Base Metals Shine by csgirla

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									      MINING
  Cancor Mines Inc.
                                                                                highest grade. This is the mission of Cancor.

Base Metals Shine                                                                    The Gemini Property: In 1997, the company acquired a property
                                                                                called Gemini from INCO in the Abitibi region of Quebec. This 25-
                                                                                kilometer belt of rock certainly contains base metals. The question
    Exploration for base metals is surging in Quebec
                                                                                remains, however: just how big are the deposits? Cancor has drilled
          as junior mining companies like Cancor                                nearly a hundred holes, and analysis of the core samples has ascertained
              identify significant new ore bodies                               the existence of about two million tons of resources.
                           BY MICHAEL CARIN                                          “The aim is to bring validated tonnage to five million,” says Khobzi.
                                                                                “We have extremely realistic prospects of doing so. It’s at five million




T
                 he lustre is returning to the                                                                          tons that the explorer can begin to
                 prospects of one of Canada’s most                                                                      think: mining!”
                 fundamental industries. The opti-                                                                          For its discovery of zinc-rich
                 mism has been a long while reviving,                                                                   sulphides on the Gemini property
but investors once again appear bullish about sinking                                                                   in 1998, Cancor’S President, Kamil
deep shafts into the northern shield. With the price of                                                                 Khobzi, was named Prospector of
gold near an eight-year high, with existing base metal                                                                  t h e Ye a r b y t h e Q u e b e c
mines rapidly depleting, and with the catastrophe of                                                                    Prospectors Association.
Bre-X at last suitably fading into history, a new spirit                                                                    Partnership with Cambior: The
(and a healthy measure of urgency) is driving the           Kamil Khobi                                                 most recent confir mation of
search for natural resources. For example, in Quebec        Chairman and CEO, Cancor Mines Inc.                         Cancor’s potential on the Gemini
these days, the best indication of the upbeat mood                                                                      property has come from the mining
                                                            “As we speak, there is no major mining project in
can be read in the availability of drilling rigs. At the                                                                major, Cambior Inc. Success for a
moment, none are available. Every rig in the province
                                                            the pipeline in Quebec. We must rectify this rather         junior mining company can be
is deployed in the field.                                   quickly with intensive exploration that results in          defined as the extent to which it
    In short, exploration is enjoying something of a        discovery. Otherwise we’ll see a lag of three to five       attracts interest and capital from the
boom.                                                       years without any mining. In base metals, there             majors. By this yardstick, Cancor’s
    Consider the experience of Cancor Mines Inc.            are maybe five years left. In gold, the same.               alliance with Cambior, signed in
This junior mining company perhaps best exempli-            During the next five years, we’re going to see              January of this year, spells arrival,
fies the current vision, strategy, risk, and potentially    more mines closing than new mines opening. This             a n d p o i n t s tow a rd f r u i t i o n .
huge reward involved in exploration.                        is why there is so much activity on the exploration         Cambior has agreed to invest $2.5
    “We established our company in the nineties,”           front. Cancor is at the exploration stage, but one          million for further exploration on
says Kamil Khobzi, Cancor’s Chairman and CEO,               thing is sure: we’re well beyond the grassroots             the Gemini site.
“because we saw a rare opportunity. On the one              stage. We’re nearing the development stage.”                    “We’ve seen a typical evolution
hand, we saw an accelerating reduction in the                                                                           here,” says Khobzi. “At the begin-
resources available for extraction in existing mines. On the other              ning, nobody wanted to listen to our Gemini story. Now it has become
hand, we saw no new mines in the pipeline. And then there was a                 sufficiently interesting, and big, to attract a company like Cambior.”
third factor, and certainly the most important factor. We were able to               Cambior must disburse the funds over six years, with specified
identify areas for exploration where the preponderance of geological            minimums for each year. In return, the international gold and base
evidence indicated the presence of notable deposits of base metals.”            metal miner will receive a stake of half of Cancor’s participation in the
    Base metals are a mix of ore that contains copper, zinc, gold and           project. Cambior will manage the exploration with its own team of
silver. These minerals and precious metals are tied together in deposits        geologists. Drilling will recommence in the summer. At the moment,
known, in the parlance of the trade, as “volcanic massive sulphides.”           all the geological data is being transferred to Cambior for analysis.
Happily, Canada, particularly northern Quebec, boasts an abundance                   Kistabiche and Allard: Cancor has acquired another property in the
of this geological feature. The challenge is to identify the precise spots      same area of Abitibi upon which it has identified one million tons of
on our vast landscape where the deposits are most concentrated, and at          resources, with 8% zinc and silver. At Kistabiche, again, the company is

