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Porphyry hunting in southern B.C. with Kodiak Copper

Commentaries & Views

The Coquihalla Connector running between Kelowna and Merritt is one of the most popular highways in Western Canada. Route 97C links British Columbia's Okanagan region to the Lower Mainland and is a vital transportation corridor for passengers and freight. 

Yet few of the occupants in cars whizzing by at speeds over 120 km/hr realize that beyond the dense forests lining the Connector, sit several active and past-producing mines.

Copper was known to occur in the Cascade Mountains near Princeton, so prospectors began searching for deposits that might hold promise. One was found north of Merritt and east of Ashcroft.

In 1962, the Highland Valley copper mine opened as a joint operation between Bethlehem Copper and Japan's Sumitomo. The mine located about 50 km southwest of Kamloops is now owned by Teck Resources, producing copper and molybdenum concentrates.

The discovery of Copper Mountain in the 1880s led to a rush of miners to the area. The first two camps, Brown's and E. Voight's, merged to create the Grandby Company. Its Copper Mountain operation lasted for over a century but was closed in 1958 and later abandoned. Copper Mountain Mining restarted the mine in the early 2000s, with open-pit mining occurring in the Copper Mountain and Ingerbelle pits. Another 21 years of mine life was envisioned.

Copper Mountain is currently being taken over by Hudbay Minerals. The combined entity would become the third largest copper producer in Canada. In play is an all-stock deal offering a 23% premium to shareholders and valuing the company at USD$439 million.

The merger shows how the demand for copper is heating up. The industrial metal is ubiquitous in construction wiring, plumbing, transportation and communications, but it is also a crucial part of the transition to the green economy. Electrical vehicles for example use about four times as much copper as gas-powered cars and trucks. The rust-colored mineral is also needed for charging stations, in renewable power projects and to build transmission lines.

Yet copper supply is being challenged to keep up with demand, with several large copper mines becoming depleted, copper grades dropping, there being a lack of new discoveries, and resource nationalistic governments intent on exacting a greater percentage of mineral revenues for the state. All has led to a flurry of M&A in the copper space and bullish market sentiment. A shortage of copper is predicted as early as 2025.

Another high-profile copper deal is the attempted takeover of Teck Resources by Glencore Plc, currently the largest mining company in the world. Vancouver-based Teck has reportedly rebuffed the Swiss firm's $23.2 billon offer to combine the two companies, and is instead pursuing plans to separate its copper and coal businesses.

A merger with Teck would bolster Glencore's copper reserves. Along with Highland Valley, Teck owns or part-owns producing mines in Peru and Chile, along with Quebrada Blanca 2, a Chilean project that just opened and is expected to double the company's copper production.

Whether or not the deal with Glencore goes ahead, Teck hasn't forgotten its B.C. roots, in fact is has recently started taking a second look at the minerals-rich region of south-central British Columbia, as a potential source of new copper supply. 

In 2020, Teck underwrote a $12.5 million financing in Kodiak Copper, becoming the largest (9.9%) shareholder in the junior, whose share price rallied on the discovery of a new zone at its flagship MPD project, located 40 km south of Merritt and 25 km north of Princeton.

Kodiak Copper

Kodiak Copper (TSX-V: KDK, OTCQB: KDKCF, Frankfurt: 5DD1) was established by chairman Chris Taylor of Great Bear fame. The founder and CEO of Great Bear Resources presided over its acquisition by Kinross Gold in 2022 for $1.8 billion. Kodiak, a Discovery Group company, is led by Claudia Tornquist, previously the general manager at Rio Tinto, working with Rio's copper operations. She was also the former director of Kennady Diamonds, leading the $176M sale of the company to Mountain Province Diamonds.

Jeff Ward as VP Exploration has been managing field work for Kodiak for the past two years. The veteran geologist has held senior positions in companies involved in grass-roots exploration to advanced evaluation, resource definition and feasibility assessment. Prior to joining Kodiak Copper, Ward was president of Kivalliq Energy, and held a management position with Ashton Mining/ Stornoway Diamond.

Rounding out the management team are David Skelton as VP, project management, Nancy Curry as VP, corporate development, Andrew Berry as general manager, operations, Emily McNie as director, operations & sustainability, and on the finance side, Mark Laycock and Harprett Bajaj.

