North of 60 Mining News - The mining newspaper for Alaska and Canada's North

This summer, Vancouver, British Columbia-based Northern Dynasty Minerals Ltd. will spend $20 million on an expanded-scale continuation of its drilling program at the newest discovery in the east zone of its Pebble mine project near Iliamna on the Alaska Peninsula. The drilling budget is twice what the company spent on the project last year.

The new find just to the east of the initial discovery made Pebble meaningfully bigger and richer, and the company expects this year's drilling program to tell just how much the east zone will expand the scope of the project.

After seeing 2005 drilling core assay results, Northern Dynasty decided it will include the new high-grade porphyry east deposit of Pebble in its mining plan. East zone drilling in 2005 confirmed not only that it was a big find, but a rich one - rich enough to make underground mining a viable proposition, company officials say.

The company's latest drill core assay analysis results confirmed company expectations that the east zone would be an attractive addition to the originally planned project, likely as a second phase with access from the open pit created in the first phase.

"At this point, expectations are that the project will integrate production from high volume, low cost, open pit and underground mines," Northern Dynasty said in a Jan. 24 statement.

"The ongoing success of our drilling programs at Pebble demonstrates the extraordinary potential of the project's mineralizing systems," said Northern Dynasty Chairman Bob Dickinson in the statement. "The combined Pebble West and Pebble East resources rank among the largest copper, gold and molybdenum accumulations in the world."

Dickenson said initial resource estimates based on drilling done so far at the east deposit indicate a substantial increase in copper, gold and molybdenum available at Pebble, with significant promise to further expand the resource.

Bigger rig needed

Northern Dynasty will have to upgrade its drilling equipment to drill to greater depths in 2006 because rigs brought in to drill the shallower original deposit were too small to drill deeply enough into its new deposit. The company said it won't know what to expect of the east deposit without drilling deeper. The east deposit is open to expansion in all lateral directions and to depth, the company said.

"Sooner or later we're going to have to get a bigger drill out here so we can go deeper because we're open at depth," field geologist Richard Moses told Mining News Oct. 4 during a field visit. "We know it extends at least 3,500 feet below the surface, but we don't know how much farther."

Moses said test holes in the east zone bottomed at more than 1 percent copper equivalent. While the original Pebble find lies near the surface, the east zone is covered with 1,500 feet or more of barren un-mineralized rock.

The Pebble east resource estimate is based on drill core assay results from 68,500 feet of drilling in 22 holes completed by Northern Dynasty in 2005. This year the company plans to drill an additional 100,000 feet of core samples.

Drilling to begin in March

The company plans to begin drilling in March, as soon as larger drill rigs with deep drilling capability can be mobilized to the site. Due to the roadless nature of the area, all of the equipment and personnel must be placed on site by helicopter, from the company's base of operations 10 miles away at the airport in the village of Iliamna.

Based on a 0.60 percent copper equivalent cut-off, the estimated inferred mineral resources in the Pebble east deposit are 1.83 billion tonnes grading 1.0 percent copper equivalent, containing 24.3 billion pounds of copper, 22.1 million ounces of gold and 1.5 billion pounds of molybdenum, the company said. At a 1.00 percent copper equivalent cut-off, the higher-grade inferred mineral resources are estimated at 947 million tonnes grading 1.28 percent copper equivalent, containing 16.0 billion pounds of copper, 14.5 million ounces of gold, and 830 million pounds of molybdenum.

Logging and sampling of drill core is conducted at Northern Dynasty's Iliamna facility.

The core is split and samples are transported to the ALS Chemex laboratory in Fairbanks for drying, weighing and crushing.

Samples are shipped from Fairbanks to the main ALS Chemex laboratory, North Vancouver, British Columbia for final preparation and analysis.

Gold is determined by 30 gram fire assay fusion with an atomic absorption spectroscopy finish, while copper and molybdenum assays are determined by four acid digestion with an inductively coupled plasma-emission spectroscopy finish, Northern Dynasty said.

All samples are also analyzed for 23 additional elements by four acid digestion and inductively coupled plasma-emission spectroscopy.

Duplicate samples are analyzed by Acme Analytical Laboratories of Vancouver, British Columbia.

Permitting delayed

The new find is good news, but the need for additional information about Pebble's east deposit has bumped Northern Dynasty off of its original timeline for the project.

Company objectives for 2005 included the preparation of a feasibility study by year end and preparation of applications for project permitting by state and federal agencies, for submittal in mid-2006. In early December, however, Bruce Jenkins, chief operating officer of Northern Dynasty Mines Inc. (Alaska) told Mining News the company was curtailing plans to file permit applications for its original open pit mine plan at the initial Pebble discovery, in order to include the new east zone in its development plan.

"Why permit a plan that is going to be obsolete?" Jenkins said.

While drilling is under way, Northern Dynasty will continue its study of ways to mitigate environmental and social impact of the Pebble project, the company said, adding that it wants to factor the potential impact of a larger proposed mine into its study.

"Comprehensive engineering, environmental, and socioeconomic programs, designed for the completion of a feasibility study and permit applications for a modern, long-life mining operation with large scale annual metal output will continue in parallel with the Pebble East drilling program," the company said.

"The company's current goal is to optimize the project design with regard to mineral resources as well as social, environmental, and economic factors," the company said. "Accordingly, the completion of the feasibility study and environmental applications has been deferred until the results of the East Zone drilling are integrated into the overall Pebble Project plan, in order to assess the impact of this new zone."

Delineation needed before feasibility study finalized

Northern Dynasty said it would be premature to finalize the feasibility study or to prepare permit applications until the new deposit is extensively drilled and delineated.

Because the mine is proposed for a pristine area located high in two watersheds that feed a massive lake and river system that serve as an incubator for Bristol Bay wild salmon runs, environmental scrutiny of the Pebble project will be stringent.

Northern Dynasty sees the project location as an asset, despite environmental and regulatory oversight the company will face in Alaska, above and beyond what competing projects face elsewhere on the globe.

"Pebble is an exceptionally important discovery because it is located on American soil - a stable jurisdiction in which the development rules are well-known - at a time when the demand for copper, gold and molybdenum is increasing worldwide while available new supplies are limited," Dickenson said.

The company also sees the high location of the Pebble deposit, above significant surface water flows, to be ideal for keeping mine tailings isolated from water bodies that are essential to fish populations, according to Jenkins.

"As currently conceived, the Pebble project will have no direct effect on important salmon spawning or rearing areas," Jenkins said in a Jan. 13 opinion piece appearing in the Anchorage Daily News. "Indirect effects will be managed in order to achieve no net reduction to any fishery."