Cancor pursues exploration in areas adjacent to known and recognized mining
camps. This is important because the economics of exploitation of a proven deposit
improve because of existing transportation, communications and hydro infrastruc-
tures and due to the availability of experienced prospective employees.
                                                  MONTREAL BUSINESS MAGAZINE
                                                                                        40 FEBRUARY 2003
                                                                           regard to Quebec taxes,
                                                                           and 115% in regard to
                                                                           federal taxes. With hard
                                                                           cash financing, for each
                                                                           dollar the investor
                                                                           spends, Quebec will
                                                                           reimburse fifty cents.
                                                                           “That kind of incentive
                                                                           you don’t find anywhere
                                                                           else,” says Khobzi.
                                                                               The Risk and Reward:
                                                                           What happens next for
                                                                           Cancor? If the geologists
                                                                           are right, the company
                                                                           will shortly prove suffi-
                                                                           cient deposits, but Kamil
                                                                           Khobzi will not pretend                Kistabiche, showing the potential of the project.
                                                                           that there’s certainty.                share price as the result of a major investment
A geological map of the Gemini, Turgeon, and       Kistabiche projects.
                                                                           “ There’s far-reaching                 in the property or a buy-out from a mining
working to increase proven tonnage to five          science involved, but also luck,” he says. “A                 giant like Noranda, Falconbridge, or INCO. If
million. “We’re going to drill below the known      reasonably good success for Cancor would be a                 Cancor hits good deposits of gold in the
ore body to determine if there’s an increase in     five to seven million tons base metal mine, and               Allard project, the par tner could be a
the tonnage,” says Khobzi.                          a share price at the four to five dollar level.”              company such as Barrick, Placer, or Cambior.
     Funds for the Kistabiche exploration were          If sufficient tonnage is found, the stage                 With Cancor’s hunt ongoing, the dynamic of
raised in the company’s most recent financing.      would be set for a dramatic increase in the                   risk and reward is in play.                  ❏
Over $500,000 came in from a flow-through
issue; $150,000 from an institutional investor,             “Junior” Mining                                       exploration. We are primarily geologists and
Sidex (the Quebec government’s $50 million                                                                        developers. Our small size and structure
FTQ fund); and an additional $100,000 from
Sodemex, the arm of the Caisse de Dépôt that
invests in mining ventures.
                                                       N         a m e s l i k e N o ra n d a , I n c o , a n d
                                                                 Falconbridge are as recognizably
                                                        Canadian as Nova Scotia or Moose Jaw.
                                                                                                                  allow for speed and flexibility.”
                                                                                                                       Effectively, Cancor constitutes an
                                                                                                                  advance team of risk-takers. It is the junior
     A third Cancor property located in the             These are the country’s giant mining compa-               miner’s task to find the ore by drilling where
Abitibi belt is a gold project called Allard.           nies, the organizations that actually build the           no one else has drilled. Once a junior
“Several drill holes at Allard have yielded             infrastructure for mining, then excavate tons             discovers a sufficiently rich mineral field, the
gold,” says Khobzi. “From one gram to five              of rock daily and prepare ore for sale to the             giant mining companies then come courting
grams per ton. This project has been on the             metallurgical plants. They employ thousands               as buy-out parties, or as senior project part-
shelf, but we’re going to revive it. We’ll be           of people and have deep, deep pockets.                    ners. Control of the mineral asset provides
drilling below what has been drilled before.                Junior mining companies like Cancor (not              the junior with a strong negotiating position
Experience shows that explorers must not                exactly a household name) are something                   in the course of structuring any sale or joint
neglect going deeper, say 300 meters deeper.            else entirely. Look at it this way: if Noranda is         venture transaction so as to maximize bene-
It’s often at the greater depth that we find a          a hundred-division army, then Cancor is a                 fits to shareholders.
mine.” Allard is a joint venture with Aur               single commando unit. But the signficance is                   This system helped make Canada one of
Resources which has a 49% stake.                        this: most major discoveries of ore deposits              the leading mining countries in the world.
     The Quebec Advantage: The Fraser                   in Canada in the last quarter century have                Although the last seven or eight years have
Institute has written that, “After Chile, Quebec        been made by juniors like Cancor. Voisey                  seen a profound lull, metals and mining now
is the best place in the world to mine”—and             Bay, for example, resulted from the venture               seem poised to take a “star turn” again in
for good reason. Over the last three years,             of a junior mining company                                the markets. It’s that time in the cycle.
Quebec has increased incentives for the                     “We don’t claim to be miners,” says                   Investment is being channelled into explo-
mining industry in a big way. Funding bene-             Cancor’s CEO, Kamil Khobzi. “We will never                ration, and thus “juniors” are proliferating.
fits accrue from what are called “flow-through          be in the business of extraction. What we do,             Cancor’s distinction is that it has a head start
shares.” These create a tax shelter whereby             and we concentrate solely on doing this, is               on the field.                                 ❏
investors can rebate 175% of their equity in

                                               MONTREAL BUSINESS MAGAZINE
                                                                                        41 FEBRUARY 2003

								
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