A Matter of Survival

Vancouver-based Canarc Resource Corp. has suffered the ups and downs typical of the junior exploration sector, but it’s looking like a winner now.

The company was founded in 1987 by geologist Brad Cooke, and built up a broad portfolio of exploration properties in its early years, especially in North and South America. Then it made a serious mistake: it moved into Indonesia in a big way in 1996, securing 13 Contracts of Work for total holdings of 2.2 million hectares in central Kalimantan. When the Bre-X fraud unraveled in 1997, Canarc suffered from the collateral damage.

Seven years later, Cooke is still at the helm as president and CEO of Canarc, but with a more disciplined approach to the business and a real shot at developing two new mines. CMJ spoke with him in mid-May about how his company survived the bear market, and what it is doing to capitalize on renewed investor confidence.

CMJ: In our 1999 mining industry survey, you said that Canarc would spend $10 million on exploration of its New Polaris gold property in British Columbia “after the NDP government is thrown out of power”. Were you really lying low then? Has that now changed?

Cooke: I didn’t know you people kept those surveys! Yes, we were very much lying low in 1999, although it started right after the whole Bre-X fiasco and the precipitous drop in precious metal prices. So 1998 to 2001 was a time of cutbacks for us. We did joint venture a number of projects but our budgets were all outside of Canada and provided by other parties. However, with the Liberals in power in British Columbia since 2001, things certainly are changing here.

CMJ: What is the political climate in BC now toward mine development?

Cooke: Better. What’s left to do now is to try and repair some of the damage done by the NDP government in the 1990s, specifically with regard to land use legislation and native land claims, both of which are still issues for exploration and development in the province. We do have an incentive to get back to work at New Polaris [100% owned by Canarc]. The next phase of work really is in the order of $10 million, including an infill drilling program to turn a portion of the 1.3-million-oz resource into a 650,000-oz reserve, plus a feasibility study to assess the economics and allow us to proceed with permitting.

CMJ: What did Canarc do to survive the six-year downturn in mining investment?

Cooke: First and foremost, we were committed to make Canarc a success for our shareholders. We recognized fairly quickly after Bre-X and the crash in the price of gold that we had to change our approach to business, because we were big exploration spenders for several years. We basically slashed spending, slashed it again, and by the time 2001 rolled around we had no spending and no staff.

Fortunately, we have very supportive shareholders who reached into their pockets a couple of times during those years to make sure Canarc retained all of its key assets. In contrast to some of the other junior companies out there, we didn’t go into the Internet sector, we didn’t continue to buy properties, we did not sell great amounts of cheap stock and dilute stockholders and we didn’t go under. We hunkered down and chose a “no spending, no dilution” approach to survival and it worked.

CMJ: Why did your shareholders stay with you?

Cooke: As it turned out, our shareholders had great faith in me, thankfully, and the gold sector in general. We believe the New Polaris and Benzdorp projects in particular have the potential to make the shares significantly more valuable as we get back to developing the key assets of the company. The proof of the pudding is that last year we raised money to drill Benzdorp, and sure enough we’ve come up with a significant new find. The next proof will be when we go to finance New Polaris and complete the infill drilling. I think investors will reawaken to the fact this is a pretty compelling project. On grade alone New Polaris should make it.

CMJ: You’ve been blowing that horn for awhile.

Cooke: Yes, we have but there was really no material work done at New Polaris from 1997 until November last year when we completed a three-hole drilling program. We showed that even today, we can go next to the old workings, drill an area not previously drilled and find new veins. It’s a great exploration target and an equally good development project.

CMJ: What is the plan now for New Polaris?

Cooke: Our business plan is to finance and complete a feasibility study for a 65,000- oz/year high-grade mine at New Polaris and then proceed with development over the next three years. We’re still ironing out some wrinkles for the conceptual mine plan. New Polaris has refractory gold ore so the old-timers would mine year-round and then barge concentrates during the summer out to the smelter in Tacoma, Washington. Metallurgical work is now ongoing to determine the economics of autoclaving or bioleaching concentrates on site versus shipping concentrates to existing processing facilities in Nevada.

CMJ: Is New Polaris your best property?

Cooke: We have two key properties in the company, New Polaris being one. The other is the Benzdorp property [80% optioned to Canarc] in Suriname, South America. It’s a brand new exploration discovery, so it really has the potential to be a value driver behind the shares.

CMJ: How about Benzdorp?

Cooke: Benzdorp, being a new discovery, is earlier stage. This year we are totally focused on drilling off the JQA discovery [“Jungle Queen” A, named after the Jungle Queen dredge that worked the alluvial deposits for many years and still sits at Benzdorp]. It’s somewhat unusual in that it is a gold-rich porphyry in Lower Proterozoic greenstones, and there are not many porphyries in such old rocks.

There are, however, a number of parallels to the Boddington mine of Newmont/ Anglo/Newcrest in Western Australia. They have the same age of rocks and same style of mineralization, hosted by quartz stockworks in diorite stocks intruding greenstone volcanics. These are large, low-grade bulk-tonnage deposits as shown by Boddington’s production history of 16 million oz [gold] and current reserve/ resource base of 10 million oz.

At Benzdorp, we have a similar scenario. Last year we drilled 38 holes, all in saprolite [oxide cap up to 100 m thick], only a couple getting into bedrock. The weighted average grade of every sample of all the 12 holes from the JQA discovery area returned 0.6 g/t Au. The copper has been leached away from the oxide zone, but in bedrock we are seeing similar gold grades and 0.1-0.3% Cu as well without using any cutoff grades. This bulk tonnage target, if projected vertically down to 300 m in depth, would contain on the order of 4 million ounces gold and half a million pounds copper. That’s the main target we plan to drill test this year. We’re now in a Phase Two deep drilling program that started in February and assays are expected shortly.

CMJ: Are you looking at any new projects?

Cooke: We had the opportunity in the last couple of years to broaden Canarc’s property portfolio, but our commitment to our shareholders when we slashed spending was that, when we got back to a better market, we would focus on developing Benzdorp and New Polaris. We believe that’s all we need to make stockholders a healthy return. So we have not chased any other acquisitions for Canarc. We intend to finish the jobs we started on New Polaris and Benzdorp.

---