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By Rose Ragsdale
For Mining News 

2010 Mining Explorers: Gold, other explorers work projects

Diamond mines lead activity, base metals and REEs attract investment

 

Last updated 10/31/2010 at Noon



Diamonds continued to dominate mining production in Northwest Territories in 2010, but other hardrock mineral projects led most of the mineral exploration activity during the year. Yet 2010 is shaping up to be a year of recovery for nearly all of the territory's miners.

Rough diamond production from Harry Winston's 40 percent share of the Diavik Mine totaled 650,000 carats in the second quarter, up significantly from 570,000 carats a year earlier. Rio Tinto plc controls 60 percent interest in Diavik, Canada's largest diamond mine, which is located 300 kilometers, or 186 miles, northeast of Yellowknife in the Lac de Gras area.

In August, Harry Winston reported repurchasing a 9 percent indirect interest in Diavik that it sold to Kinross Gold Corp. in 2009 during the depths of the global recession when it needed cash. Harry Winston bought back the stake -which also sliced in half Kinross' direct ownership interest in the Toronto-based diamond company - for US$220 million in shares, cash and debt.

Meanwhile, operator Diavik Diamond Mine Inc. started underground production at Diavik as part of a plan that will eventually phase out open-pit mining. Diavik's owners also are studying possible changes to the underground mining methods in hopes of lowering costs and extending the mine's resources.

Harry Winston also expressed interest in acquiring a larger ownership stake in the mine.

Though diamonds was one of the hardest hit mining sectors during the downturn, BHP Billiton, 80 percent owner of the nearby Ekati Diamond Mine, recently noted that the mine remained open and operating at full production despite the tough economic conditions.

BHP said prices for rough diamonds at Ekati fell 49 percent in 2009 and its share of the mine's output for the year that ended June 30 dropped to 3.05 million carats from 3.23 million carats a year earlier. The major also blamed the decrease on the mining of lower grade ore at Ekati. Still, the major's revenue from diamond production, essentially from Ekati, totaled US$901 million (underlying EBIT of US$465 million), compared with US$523 million (underlying EBIT of US$59 million), a year earlier.

The diamond producers in Northwest Territories also vowed to recruit new workers locally and end a longstanding practice of paying to transport workers to and from central locations in southern Canada.

Diavik Diamond Mines and De Beers Canada, owner of the territory's third diamond producer, the Snap Lake Mine, also promised to place new emphasis on training employees who live in Northwest Territories.

Diavik also said it would target beginners for future hires, having earmarked 25 of its 150 new jobs to be entry-level positions, with training offered.

BHP alluded to the substantial contribution diamond mines have made to the territory's economy. In September, the major said it has spent C$4.2 billion, of which C$3.4 billion has been spent with Northern Aboriginal and northern businesses and provided substantial employment in the North for nearly 12 years, creating 1,457 person years of employment last calendar year and 15,426 person years since 1999.

De Beers Canada promised to hire 175 more workers at Snap Lake by the end of 2010 and targeted full production at the mine by the end of 2012. The Snap Lake mine, which opened in 2007, is located 220 kilometers, or 137 miles, northeast of Yellowknife.

"Our decision to increase production is consistent with our business strategy to align production with global demand," said Jim Gowans, president and CEO of DeBeers Group. "Although our industry might not see the same sales levels in the next few years that we enjoyed in 2007 and early 2008, we anticipate a steady growth in demand over the next three or four years, and the long term looks bright."

Along with ramping up output, De Beers also said it will complete construction of a permanent accommodation complex for mine employees by October. De Beers put the camp's construction on hold in 2008 in response to the economic slowdown.

De Beers said it is pursuing a new training initiative with education partners that will enable Northwest Territories residents to become underground mine workers certified to Canadian standards.

Another diamond mine?

De Beers also is a 51-49 percent joint venture partner with Mountain Province Diamonds Inc. in the huge Gahcho Kué diamond project in Northwest Territories, which is currently undergoing permitting and environmental review. Gahcho Kué, perhaps the largest diamond deposit under development globally, could become the next producing diamond mine in Northwest Territories.

The project consists of a cluster of kimberlites, three of which have an indicated resource of about 30.2 million metric tons grading 1.67 carats per metric ton (about 50.5 million carats) and an inferred resource of about 6Mt grading at 1.73 cpt (about 10.3 million carats).

Mountain Province Sept. 14 reported that a C$10 million independent definitive feasibility study conducted by JDS Energy and Mining found the project could support a profitable 11-year mine life that produced diamonds at a rate of about 4.5 million carats annually. With an estimated capital cost of C$550 million to C$650 million, including contingencies, and a cash operating cost of C$48-C$60 per metric ton, the project would generate a minimum 15 percent internal rate of return.

"Mountain Province believes that the study delivers an economically viable, technically credible and environmentally sound, development plan for the Gahcho Kué project. Our focus now shifts to completion of the Gahcho Kué environmental impact assessment, which will be filed with the Mackenzie Valley Environmental Review Board prior to the end of the year," said Mountain Province CEO Patrick Evans.

