/share, at various dates to February 25, 2004, as a finder’s fee for introductions that may lead to the acquisition of new exploration opportunities in Peru. Exercise of the warrants is conditional on Pacific Rim successfully acquiring such a project. The company is currently investigating gold projects in Peru as a result of this agreement. David Lowell is a well-known geologist, associated with La Escondida copper deposit in Chile, and the Pierina gold deposit in Peru. The president of Pacific Rim is Catherine McLeod-Seltzer, who floated Arequipa Resources, the company founded by Mr Lowell which established the Pierina deposit and which was bought by Barrick Gold Corp. for C$1.1 billion (MJ, August 23, 1996, p.137).

ARGOSY MINING CORP. AND AUSTRALIAN-LISTED CALLIOPE METALS CORP

A merger has been announced between Vancouver-listed Argosy Mining Corp. and Australian-listed Calliope Metals Corp. The merger is to be effected by the takeover under the Yukon Business Corporations Act of Argosy by Calliope, on the basis of three common shares in the latter for every five held in Argosy. The two companies hope to put the plan to shareholders at general meetings scheduled for April 21. Successful merger would bring together two nickel laterites : Argosy’s Musongati project in Burundi (MJ, February 19, p.117) and Calliope’s Nakety project in New Caledonia. The management of the two companies hope to apply Calliope’s experience from Nakety to Musongati, and to benefit from the fact that both projects will require access to the new pressure acid-leach technology currently being established at several operations in Australia. The merged company would also hold the Kremnica gold project in the Slovak Republic, plus C$8.3 million in cash.

PT TIMAH, OWNED 51% BY THE INDONESIAN GOVERNMENT The tin producer PT Timah, owned 51% by the Indonesian Government, has revealed the size of the interest that it is currently negotiating to buy in Kaltim Prima Coal (KPC) (MJ, February 19, p.114). The president of PT Timah, Erry Riyana Hardjapmekas this week told Reuters that the company is hoping to buy a 30% interest, raised from the 23% initially offered (MJOctober 30, 1998, p.352). KPC’s owners, British Petroleum plc (50%) and Rio Tinto plc (50%), are obliged by KPC’s Contract of Work to divest up to 51% of the coal producer to Indonesian interests between the fifth and tenth year of operations. The Indonesian Government is understood to have set 30% as the minium divestment target for 1999. The main issue appears to be price, with PT Timah reportedly offering only half of the US$170 million at which KPC valued the original 23% interest.

KROONDAL PLATINUM MINES LTD (KPM), The US$35 million in loan facilities for Johannesburg-listed Kroondal Platinum Mines Ltd (KPM), agreed last year by KPM’s par ent, Aquarius Platinum Ltd of Australia, prior to KPM’s listing (MJ, July 24, 1998, p.67), have been completed. The facilities, comprising US$25 million in senior debt and US$10 million in subordinate debt, are with RMB Australia Holdings Pty Ltd and Dresdner Bank AG (Australia Branch), and should provide sufficient funding for the Kroondal platinum project to be completed. Aquarius also reports that it recently changed its status to ‘Ltd’ from ‘NL’.

NEW CALEDONIA MINING CORP Toronto-listed New Caledonia Mining Corp. has competed the restructuring of its debt announced last year (MJ, November 6, 1998, p.378). Caledonia’s original guarantee for the outstanding US$8.4 million balance of the project loan for the Filon Sur gold mine in Spain has been replaced by a US$4.2 million convertible promissory note, which only becomes payable if there is a default on the loan. The loan itself now has a margin of 150 basis points (100 bp = 1%) over the London Inter-Bank Offered Rate. Caledonia’s C$20.4 million in convertible debentures, originally scheduled to mature on December 15, 1999, have been converted into 14.6 million common shares, a conversion rate equivalent to C$1.40/share, plus rights. These rights automatically convert into a new debenture in Caledonia should Filon Sur default on its loan and the lender call on Caledonia to make a cash payment under the promissory note.

COMMONWEALTH BANK OF AUSTRALIA AND SCOTIA MOCATTA A strategic alliance has been forged between Commonwealth Bank of Australia and ScotiaMocatta to offer base and precious metals hedging, and associated services to clients in the commodities markets of Australia and New Zealand. ScotiaMocatta, part of the Scotiabank Group of Canada, is well established in metals trading, with membership of the five-strong London Gold Fix, chairmanship of the London Silver Fix, and ring-dealing membership of the London Metal Exchange. Apart from its obvious presence in the geographical area targeted by the new alliance, Commonwealth Bank has expertise in foreign-exchange and interest-rate instruments, including derivative products. ScotiaMocatta already has similar regional alliances with ABSA Bank in South Africa, and Banco del Credito de Peru.

MEEKATHARRA MINERALS LTD Sydney-based Meekatharra Minerals Ltd has listed its shares on the Berlin and Frankfurt Stock Exchanges. The listings were sponsored and paid for by Baader Wertpapierhandelsbank AG. Meekatharra expects the new listings to provide access to the large numbers of potential institutional and retail investors in the group of countries that have adopted the Euro.