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October 2010

Week of October 31, 2010

2010 Mining Explorers: Territory ranks fourth in investment

Explorers seek giant mineral deposits in Far North’s ‘elephant country’

Rose Ragsdale

For Mining News

Government and industry officials agree that mining exploration and development in recent years have brought substantial positive change to Nunavut, Canada’s newest and least explored territory. Ongoing and new exploration, however, are rapidly advancing understanding of this vast Arctic land’s mineral potential.

“In this industry, it seems that all of the best and worst of times were compressed into less than two years (between 2008 and 2010),” said Peter Taptuna, minister of Economic Development & Transportation for the Government of Nunavut.

In April, Taptuna said Nunavut was expected to attract about C$250 million in mineral exploration spending in 2010, up substantially from C$175 million spent by explorers in 2009, but less than record industry spending of C$330 million in 2008. Still, the outlay would rank the northern territory No. 4 among Canadian jurisdictions attracting most exploration investment, after Ontario, Quebec and Saskatchewan.

John Kearney, president of the NWT & Nunavut Chamber of Mines, said mining development and exploration spending has been especially impressive in Nunavut in recent years. Kearney said a total of C$1.3 billion was invested in such activity in 2008 and 2009, more than double the C$642 million invested in the Northwest Territories and nearly triple the C$500 million attracted to Yukon Territory during the same period.

The future success of mining in Nunavut, however, is dependent on land access and the efficiency of the territory’s regulatory framework, he warned. The industry also needs new roads, bridges and power plants, he added. Nunavut regulators, meanwhile, vowed to continue working to streamline the territory’s regulatory process, while providing greater environmental protection, according to Bernie MacIsaac, acting regional director for Indian and North Affairs Canada in Nunavut.

At 1/5 the size of Canada, Nunavut covers 1,994,000 million square kilometers, or 770,000 square miles, (nearly three times the size of Texas). The Far North territory is only 11 1/2 years old, but its geology records nearly 3 billion years of Earth history and contains a wide spectrum of economic commodity types, according to geologists at the Canada-Nunavut Geoscience Office.

The territory was expected to attract investment in at least 120 active mining exploration and/or development projects in 2010 that altogether would employ about 2,000 workers. Explorers, mainly Canadian juniors and a few majors, sought economic deposits of gold, silver, base metals, uranium, diamonds and iron ore deposits.

Gold mining hot spot

Donald James, chief geologist for the Canada-Nunavut Geoscience Office, told Mining News that he believes Nunavut is well on its way to becoming the new gold mining center for North America.

“We have some very big projects coming on line in the next few years,” he said. James cited Newmont Mining Corp.’s Hope Bay Project and Agnico-Eagle’s recent acquisition of the Meliadine Project in Nunavut as examples of huge gold mining ventures rapidly advancing to startup in the territory.

Denver-based Newmont is exploring the Hope Bay Project, home to one of the largest undeveloped greenstone belts in North America. Purchased from Miramar Mining Ltd. two years ago, the belt is known to host three significant gold deposits – Doris North, a few miles from the Arctic Ocean; Madrid, about 5 miles inland from Doris; and Boston, about 27 miles south of Madrid. Doris and Boston are smaller high-grade (4.0-8.0 grams-per-metric-ton cut-offs) lode deposits. Madrid is a low-grade (average 4 g/t) deposit with high-tonnage potential. Together, they contain estimated indicated and inferred resources of more than 10 million ounces of gold.

Agnico-Eagle and Comaplex Minerals Corp. recently closed a deal in which Agnico-Eagle effectively purchased the advanced stage Meliadine gold project located near Rankin Inlet about 300 kilometers, or 186 miles, southeast of Agnico-Eagle’s newly opened Meadowbank Mine. First discovered in 1990, Meliadine currently boasts 3.29 million ozs in measured and indicated resources of nearly 13 million metric tons, grading 7.9 g/t gold, and an inferred resource of 1.73 million ozs from nearly 8.39Mt grading 6.4 g/t gold. Comaplex transferred all of its non-Meliadine-related assets to a new company, Geomark Exploration Ltd.