Kodiak trades under the symbol KDK on the Toronto Venture Stock Exchange and has a market value of about $47 million.

Site tour

On Wednesday, May 24, a select group of mining writers participated in a tour of the MPD project led by Nancy Curry, Jeff Ward and David Skelton. The group assembled early in downtown Vancouver, then were driven by shuttle bus to a commercial building in Merritt that functions as a core shack/ operations headquarters.

Upon arrival, Skelton delivered an introduction and a safety briefing, followed by a Power Point presentation by Tornquist and Ward detailing the company's latest activities and plans.

The group was served lunch and invited to peruse maps, check out historical core samples, and chat with field geologists.

Then it was time to depart for the site, about an hour's drive from Merritt including several kilometers on forestry roads. Traveling by pickup truck convoy, the group was oriented to nearby mines and local geology/ fault structures, then visited the one drill rig turning on the West target of the MPD South claims.

A walk-through historical trenching sites including the identification of rocks containing copper and gold minerals, concluded the tour.

MPD property

Kodiak acquired 32 mineral claims in late 2018 as a single land package, which consolidated three historical prospect areas for the first time — Man, Prime and Dillard. An adjoining 25 claims were added in 2021, known as MPD South or Axe.

The MPD property is surrounded by several producing and past-producing mines. The producers are Copper Mountain to the south, Highland Valley in the north, and New Afton, close to Kamloops, re-opened by New Gold in 2012.

Brenda and Hedley are well-known historical mines. Other mineral exploration projects nearby include Westhaven's Shovelnose and the New Craigmont property being worked by Nicola Mining.

The project lies within the southern portion of the Quesnel Terrane, British Columbia's main copper-producing belt that hosts nearby Highland Valley, New Afton and Copper Mountain.

The Nicola Arc, a volcanic belt starting in the United States and running north towards Kamloops, is divided into three faults: Allison, Western and Summers Creek.

Kodiak says the claims are cut by a complex structural framework of steeply dipping faults, with jogs and splays that have facilitated pathways for porphyritic intrusions.

According to the company, MPD has all the hallmarks of a district-scale, multi-centered porphyry system, with several previously drilled targets with similar signatures to the Gate zone yet to be tested, and multiple new targets being generated.

Mining, like real estate, is all about location. Tornquist made three points regarding where MPD is situated.

The first point concerns access. Getting to the property is much easier compared to other copper porphyry projects in remote locations such as the Andes or northwestern B.C. Being able to drive an hour to the project and base operations in Merritt offers several advantages. Employees stay at a hotel rather than a mining camp and work four weeks on, two off. Getting equipment to the site if parts break down is a short drive away. And the property can be worked year-round.

Mining infrastructure is in good supply. Compared to other similar projects, MPD is not in a water-stressed location; water can be easily tapped from nearby creeks and lakes. A power line on the southwestern portion of the property parallels highway 5A, there are roads throughout the claims, and drill pads can even be built on existing roads. Labor is plentiful throughout the region including from larger centers like Kelowna and Kamloops.

Tornquist highlights the fact that, with such easy access and infrastructure, the "economic hurdle" (i.e., the grades) to developing MPD into a working mine is lower than in a more remote location.

Tornquist's second point is regarding the consolidated claims. "Why did nobody ever make this work before us?" she asks rhetorically. The reason is the large property — 226 square kilometers — has up to now been a patchwork of claims, with drips and drabs of exploration done by several operators since the 1960s. The black dots on the map below are historical holes. Before Kodiak acquired the 32 claims in 2018, nearly 400 holes had been drilled or about 50,000 meters. But the property had never been consolidated.

"Everybody always had just a little claim package somewhere and did some drilling and for porphyries in particular which are all about size, having a little postage stamp on top of it doesn't really get you anywhere, you can't explore it to the fullest, so the fact that we were able to acquire a consolidated package, that was really the first step to make this work and to create value," she said.

Tornquist's third point is regarding how shallow the earlier holes were drilled. This is the crux of Kodiak Copper's exploration thesis, which is to drill deeper holes than previously to find the higher-grade zones of the porphyry-style mineralization.

(A porphyry is a geological term that describes an intrusive or extrusive igneous rock with consistently larger crystals set in a finer-grained matrix.)

