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By Shane Lasley
Mining News 

New junior raises funds for Tulsequah

Completing a C$20M initial financing, Chieftain Metals plans to install long-awaited water treatment plant, expand resource


Last updated 1/23/2011 at Noon

Terrence Chandler, former CEO of Redfern Resources Ltd., has joined Chieftain Metals Inc., a newly created company focused on re-opening the Tulsequah Chief Mine, a precious metals-rich volcanic massive sulfide deposit on British Columbia's western border, about 40 miles, or 64 kilometers, northeast of Juneau.

Chandler serves as executive vice president of the company. In his former role at Redfern, he spent some 20 years working on exploration, permitting and development of the Tulsequah Chief Project. Unable to survive a period of financial and regulatory uncertainty, Redfern, and parent company Redcorp Ventures Ltd., filed for bankruptcy in the Supreme Court of British Columbia in 2009.

Toronto-based Chieftain Metals, which went public in December, is lead by President and CEO Victor Wyprysky, who brings 25 years of experience in Canadian investment banking to the company.

The junior also touts former National Chief of the Assembly of First Nations Phil Fontaine and Yukon Zinc Corp. COO Raymond Mah as new directors.

Chieftain Metals closed a deal to buy the defunct project's assets in September, giving Chieftain a clear title to 13 mineral claims, 25 crown-granted claims and four fee-simple lots that make up the Tulsequah property.

The junior then completed an initial public offering on the Toronto Stock Exchange, grossing some C$20 million for the young company, including proceeds of an over-allotment that closed in January.

"Net proceeds of the offering will be used to initiate the recommended Phase 1 work program at the Tulsequah Chief Deposit and the drilling program at the Big Bull Deposit, and to repay a portion of certain indebtedness of the company," Chieftain Metals said on closing the financing.

Water treatment a priority

Chieftain Metals' first task as owners of Tulsequah Chief is to install a plant to treat the acidic metal-laden water flowing from historic copper-gold-silver-zinc-lead mines on the property, which have been sitting idle since Cominco Ltd. shut down production in 1957.

The acid rock drainage, which is believed to be reaching a tributary of the Taku River, has been a concern for regulators in both Alaska and British Columbia.

"Any transfer of the property and its associated authorizations should be tied to a plan and an enforceable commitment, including a timetable, for addressing the existing acidic mine drainage and metal leaching from the mine workings and waste materials currently at the site," Alaska Department of Natural Resources Office of Project Management & Permitting Director Thomas Crafford wrote to his counterparts in British Columbia.

Environment Canada is requiring the installation of the water treatment plant as part of the conditions of the property transfer.

Redcorp had purchased and begun the groundwork for the installation of a plant to treat the acidic mine waters at Tulsequah, but the company filed for bankruptcy before the water treatment facility could be made operational.

According to a technical report completed by SRK Consulting in November, the water treatment plant that Redcorp planned to install was part of the assets acquired by Chieftain. It is estimated that the installation of the water treatment facility will cost C$4.2 million and is the single largest expense of the C$10.1 phase-1 work proposed by the engineering firm.

The balance of the C$10.3 million phase-1 work proposed by SRK focuses primarily on exploration of the 14,220-hectare, or 35,123-acre, property.

SRK calculates the Tulsequah Chief deposit has an indicated resource of 6 million metric tons grading 1.42 percent copper, 6.44 percent zinc, 1.23 percent lead, 2.63 grams-per-metric-ton gold and 96 g/t silver. In addition, the deposit contains an inferred resource of 1.1M grading 0.94 percent copper, 5 percent zinc, 0.93 percent lead, 1.63 g/t gold and 72 g/t silver.

Big Bull, a deposit about 8 kilometers, or 5 miles, southeast of Tulsequah contains a smaller resource.

"There is excellent potential to discover new deposits to the southeast of the Tulsequah Chief deposit within rhyolite stretching between it and the Big Bull deposit, located 8 kilometers to the south," SRK wrote in the report.

The consulting firm recommends 15,000 meters of underground drilling and an 8,000-meter surface program during the phase-1 program.

Back to the drawing board

One of the big hurdles that Chieftain Metals must overcome is getting metal concentrates to market. The company's website depicts an overland route to Atlin about 155 kilometers, or 96 miles north and a river route following the Taku River to Juneau.

Redfern ran into challenges with both routes. The proposed road to Atlin received staunch opposition from the environmental community who cited concerns over caribou in the region. The river route proved to be technically challenging, and the company never completed a plan that it could submit for permitting approval.

"At this time, Chieftain has not made a decision on a preferred route and more work is required to evaluate the different shipping options. The company has acquired a permit to construct the overland road from Atlin with the purchase of the Tulsequah Chief property. A permit from the Alaska Department of Natural Resources and the Department of Fish and Game is required to allow the use of the air cushion barge transportation and winter transportation on ice," SRK Consulting wrote in its report.

Chandlar told CBC in a recent interview, "We are back to the drawing board looking at the access. Certainly there are some difficulties associated with barging, and it isn't the solution that some people thought it would be."

An Environmental Approval Certificate to develop the Tulsequah project issued by the British Columbia provincial government also was included in Chieftain Metals' purchase of Redfern's assets.

Chieftain Metals is expected to outline its initial plans at a meeting hosted by the Northwest Mine Development Review Committee in Smithers, B.C., Feb. 1.

Crafford told Mining News he plans to join his B.C. counterparts at this initial meeting by the new Tulsequah owner.


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