Through early 2013, a C$130 million budget has been approved for drilling about 200,000 meters with the main focus being on converting the 5-million ounce resource at the high grade Tiriganiaq zone to reserves. In September, Agnico-Eagle also said early drilling results suggest a possible combination of open pit and underground mining at the project’s F zone. A feasibility study is expected to be completed in 2013.

Gold deposits at the Meadowbank Mine have probable reserves of at least 3.6 million ounces (32.8Mt at 3.5 g/t) and remain open on strike and at depth. Since it achieved commercial production March 1, Meadowbank’s gold output has increased gradually. In 2010, the mine is expected to produce about 300,000 ozs, while its life-of-mine annual output is projected to average 350,000 ozs through 2019.

Meadowbank and Meliadine, together, are expected to employ 1,000 people in permanent jobs, spend C$350 million a year on operating expenses and another C$120 million annually on wages.

Huge gold potential

Gordon Davidson, general manager of projects for Commander Resources Ltd., says Nunavut is definitely “elephant country.”

“You can find huge mineral deposits at surface, and there are few other places in the world like that,” Davidson told Mining News in April.

Commander and joint venture partner AngloGold Ashanti Ltd. are exploring the Baffin Gold Project on Baffin Island in northern Nunavut.

“This is the first exposure in North America for AngloGold and their investment in the project is a validation of our program and our management team,” Davidson said. “We also hope AngloGold will bring world exposure to our company and to other Canadian explorers.”

Davidson described the Baffin Gold Project as “a juicy system” where gold extends outside the quartz veins and into the wall rock.

Commander had a 2010 exploration budget of a little more than C$5 million to extend the Malrok gold zone identified by drilling in 2004 and to initiate drilling at the newly discovered Kanosak prospect where significant high-grade gold mineralization was identified over a corridor about 300 meters wide by 3.5 kilometers long on surface with channel and grab sampling in 2008 and 2009. In late September, Commander reported results from Malrok continued to define and enlarge the scope of its gold-bearing structures, and the widespread extent of gold mineralization on the property confirms continuing potential for a significant gold discovery. Reconnaissance drilling at Kanosak intersected zones of gold mineralization with locally high grades. The explorer said this stratabound gold mineralization is contained in two layers of gently dipping siliceous sediments distributed over a very large regional area. Highlights of the first drill results are a 9.39-mete interval of the upper strata assaying 2.26 g/t gold in hole KAN-10-07 and a vein in the deeper layer assaying 22.5 g/t gold over 0.94 meters in hole KAN-10-01. This deeper zone, situated about 50 meters below the base of the upper mineralized strata, is blind and was discovered only in the 2010 drill program.

Sabina Gold & Silver earmarked C$25.5 million for 2010 exploration programs on its Back River gold and Hackett River volcanic massive sulphide projects and Wishbone greenstone belt in western Nunavut. The Back River Project is situated about 520 kilometers, or about 322 miles northeast of Yellowknife, Northwest Territories. Sabina budgeted about C$10 million for 20,000 meters of drill in 2010 exploration that resulted in the discovery of Llama Lake in May and the Unwelt Zone in June. This followed the discovery of the Echo Zone in August 2009. Success at Llama Lake led to additional spending of C$2.5 million for another 10,000 meters of drilling.

Sabina mounted a C$10 million exploration program at Hackett River located 480 kilometers, or 298 miles, northeast of Yellowknife to explore several silver/zinc-rich zones, and uncovered new mineralization in several areas. The discoveries will add additional tonnage to the global Hackett River resource, which already is considered one of the largest undeveloped VMS deposits in the world, and enhance economics for the project by converting waste material to mineralization in the pits, possibly reducing stripping rates.

