Investing dollars into the ground

“Exploration is treated as a business at Teck Cominco,” says the company’s vice-president of exploration Fred Daley. “We develop a strategy, do risk analysis, prioritize projects, justify spending and make quarterly adjustments. We put the best dollars into the best projects.” The group of 130 (in 14 offices in 11 countries on five continents) has a Cdn$70-million budget this year, up from $50 million last year.

Low-cost copper, gold and zinc are the main targets, with most spending in Mexico, Brazil, Chile/Argentina and Australia. “Our ideal project in this market would be a large Chilean open pit copper mine like Escondida — a giant with good grade,” muses Daley. He adds: “It’s not just size, but also longevity and profitability. The best are a combination of all three.”

The company frequently advances its business plan through partnering. “We are very creative in how we do option deals,” says Daley. “We could provide equity financings, loans, or strategic alliances. We helped a private company to get listed on a stock exchange. Being a partner of choice on good projects creates value both for them and for us.”

One of the best projects is the Carrapateena copper-gold discovery in South Australia, 100 km southeast of BHP Billiton’s Olympic Dam IOCG mine. Many Australian companies were eager to cut a deal with the private prospector who owned it once they heard about an initial drill intersection of 167 m grading 1.9% Cu and 0.7 g/t Au. Daley describes it as “serendipity” that brought Teck Cominco’s four-man team to camp out near the vendor’s home in Adelaide in September 2005. “We developed a good personal relationship with him. We demonstrated that we would make it a high priority, in addition to using his consulting and research.” A $5-million drill program is currently testing its potential.

Other projects receiving $5 million of spending this year are the Morelos Norte gold property (78.8% interest) in Guerrero state, Mexico, and the Santa Fe/Ipora nickel laterite project in western Goias State, Brazil, in which Teck Cominco can earn a majority interest.