By Rose Ragsdale
Petroleum News Contributing Writer 

Northern Dynasty uncovers zone rich in molybdenum at Pebble

Company opts for bigger stake in promising Southwest Alaska gold-copper-molybdenum mine

 

Last updated 12/12/2004 at Noon



Northern Dynasty Minerals Ltd. has discovered a new higher-grade zone on the east side of the Pebble gold-copper-molybdenum deposit in southwestern Alaska near Iliamna, Ronald W. Thiessen, the company's president and CEO said Nov. 29.

Pebble, which has a 2.74 billion-ton inferred resource, is believed to contain the largest gold deposit in North America and the second-largest copper deposit.

Separately, Thiessen and Galahad Gold of London announced that Vancouver, British Columbia-based Northern Dynasty exercised an option the week of Nov. 22 to acquire 80 percent interest in Pebble's main deposit. Northern Dynasty issued 1.77 million shares of its common stock valued at $9.94 million to Teck Cominco American Inc. in exchange for the lion's share of ownership in the mine.

Galahad Gold holds a 35.81 percent ownership interest in Northern Dynasty.

Under the option agreement, Teck Cominco has 180 days to require Northern Dynasty to manage the liquidation of the stock over a two-year period, with any surplus proceeds over $9.94 million credited back to Northern Dynasty and any shortfall from that figure being made up in cash or shares by Northern Dynasty.


Exploration interest also acquired

Northern Dynasty, which had until Nov. 30 to exercise its options, also chose to acquire up to a 50 percent interest in the exploration lands surrounding Pebble. To exercise the option, the company had to complete more than 60,000 feet of drilling on the exploration lands.

Teck Cominco has 90 days to form a 50-50 joint venture with the company on the exploration lands, or sell its 50 percent interest in the exploration Lands to Northern Dynasty for $4 million in cash or shares, depending on Northern Dynasty's preference. Teck Cominco would then retain a 5 percent after-pay-back net profits interest in any mine located on the exploration Lands.


By exercising its options, Northern Dynasty also gained a 90-day period to decide whether to acquire the remaining 20 percent ownership interest in the main Pebble project, held by a related party, in exchange for common stock equal to the independently appraised value of the 20 percent interest. Ultimately, Northern Dynasty could acquire full ownership of the main Pebble deposit (with no back-in right or royalty) and at least 40 percent interest in the surrounding exploration lands.


East Zone uncovered this year

Thiessen said results from drilling, engineering and environmental studies at the Pebble site earlier this year uncovered the East Zone. The work, which involved $25 million in spending, was designed to provide detailed data for a feasibility study and environmental impact statement for a large-scale open pit mining operation.

The substantial size of the new zone demonstrates that Pebble has multiple sources of mineralization and offers significant implications for the deposit model and mine operations currently being planned for the site, he said.

The United States Geological Survey has said Pebble is the most extensive mineral system of its type in the world. It includes the central deposit and several porphyry gold-copper-molybdenum deposits and gold occurrences spread over an area two miles long by 1.2 miles wide about 86 miles west of Cook Inlet. Though the new zone is expected to add substantially to Pebble's inferred resource, it is too soon to estimate to what extent, Eric Bertsch, a Northern Dynasty spokesman, said Nov. 29.


"We're still waiting for samples from well over 100 holes to get back from the assay labs," Bertsch said.

An inferred eastern source area for the East Zone mineralization requires substantial additional drilling to establish its full potential, he added.

Drilling found more molybdenum than expected

However, it is especially significant that the latest drilling revealed "more than anticipated" amounts of molybdenum, a metal used to harden steel, Bertsch said.

Thanks to short supplies worldwide, prices for the mineral have climbed recently to more than $27 per pound, up sharply from $4.50 per pound last year. At current prices, the molybdenum ore at Pebble could pay for production and enable the mine's owners to turn a profit on copper extracted from the deposit, he said.

"This could substantially change the economics of the project," he added.

Copper currently sells for about $1.43 per pound, up from 80 cents per pound last year. Pebble has an inferred resource of 16.5 billion pounds of copper, along with 27 million ounces of gold.

Pebble's East Zone extends east across the boundary of the main deposit, well onto exploration lands surrounding the deposit.

Northern Dynasty defined the East Zone as an area 2,000 feet by 2,000, with similar geology and features to the Central Zone of the Pebble deposit. Its favorable characteristics have been observed in drill holes to at least 2,379 in depth - much deeper than mineralization in the central deposit, Thiessen added.

 

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