Another potential elephant in the making is North Country Gold Corp.’s Three Bluffs gold project in the Committee Bay Greenstone Belt of eastern Nunavut, a 300 kilometers long, 5- to 50-kilometers-wide package of highly prospective lithologies geologically comparable to gold-bearing belts hosting the Meadowbank and Meliadine deposits. Located about 300 kilometers, or 186 miles, northeast of Baker Lake, Three Bluffs has a gold resource of about 800,000 ozs and current drilling includes an intercept of 23.53g/t gold over 13.59 meters, within the same iron formation 400 meters west of the current resource shell.

In a 20,000-meter drill program using four diamond drill rigs, North Country targeted expansion of the gold resource at Three Bluffs in 2010 to 2 million ozs. By late August, the junior had reported discovery of the new Antler gold deposit, drilled high-grade gold intercepts in the Three Bluffs and Hayes deposits and identified gold mineralization in numerous rock types at Committee Bay within a corridor of sheared supracrustal rocks termed the Walker Lake Trend. Spending more than C$8 million on exploration at Three Bluffs this year, the explorer also tested for blind mineralization in July with an induced polarization survey over a 24-square-kilometer area.

Aura Silver Resources Inc.’s Greyhound Project located about 46 kilometers, or 29 miles, south of Meadowbank Mine is a base metals project that is beginning to glint with precious metals. Aura Silver reported results in early September and August from C$725,000 spent on surface sampling and drilling programs that returned grades as high as 28.2 grams per metric ton gold and up to 5,380 g/t silver. The samples were taken as part of a brief mapping and sampling program in the western part of the Greyhound property.

Aura Silver said it planned to test for deep mineralization by following up on the recent results with an induced polarization survey at Greyhound in September and October, along with additional soil sampling and prospecting in preparation for a 2011 drill program.

Massive iron ore deposits

Two companies, Baffinland Iron Mines Corp. and Advanced Explorations Inc., are carrying out exploration and development of massive iron ore deposits in Nunavut.

With total exploration spending for 2010 projected to reach C$37 million, Baffinland Sept. 28 reported the discovery of two new iron deposits, Nos. 6 and 7, on its giant Mary River iron ore property on Baffin Island. Earlier, the Toronto-based junior said recent drilling results expanded the potential of Mary River’s deposits No. 4 and No. 5 on the property. Baffinland is working to develop an 18 million-metric-ton-per-year open-pit mine with an initial mine of life of 20-plus years with ore mainly from the project’s No. 1 deposit.

Further, Baffinland reported an unsolicited takeover offer from Nunavut Iron Ore Acquisition Inc., a subsidiary of Iron Ore Holdings LP, for a price of C80 cents in cash per common share, for the company’s outstanding shares. The bidder already owns or controls nearly 30 percent of Baffinland’s outstanding common shares on a fully diluted basis.

Advance Explorations said XinXing Pipes Group Co., Ltd. a Chinese state-owned mining and manufacturing conglomerate, is moving ahead with its plans to acquire a 19 percent stake in junior for about C$4.28 million. The Chinese investor is mainly focused on the junior’s flagship iron ore project at Roche Bay, where a recent preliminary economic assessment indicates a potential US$2.76 billion net present value, a minimum 50-year mine life and a return on investment in three to five years. Further, XinXing and Advanced Explorations said they will jointly assess possible synergies to their plans for other opportunities.

In September, Advanced Explorations said it staked key precious and base metal prospects on the Melville Peninsula in Nunavut. Fourteen claims totaling more than 22,000 acres were staked for gold, silver, copper, molybdenum and iron ore. These targets were last worked more than 30 years ago, and their full exploration potential has been overlooked since, the junior said.

Base metals examined

Chinese-owned Mining Metals Group is systematically exploring mineral assets at its High Lake and Izok Lake projects in Nunavut, targeting copper, zinc-lead and nickel mineralization in aggressive 2010 exploration programs. 

