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Mining news update: Not a bad start for the year!

All in the last month: Pogo start-up, permit approvals at Nixon Fork, substantial resource increases at Donlin Creek and Pebble

 

February 26, 2006



In the last month the Alaska mining industry has seen start-up of its first major gold mine in five years (Pogo) and approval of permits for the Nixon Fork copper-gold mine.

We also saw announcement of substantial increases in copper, gold and molybdenum resources at two advanced exploration/development projects (Donlin Creek and Pebble). New development plans were offered for heap leaching at the Fort Knox gold mine and initial funding was approved for evaluation of a coal to liquids facility at the Beluga coal deposits.

Red Dog and Greens Creek reported stellar operating results, in part due to robust metals prices.

Exploration plans for drilling and other activities were tabled by a number of companies and planning is on-going for dozens more.

All in all, not a bad way to start off the year!

Western Alaska

Teck Cominco American announced fourth quarter and year-end 2005 results from its Red Dog mine. In the fourth quarter the mine produced 142,200 tonnes of zinc in concentrate and for the year the mine produced 568,000 tonnes of zinc in concentrate. Zinc ore grade increased slightly to 22.3 percent while mill recoveries decreased slightly to 83.6 percent for the fourth quarter.

The mine also produced 29,000 tonnes of lead in concentrate during the fourth quarter and 102,000 tonnes of lead in concentrate for the year. Lead ore grade increased to 6.6 percent while mill recoveries decreased to 55.7 percent for the fourth quarter.

As a result primarily of higher zinc and lead prices (average 74 cents and 48 cents per pound respectively for the quarter), the mine posted a $167 million operating profit for the quarter and a $325 million operating profit for the year, both significant increased over profits for the year and the fourth quarter of 2004.

Novagold Resources and new partner Barrick Gold (who took over Placer Dome in late January) announced increased resources at the Donlin Creek deposit in southwestern Alaska.

Measured and indicated resource categories increased by 3.7 million ounces or 33 percent to 14.8 million ounces of gold grading an average of 2.76 grams of gold per tonne using a 1.2 gram per tonne cut-off grade. Inferred Resources decreased by 0.7 million ounces to 13.6 million ounces of gold grading 2.72 grams of gold per tonne through conversion of those ounces to the measured and indicated category. Total gold resource is now 28.4 million ounces in all categories.

The new resource estimates are based on an updated 3-D geologic and mineralization model that integrates 28,240 meters of drilling completed in 2005 and 193,598 meters of drilling previously completed on the project.

Northern Dynasty Minerals Ltd announced new resource estimates at its East zone at the Pebble deposit near Iliamna. At a 1.00 percent copper equivalent cut-off, the inferred mineral resources are estimated at 947 million tonnes grading 0.77 percent copper, 0.48 grams of gold per tonne and 0.040 percent molybdenum (1.28 percent copper equivalent), containing 16.0 billion pounds of copper, 14.5 million ounces of gold, and 830 million pounds of molybdenum.

The Pebble East resource estimate is based upon drill core assay results from 20,890 meters of drilling in 22 holes. The Pebble East deposit is open to expansion in all lateral directions and to depth. Plans for 2006 include 30,500 meters of drilling at a budgeted cost of US$20 million and will commence as soon as rigs with deep drilling capability can be mobilized to site, expected in March.

St. Andrew Goldfields announced that permits have been approved for the operation of the Nixon Fork gold-copper mine near McGrath. The permits were received from State of Alaska and the U.S. Bureau of Land Management.

Plans include upgrading and refurbishing the existing gold mill, including the installation of a cyanide leach circuit. In addition facilities will be installed to extract and re-treat the existing tailings from the previous operation which contain an estimated 30,000 ounce gold resource. Engineering is expected to be completed in April and onsite construction will commence in May.

Re-treatment of the existing tailings is expected to begin in July with processing of underground ore expected to start in the early fall. The company also announced that an underground diamond drilling program is under way at the Mystery Creek deposit. The objective of this program has been to delineate and confirm additional ore zones that will provide feed for the Nixon Fork operations.

Liberty Star Gold Corp. announced that 69 additional claims have been staked at the company's Bonanza Hills project in southwest Alaska. The block now covers 163 Alaska State quarter section mining claims covering approximately 40.75 square miles. The additional claims cover stream sediment anomalies containing gold and geochemical indicator metals.