A new look at old diggings

Mining companies are returning to the Northwest Territories as gold prices set new records, soaring past US$1,351 per ounce recently. But these explorers are targeting known deposits or previously identified mineralization rather than seeking new discoveries.

"The price of gold has brought people back, especially in the Yellowknife area," said Ryan Silke, land access analyst for the Nwt & Nunavut Chamber of Mines in Yellowknife. "It's proven territory for gold exploration. It's been picked at, over and over again."

Most of the gold exploration programs under way in Northwest Territories this year are on properties with known mineralization, a lot of which was discovered in the 1960s, '70s and '80s," Silke told Mining News. "People are poking around, re-identifying resources."

Advances in mining exploration and development technology during the past 20 to 30 years also give explorers tools to detect mineralization missed earlier.

"It's a new era for gold technology. There are new methods of mining and new recovery techniques," Silke said.

This re-examination of old ground is part of a cyclical trend that has happened before. Old deposits get another look when the price of a commodity "is on the up-swing," Silke observed.

Regulatory permitting has advanced considerably for at least two projects with potential gold production - Tyhee Development Corp.'s Yellowknife Gold Project in the historic gold camp about 90 kilometers, or 56 miles north, of Yellowknife, Nwt., and Fortune Minerals Ltd.'s Nico gold-bismuth-cobalt-copper-nickel project located 160 kilometers, or 100 miles, northwest of the territorial capital. One or both of them could produce first gold within the next two-three years.

Tyhee, for example, is a good candidate to become the territory's next gold mine. A positive preliminary feasibility study released in July projected a 7.5-year mine life for an initial 3,000-metric-ton-per-day combined open pit and underground operation to mine 7.56Mt ore grading 3.34 grams per metric ton yielding 811,000 ounces gold at the project. In August, Tyhee reported the discovery of more gold zones that has extended known mineralization on the property.

Fortune Minerals also is expected to begin production at the Nico Project within the next couple of years. Nico currently is undergoing an environmental assessment to permit a mine and concentrator. The Nico orebody is best known for its cobalt and bismuth mineralization, but it also contains significant quantities of copper, nickel and 31 million metric tons averaging 0.91 g/t (907,000 ounces) gold. Nico is being developed as an open-pit and underground mining operation.

A half-dozen or so other explorers also chased early stage gold projects in Northwest Territories in 2010. Among them:

Merc International Minerals Inc. focused on the high-grade, near-surface Damoti Lake gold deposit on Tlicho land, near the community of Wekweeti 200 kilometers, or 124 miles, north of Yellowknife. The Damoti Lake property encompasses 4,391 hectares, or 10,846 acres, of land in six mining leases and five mining claims where Merc is working to outline 6 to 10 million metric tons grading 9-15 g/t gold along strike, in parallel structures and at depth in an iron formation-hosted deposit, and to advance the project toward a 3-million-ounce gold resource.

Seabridge Gold Inc. explored its Courageous Lake Project, which is comprised of 27,263 hectares, or 67,366 acres, covering 53 kilometers, or 33 miles, of a greenstone belt that includes the 2-kilometer-, or 1.24-mile-long FAT deposit. The gold resource at Courageous Lake - confirmed by independent engineering consultants - totals 4.2 million ounces in the measured and indicated categories and 6 million ounces in the inferred category. Seabridge reported success in August in achieving its 2010 objective of upgrading the project's inferred resources to higher categories using a resource model developed for the property.

Triple Dragon Resources Inc. received encouraging initial exploration of its Murray Property in south-central Northwest Territories. The Murray property encompasses about 1,005 hectares, or 2,480 acres, and is located 6 kilometers, or 4 miles, north-northwest of the former producing Camlaren Gold Mine. The property also is about 80 kilometers, or 50 miles, northeast of Yellowknife and within a few kilometers of the winter road to the Diavik and Ekati diamond mines.

Triple Dragon also is exploring the May Property, where gold values exist in a vein beneath Gordon Lake. The May mineral lease covers a small island in Gordon Lake, 77 kilometers, or about 48 miles, northeast of Yellowknife.

NT Mining Corp. is another junior tracing new possibilities in old deposits. In June, the company said there may be as much as 15,000 tons of gold ore in existing surface piles at the Bullmoose Mine site located 53 miles, or 88 kilometers, east-southeast of Yellowknife. The mine property consists of one mineral lease of 395 acres, or 160 hectares, and four recently acquired mineral claims of 4,771 acres, or about 1,932 hectares. NT Mining said that upon completion of an expanded drilling program over the new claims, and on existing known vein structures, a potential of 3 million ounces of gold reserve is possible at Bullmoose.

Rare earth elements, IOCG

Some companies are tackling the territory's uncommon prospectivity for rare earth elements, increasingly strategic minerals on the world stage, while others prospect for iron oxide copper gold ore deposits, which typically host valuable concentrations of uranium along with metal ores in large quantities.