High Lake has an NI 43-101-compliant resource calculations of measured and indicated resources totaling 17.2 Mt grading 3.36 percent zinc, 2.25 percent copper, 0.31 percent lead, 70 g/t silver and 0.95 g/t gold, along with a 40,000-metric-ton inferred resource grading 2.38 percent zinc, 0.49 percent copper, 0.44 percent lead, 122 g/t silver and 0.21 g/t gold at High Lake and measured and indicated resources totaling 14.4 Mt grading 12.94 percent zinc, 2.51 percent copper, 1.28 percent lead and 71 g/t silver, along with a 369,000-metric-ton inferred resource grading 6.40 percent zinc, 3.79 percent copper, 0.27 percent lead and 54 g/t silver at Izok Lake.

MMG geologists focused exploration efforts mainly on Izok Lake with a C$7 million exploration program aimed at testing extensions of the Izok deposit at depth and along strike, and also drill testing High Lake East targets identified in 2009, prospecting for more targets at High Lake East and exploring the region for another Izok-caliber target.

MMG’s board also approved a budget of C$4 million to complete a new prefeasibility study in 2010, incorporating ideas, including a more detailed road design and the possibility of using the nearby but defunct Lupin gold mine for ore processing.

Encouraging diamond finds

In September, Peregrine Diamonds Ltd. reported the discovery of 12 new kimberlites and successful completion of its summer exploration program at the Chidliak diamond project on Baffin Island, Nunavut. The 12 new discoveries bring the total number of kimberlites on the 9,800-square-kilometer, or 3,783-square-mile, property to 50, of which 34 were found in 2010.

The junior also said the discovery of the CH-31 kimberlite by prospecting proved to be a very important development for the project because it emphasizes the probability of discovering more multi-hectare kimberlite bodies. The geophysical model generated from CH-31 will be used to select additional large kimberlite targets at Chidliak for ground geophysical surveying and drilling in 2011, the junior added.

Peregrine and its partner, BHP Billiton, have begun planning for a 2011 exploration program at Chidliak that will be similar in scale to their 2010 campaign in hopes of rapidly discovering more diamondiferous kimberlites. Peregrine will be the operator of the 2011 exploration program.

BHP has exercised its first option earn-in rights for a 51 percent interest in Chidliak, and Peregrine estimated that the major will reach C$22.3 million in cumulative spending on the property toward the end of September. BHP also has until November to exercise a second option to earn an additional 7 percent interest in Chidliak by electing to fund the project to completion of a bankable feasibility study.

Peregrine also reported discovery of two kimberlites on its adjacent Qilaq Project, further expanding the new diamond district, which now stretches about 70 kilometers, or 43 miles, in a north-south direction and 40 kilometers, or 25 miles, east to west. The explorer also acquired a huge swath of diamond prospective claims on the Cumberland Peninsula in early 2010.

Other diamond explorers reported encouraging results from 2010 exploration programs in Nunavut, including Shear Minerals Ltd., Indicator Minerals Inc., and Stornoway Diamond Corp.

In late August, Shear Minerals also completed the purchase of the defunct Jericho diamond mine located about 420 kilometers, or about 260 miles, northeast of Yellowknife from Caz Petroleum Inc. for 80 million shares and C$2 million in cash and debt. Jericho has an existing indicated diamond resource of 1.88 million carats and an inferred resource of 1.13 million carats. A past-producer, it also has potential for resource expansion and more than C$200 million in infrastructure.

Shear Minerals said in September that it hopes to know by 2012 whether it can reopen the mine, which produced 780,000 carats of diamonds in less than two years before former owner Tahera Diamond Corp. was forced to suspend production in 2008.

Uranium hunt

The mining industry was expected to invest some C$30 million into investigating some 36 uranium properties in Nunavut during the 2010 season.

In July Forum Uranium Corp. reported the start of summer exploration activities at its North Thelon project in Nunavut. The North Thelon project is a large property comprising 69,316 hectares, or 171,210 acres, that surround Areva Canada’s Kiggavik Project on the north, east and south sides.

Kiggavik, the largest known uranium deposit in Nunavut, contains an estimated resource of 134 million pounds U3O8 grading 0.27 percent, is undergoing review by Nunavut regulators. Areva wants to develop a uranium mine that would produce 8 million pounds of uranium per year over a 17-year mine life.