Full Metal Minerals Ltd. and Triex Minerals Corp. announced that several new geochemical anomalies have been identified at their Boulder Creek uranium prospect on the Seward Peninsula. These results suggest potential extensions along strike to the existing deposit, as well as potential new deposits along the same granite-sandstone contact.

Additionally, four new areas with multi-element geochemical anomalies covering a strike length of approximately nine kilometers were identified. Several of the anomalies are larger in area and stronger in terms of element abundances than the baseline data collected over the known extent of the current resources at Boulder Creek. Planning is currently under way for a 3,000-meter drill program including down-hole geophysical surveys. The drilling program is scheduled to commence in early March.

Interior Alaska

Kinross Gold is currently conducting preliminary feasibility-level work on the possibility of adding a heap leaching circuit to its Fort Knox mine operations near Fairbanks. The company indicated that evaluations are on-going on a possible 160 million ton valley-leach operation in the Walter Creek drainage above the current tailings impoundment. Geotechnical studies identified Walter Creek as a suitable site for the valley leach which the company hopes will operate at approximately one-third the cost of it current 40,000 ton per day milling operation. If economic evaluations are positive, initial ground work for the project could occur as soon as late 2006.

Teryl Resources Corp. announced results from the 2005 Gil project that included an update of the geologic database and completion of a high-resolution electromagnetic, or HEM, airborne geophysical survey. Two geophysical targets were recommended for further follow-up: the Last Chance Creek and Too Much Gold Creek prospects. Fieldwork recommended prior to drill testing of these anomalies includes mapping and sampling across interpreted geophysical and geochemical anomalies.

Freegold Ventures announced additional results from trenching completed at their Golden Summit project near Fairbanks. The six-trench program encountered two new veins at surface with gold grades of 35.3 grams of gold per tonne over 5 feet (grab sample of 63.7 grams of gold per tonne) and 28.6 grams of gold per tonne over 5 feet (grab samples of 139.0, 22.1 and 12.0 grams of gold per tonne). In addition, the strike length of the Wackwitz vein was extended to 730 feet where the shear zone hosting the vein returned 10 feet grading 2.89 grams of gold per tonne.

Two additional short trenches were excavated along the Wackwitz vein and returned 59 feet grading 6.4 grams of gold per tonne with four grab samples of the vein returning grades ranging from 0.38 to 16.35 grams of gold per tonne.

The biggest news in the last month came from Teck Cominco and partner Sumitomo who announced that the Pogo Mine poured its first gold bar, a 31.55 kilogram brick, on Feb. 12.

With this pour the mine and mill began a several month shake-down of operating systems at the new mine with the goal of reaching full-scale production in the second quarter of 2006. For those of you counting, the Pogo deposit was discovered in 1994 and has been under continuous exploration and development since then. Total construction costs for the mine are now estimated at $347 million. Congratulations Teck Cominco and Sumitomo!

Geoinformatics Exploration announced that its partner, Midas Resources Ltd. plans to conduct a winter drilling program at the Uncle Sam gold project in the Richardson district. The reverse circulation program is designed to follow up on results from past drilling by Kennecott Exploration who intersected both low grade gold mineralization (11 meters at 2.4 grams of gold per tonne and 8 meters at 2.1 grams of gold per tonne) along with higher grade intersections (6 meters at 10.6 grams of gold per tonne and 5.5 meters at 4.9 grams of gold per tonne). The higher tenor intersections have very similar gold to bismuth ratios to mineralization at the Pogo deposit.

Rimfire Minerals Corp. has staked an additional 442 square kilometers of state mining claims in the Goodpaster district. The claims were staked adjacent to the LMS project where AngloGold Ashanti announced a new high grade gold discovery in 2005. The company is now the largest landholder in the Goodpaster district, with claims covering 740 square kilometers (182,800 acres).

Alaska Range

Piper Capital announced results of drilling from the Long Creek prospect on its Golden Zone project in the central Alaska Range. Highlights of this drilling include 7 grams of gold per tonne, 20.1 grams of silver per tonne and 0.72 percent copper over 12.2 meters and 2.35 grams of gold per tonne, 80.1 grams of silver per tonne and 0.55 percent copper over 3 meters in exploration trenches while diamond drill holes returned 0.08 grams of gold per tonne, 29.2 grams of silver per tonne and 0.62 percent copper over 6.1 meters and 1.11 grams of gold per tonne, 36.1 grams of silver per tonne and 0.40 percent copper over 3.0 meters in hole 05 LC-1.