Porphyries are generally large and low-grade, making them a challenge to explore, especially for a junior with limited resources. They often require dozens, sometimes hundreds of holes, to delineate a resource. In fact no major porphyry deposit has ever been mined by the exploration company that discovered it. Thus, porphyries invariably require the help of larger mining companies who have deeper pockets with which to move the project from development to production.

Tornquist says when Chris Taylor first looked at the property, he interpreted it to be on the outer zones of a porphyry, meaning you must drill deeper to get at the higher-grade zones.

During Kodiak's maiden drill program, the holes went as far as 800 meters underground, compared to the 200m maximum drilled historically. That's because previous operators, like Antofagasta, were only interested in targeting magnetic highs, which tend to be near surface. Anything lower was not of interest at the time.

Interestingly, the Gate zone discovery in 2019 was within a magnetic low. The field team had noticed a deep hole drilled in 2014 ended in mineralization, and had encountered high-temperature bornite. Kodiak decided to investigate further.

"The presence of bornite shows you're getting closer to the center of the intrusion but also bornite itself as a sulfide mineral carries twice the amount of copper as say, copper in chalcopyrite," Ward, Kodiak Copper's head geologist, explained.

The third hole of a three-hole program cut 102 meters of 0.53% copper and 0.16 grams per tonne gold, for a 0.68% copper equivalent (CuEq).

"We found success right away and the thesis of the higher-grade mineralization being deeper, validated," said Tornquist.

It was the best hole in the 50-year history of the project and changed the game for Kodiak Copper, with Teck Resources coming through with an $8 million investment, giving the Canadian miner a 9.9% stake.

Most of Kodiak Copper's drilling has so far been in the northern part of the property — a little over 50,000 meters in 90 holes. The fact that historical drilling amounted to the same amount of meterage with 393 holes shows the different exploration strategy; Kodiak is drilling fewer holes but deeper.

Notably, 48,000 meters of drilling has expanded the Gate zone from 125 meters long by 350m wide by 800m deep, in 2020, to 1 kilometer strike length x 350m x 900m in 2022. The best 2020 intercept was 282m of 0.70% Cu and 0.49 g/t Au (1.16% CuEq), including 45.7m of 1.41% Cu and 1.46 g/t Au (2.75% CuEq).

The best intercept of 36 holes drilled in 2021 was 699m of 0.29% Cu and 0.12 g/t Au (0.37% CuEq), including 105m of 0.50% Cu and 0.39 g/t Au (0.76% CuEq).

In 2022, Kodiak discovered a 400 meter-long copper-porphyry trend parallel to the Gate zone, marked on the map below as the Prime zone. Another zone, Beyer, discovered during trenching, features high gold and silver grades of 3.02 g/t Au and 24.18 g/t Ag over 12m; and 9.11 g/t Au and 24.00 g/t over 2m.

Referring to Gate, Tornquist stated: "it's showing some size, we're pleased with where we are, but the important thing to remember is that this is only one out of numerous targets."

This is another important aspect of Kodiak's exploration strategy. Instead of staying in the Gate zone and trying to build a resource around those holes, which may not be the best approach given the potential size of the porphyry, Kodiak is using its healthy $12 million treasury to identify and work up several drill targets.

"The board believes we can create most value for shareholders by testing other targets and proving out our model that this is a big porphyry system," said Tornquist. "We have several other targets that are just like Gate, that were historically drilled, shallow, but have never been tested deeper. It's really about testing those targets and finding the next and the next high-grade zone, how we can build value to its maximum. This stage it's all about exploration and discovery."

What drew Teck to the project, Ward noted, was the discovery of high-grade copper zones like Gate with gold associations.

"Until then people had been kicking around for decades but nobody had found anything that pushed it over the top, until we found Gate and said ‘yeah these do exist here'. I think our goal right now is to find a few more of them."

The company has identified 18 new targets based on prospecting and geophysical work. The plan this year is to drill four or five, the priorities being West, South and 1516 in the southern part of the property (the Axe claims), and Man and Beyer in the north.

A 25,000-meter drill program is underway, with one drill rig operating on the western side of the valley, at the West target. A second drill rig will be set up on the eastern side, likely targeting 1516, depending on water availability.

"It'll be a somewhat pivotal year for our company if we can repeat what we did at Gate at these other targets and find higher-grade zones. That would be a big step up for the project and would validate our thesis that this is a big porphyry system," Tornquist concluded. 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.