The uranium producer has said the project would likely create 400 to 600 jobs worth at least C$200 million in wages over 25 years.

Forum said the only other company actively exploring in the Kiggavik area is Cameco Corp. to the west of the Kiggavik deposits. Cameco is another large uranium producer with mines in the Athabasca Basin of Saskatchewan.

A number of historical and new showings with grades of up to 8.75 percent U3O8 have been discovered by Forum on its North Thelon Project in past exploration programs. In 2010, the junior aimed to identify additional gravity targets (zones of alteration); to refine the geology and structural knowledge and to collect soil samples for geochemistry from high priority areas on the property. Forum said this information will position the property for a major drilling campaign in 2011.

Forum also intended to evaluate the property’s potential for rare earth elements discovered in the Nutaaq area in 2009. The REE showing in a 10-kilometer by 8-kilometer, or 7-mile by 5-mile, intrusive syenite complex, returned assays with up to 3.8 percent total REE. Forum plans to conduct a detailed mapping, soil sampling and rock sampling campaign in the area to determine the size, grade and geological controls of the new REE discovery.

Other mining companies are also busy pursuing their visions of a big uranium payday in Nunavut.

In late June, Kivalliq Energy Corp. posted final assays for its 2010 phase 1 drill program, totaling 2,375 meters in 13 holes, at the Lac Cinquante uranium deposit on the 91,093-hectare, or 225,000-acre, Angilak Property located 220 kilometers, or about 136 miles, southwest of Baker Lake in central Nunavut. Ten of the 13 holes intersected significant uranium mineralization.

“Since Kivalliq’s first drill program in 2009, we have an impressive drilling success rate of over 85 percent,” John Robins, Kivalliq’s president and CEO. “Our team has dramatically increased the potential at Lac Cinquante by intersecting uranium mineralization at a new zone 500 meters west along trend from the historic deposit, and by drilling the highest grades and widest intercepts to date within the historic resource area.”

In August, the junior started a second drill rig on the property as part of a 10,000-meter second phase of its 2010 diamond drill program, which will consist of drilling, prospecting, sampling and field baseline studies, with the goal of establishing a NI 43-101-compliant mineral resource by early 2011.

In mid-September, Kivalliq closed a C$6.2 million non-brokered private placement, of which net proceeds will be used to explore and develop the Lac Cinquante uranium deposit, and for general working capital.

Another uranium explorer, Hornby Bay Minerals Exploration Ltd. reported July 29 that its 2010/11 diamond drilling and seismic exploration program was underway on the Coppermine River Property in the Hornby basin.

Exploration for uranium in the Great Bear Lake – Hornby Bay Basin region about 500 kilometers, or 336 miles, north of Yellowknife, Northwestern Territories, dates back to the 1940s.

Hornby Bay said it raised nearly C$1.8 million in a rights offering to existing shareholders that will help fund exploration on its 40 mineral leases and 16 mining claims at Coppermine River.

Hornby Bay is also participating in a 50-50 joint venture with MIE Metals Corp. on 29 mineral claims and 1 mining lease covering 24,648 hectares, or 60,906 acres. Hornby Bay is the operator of 10 mineral claims of the property, covering 10,451 hectares, or 25,825 acres, and owns 13 mineral claims and one mining lease of the joint venture, covering 14,627 hectares, or 36,144 acres.

For the area covered by its uranium properties, Hornby Bay has built a multilayered GIS database that integrates all geological, geochemical, geophysical, and drill hole information that it acquired along with historical uranium exploration data for western Nunavut that it purchased in 1996.

Numerous other juniors are pursuing smaller exploration programs in search of a host of other minerals and gemstones across Nunavut. They include Starfield Resources Inc., which launched a 2010 exploration program at its 625,000-acre Ferguson Lake nickel-copper-cobalt-platinum-palladium property with about C$2 million in working capital and Anglo American Exploration Canada and Vale INCO, which acquired permits and initiated early stage exploration on Southhampton Island in 2009 and 2010.






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