Mineralization was extended more than 1.5 kilometers south from the trenched and drilled area with rock chip samples which contained up to 3.73 grams of gold per tonne, 163 grams of silver per tonne and 1.25 percent copper. The Long Creek area is in a distinct structural province separated from the Golden Zone breccia pipe by the Bryn Mawr fault and includes the historic Copper King prospect and mineralization at a prospect previously called South Long Creek.

The newly identified area remains open to expansion but currently covers more than 6 square kilometers. Gold-copper-silver mineralization at Long Creek is characterized by crudely stratabound disseminated to massive carbonate replacement zones in limestone and calcareous conglomerate which are cut by northeast-striking massive sulfide veins. Three prominent aeromagnetic low areas coincide with substantial hornfels and are believed to reflect relatively shallow underlying granitic intrusions.

Nevada Star Resource Corp. announced that JV partner Anglo American Exploration (USA) Inc. intends to continue exploration on the MAN project in 2006. A spring 2006 drill program has been approved to test high-ranking targets, including electromagnetic geophysical anomalies, multi-element geochemical anomalies and predicted down-plunge extensions of surface nickel-copper sulfide showings.

On Jan. 27 the Alaska Industrial Development and Export Authority's board approved a $500,000 contribution to a $1.5 million feasibility study of Alaska Natural Resources To Liquids' proposed coal-to-liquids fuel plant. The plant would use coal from the Beluga River coal fields 50 miles west of Anchorage and be located about 12 miles from an existing Chugach Electric Association power plant.

The funding from AIDEA is not certain because ANRTL has to finish raising the remaining $1 million, but AIDEA's board has agreed to advance $100,000 of the $500,000 for an ongoing study of Beluga coal resources which will determine if there is enough coal in the area to supply a big coal-to-liquids plant.

ANRTL President Richard Peterson told Mining News that the plant will require 17 million tons of coal annually for 40 years. (Peterson is also president of Alaska Natural Gas To Liquids.)

ANRTL is talking to both Sasol and Shell about participating in the coal to liquids plant.

If the project proves feasible, the plant would cost in the neighborhood of $5 billion and produce 80,000 barrels of clean diesel and other products per day. It would also generate 300 megawatts of electricity per day from waste heat for Southcentral Alaska markets and produce a regular supply of carbon dioxide that could be used in enhanced oil recovery in Cook Inlet's aging fields, increasing oil production there by hundreds of millions of barrels.

The Fischer-Tropsch chemical process to convert coal and other carbon material to liquid petroleum products has been used by Shell and Sasol to develop commercial scale coal-to-liquids and gas-to-liquids projects in South Africa, Malaysia, Qatar and China.

Northern Alaska

Silverado Gold Mines announced that underground development at its Nolan gold project has reached virgin placer ground and the operation has begun mining and stockpiling gold for summer treatment. A bulk sample of 7,625 bank cubic yards of gravel was taken from this area in 1998-1999 and yielded 623 ounces of gold or 0.08 ounces per cubic yard.

Southeast Alaska

Hecla Mining (29.73 percent) and Kennecott Mining (70.27 percent) announced fourth quarter and year-end production results from the Greens Creek mine near Juneau. For the year the mine produced 9,665,428 ounces of silver, 72,758 ounces of gold, 21,913 tonnes of lead and 64.611 tonnes of zinc. Cash operating costs were negative 66 cents per ounce (due to byproduct credits) while total operating costs were $2.18 per ounce. Average head grade mined for the year was 18.17 ounces of silver per tonne.

Year-end proven and probable reserves stood at 2,223,872 tons grading 0.12 ounces of gold per ton, 14.5 ounces of silver per ton, 3.9 percent lead and 10.2 percent zinc. Inferred resources stood at 654.214 tons grading 0.14 ounces of gold per ton, 14.5 ounces of silver per ton, 4.1 percent lead and 11.2 percent zinc.

Exploration efforts in 2005 continue to expand the mineralization west of the Gallagher fault where exploration has already outlined an additional eight years of mineable resource.

 

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