Mining exploration at the Palmer deposit near 40 Mile would resume next May under a draft, joint-venture agreement between Constantine Metal Resources and Dowa Metals and Mining Co. of Japan.
Constantine president Garfield MacVeigh said if the agreement is approved by the boards of the two companies in coming weeks, as many as 30 workers and three drill crews will continue surface exploration at the zinc and copper deposit next summer.
Under the “letter agreement” signed this week, Dowa would provide $3 million for work in 2013, which would match or exceed the scope of work done in summers previous to 2010, MacVeigh said.
“We would be exploring very aggressively with a minimum of $3 million and probably more than that. It would be the maximum level of activity people in Haines have seen us involved with,” he said.
The agreement stipulates Dowa would acquire a 49 percent interest in the project if it invests $22 million in the deposit over four years, and it would get rights to buy zinc concentrate if it invests amounts up to other, lower benchmarks.
“It’s not a payment to Constantine. It’s an investment into the opportunity of the project,” MacVeigh said.
“When Constantine benefits is with the success of finding a large enough deposit or sufficient ore to make an economic project. The up side for Constantine shareholders is they get a significant expenditure in the project with no further share dilution in the company,” he said.
Exploration stalled the past two years as Constantine, a junior exploration firm, sought investors.
“The market for investment has been focused on gold. It’s been more challenging on the base metal side of the business, especially for a junior exploration firm,” MacVeigh said. “For the amount of money it takes to advance a project the size of Palmer, it just makes sense to bring in a senior partner.”
Dowa operates the second-largest zinc smelter in Japan and holds a 49 percent interest in the Tizapa mine, a zinc, copper and lead operation in central Mexico, MacVeigh said. It also has interest in two open-pit copper mines in central British Columbia. Its resources would allow it to finance development and operation of a mine at the Palmer deposit, he said.
Constantine has spent about $11 million to date at the deposit and two to four years of additional surface exploration may be necessary, MacVeigh said. It has identified five million tons of ore there, he said.
The size of the deposit puts it on a scale with the Greens Creek mine, he said. Development of a mine there would cost about $300 million, MacVeigh said.
Constantine has worked at the Palmer site the past two summers, but work was limited to maintaining the property and doing “basic environmental work,” MacVeigh said.
Dowa’s smelter also is used in recycling, or creating refined metals after melting down alloys from electronics and other sources, he said.