Avalon Rare Metals Inc. is exploring the Nechalacho deposit at Thor Lake, located 100 kilometers, or 62 miles, southeast of Yellowknife.

The junior said Nechalacho ranks as the second-largest rare earth elements deposit and the third-largest contained niobium deposit globally.

The inferred mineral resources for Basal and Upper, two zones identified on the property, now total 175.93 million metric tons averaging 1.43 percent TREO, or 2.5 million metric tons of contained rare earth oxides.

A prefeasibility study released by Avalon in June envisions an 18-year mine life at Nechalacho based on an NI 43-101-compliant probable mineral reserve estimate of 12 million metric tons averaging 1.7 percent TREO, 3.16 percent zirconium oxide, 0.41 percent niobium oxide and 0.041 percent tantalum oxide.

This comes to 204,000 metric tons of TREO, 379,200 metric tons of zirconium oxide, 49,200 metric tons of niobium oxide and 4,920 tons of tantalum oxide.

Avalon Sept. 8 said results of winter drilling has increased indicated mineral resources in the key Basal zone part of the deposit by 40 percent with an additional 5.97Mt grading 1.57 percent TREO with 25.5 percent of the TREO being heavy rare earth element oxides, using the same C$260 net metal return cut-off grade applied in a previous resource estimate reported in June. Combined with a previously reported NI 43-101-compliant indicated resource located in the area referred to as Tardiff Lakes, total indicated mineral resources in the Basal zone now stands at 20.45Mt grading 1.75 percent TREO with 23 percent being HREO.

Further, the Basal zone in the West Long Lake area contains a high grade sub-zone defined by applying a higher cut-off grade at C$600. This yields 1.87Mt grading 2.19 percent TREO, with 28.8 percent being HREO, 4.29 percent zirconium oxide, 0.50 percent niobium oxide and 0.06 percent tantalum oxide, representing 30 percent of the total indicated resources in the West Long Lake area. Further additions to this high-grade sub-zone are anticipated from the 2010 summer drilling program on the land-accessible north extension of this zone.

Avalon said the increase in indicated mineral resources in the Basal zone will have a positive effect on the economics of the project, through extension of the mine life used in its financial model.

IOCG explorer REC Minerals Corp. completed an initial C$100,000 surface exploration and shallow drilling program in July at its North Nonacho Property, which is comprised of two mining claims covering 60 units in the vicinity of Nonacho Lake, Northwest Territories. The company has an option to acquire up to a 100 percent interest in the property. Based on fieldwork completed on areas of exposed outcrop on the property, REC said a number of anomalously high magnetic areas were found to host encouraging iron, manganese and copper oxide and sulphide mineralization.

In September, REC reported that analytical results from a surface chip and grab sampling program at North Nonacho show the presence of significant concentrations of copper, silver and gold. The company hopes to conduct a follow-up program of ground induced polarization surveys and diamond drilling of mineralized showings and other favorable high magnetic anomalies on the property.

Base metals progress

Owners of at least two base metals projects reported progress in 2010 in their respective quests to secure permitting for mine operations in Northwest Territories. Both the Prairie Creek zinc-lead-silver project located in the Mackenzie Mountains and the Pine Point zinc-lead project 129 kilometers, or 80 miles, south of Yellowknife inched forward as Canadian Zinc Corp. and Tamerlane Ventures Inc., respectively, worked to advance the projects.

The Prairie Creek zinc-lead-silver project has a 2007 NI 43-101-compliant measured and indicated resources estimate exceeding 5.8 million metric tons grading 10.71 percent zinc, 9.90 percent lead, 0.326 percent copper and 161.12 grams per metric ton silver capable of supporting 14-plus years of mine life at an initial rate of 600 tpd, which will increase to 1,200 tpd, and the future inclusion of inferred resources is expected to extend the mine life to at least 20 years.

The mine site is partially developed with an existing 1,000 tpd mill and related infrastructure. A decision on an environmental assessment of the project is expected from regulators by March 2011.

Canadian Zinc is conducting a diamond drill program at Prairie Creek in 2010 to test for possible extensions of the defined mineral resource within the main zone at Prairie Creek mine. The collar of the new hole, PC-10-185, is about 1.5 kilometers, or nearly 1 mile, north of the last drill hole (PC-95-125) that is within the defined mineral resource.

Pine Point is located on the south side of the Great Slave Lake at the site of the historic Pine Point Mine where more than 65Mt of high-grade ore was extracted between 1964 and 1987. The project's current mineral inventory contains NI 43-101-compliant proven and probable reserves of 7.8Mt grading 3.01 percent lead and 6.16 percent zinc along with measured and indicated resources of 8.0Mt grading 1.13 percent lead and 2.26 percent zinc. In addition, Pine Point hosts non 43-101-compliant historical resources totaling about 50.9Mt grading1.24 percent lead and 3.84 percent zinc.

Tamerlane has completed a bankable feasibility study for the project and since has worked it to production. In August, the junior reported the appointment of mine development veteran Margaret Kent, and said it would focus on raising enough capital to bring the Pine Point Project into production.

 

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