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Vol. 19, No. 21 Week of May 25, 2014
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Factors affect span between find, mine

Study: Of 3,500 nonferrous metal deposits discovered between 1950 and 2013, lead-zinc deposits showed highest conversion rate

Curt Freeman

For Mining News

At the recent Prospectors and Developers Association of Canada meeting in Toronto, Dr. Richard Schodde, managing director of MinEx Consulting, presented some key factors which affect the time span between a mineral discovery and start-up of commercial mining.

The study reviewed about 3,500 nonferrous metal deposits discovered between 1950 and 2013. Dr. Schodde’s findings suggest that only 45 percent of all discoveries made since 1950 have turned into mines. The rate is highest for lead-zinc deposits (58 percent) followed by gold at 51 percent conversion rate. The rate for copper deposits has been 39 percent. Not surprisingly, larger deposits have better conversion rates. For all deposits that were developed, there was an average delay of 12.4 years between discovery and mine start-up. The delay is getting longer over time. The delay varies from 10.0 years for gold to 17.1 years for copper. One somewhat surprising finding was that the delay period was not significantly affected by the size of the deposit or the depth of cover. Projects discovered in low risk countries (United States, Canada, Australia, Chile) are 30-40 percent quicker to develop than discoveries in higher risk political jurisdictions. Over the past two years the development pipeline for copper deposits has been put on hold. The main factors causing these delays are cost over-runs (23 percent), poor economics (21 percent), a general lack of supporting infrastructure (15 percent) and social issues (15 percent). Dr. Schodde found that a project may take several economic cycles, sometimes spanning more than one decade, to reach production. In terms of creating value for the explorer and its shareholders, it is critical to reach production during the project’s first economic wave. He concluded by stating that the next generation of mines will be found under progressively deeper cover in more remote or difficult to access areas in higher risk countries. These deposits will likely face more challenging social and infrastructure issues.

Western Alaska

Teck Resources Ltd. and partner NANA, Inc. announced first-quarter 2014 results from its Red Dog mine. In the 1st quarter the mine produced 152,000 metric tons of zinc in concentrate, up significantly from the 128,000 metric tons produced in the year-previous period. Zinc ore grade decreased slightly to 16.0 percent while mill recoveries were up slightly at 83.6 percent. The mine also produced 29,400 metric tons of lead in concentrate. Lead ore grade increased slightly to 4.0 percent, while mill recoveries increased to 68.2 percent. The mine posted a US$88 million operating profit for the quarter, up significantly from the US$71 million profit in the year previous period. Royalty costs nearly doubled to US$32 million versus US$14 million in the first quarter of 2013. Mill throughput increased to 1.077 million metric tons versus 873,000 metric tons in the year previous period.

Graphite One Resources Inc. announced results from a second series of mineral beneficiation tests on its Graphite Creek deposit. Tests using a leaching process yielded results exceeding 99.9 percent carbon from a rough concentrate produced from floatation which had an initial 92 percent carbon head grade. The company hopes to take advantage of a growing graphite market in North America, a market expected to grow significantly in the next five years. The company also announced that it had raise US$1.3 million through exercise of warrants. The company plans to use these funds for future exploration as well as to advance ongoing metallurgical studies.

The news wires have been humming ever since the Washington Times reported that internal Environmental Protection Agency memos dating back to at least 2008 were urging a never-before attempted pre-emptive veto of Northern Dynasty Minerals Ltd.’s right to develop its Pebble project. The EPA did not announce their ill-conceived review of the Bristol Bay watershed until 2011. The Washington Post reported that, despite EPA’s claim that the Bristol Bay watershed study was prompted by requests from Alaska tribal entities, internal EPA memos that long pre-date the study showed that “EPA officials had regular contacts with potential opponents of the mining project, coordinating activities with environmentalists and even coaching local tribes on how they could strengthen their case opposing the project.” In a written response, Pebble Partnership CEO Tom Collier said, “The actions EPA is contemplating today go well beyond Pebble. It is a precedent that will be leveraged by environmental activist groups and will have a chilling effect on future investment and job creation throughout the country.” A few days ago the Wall Street Journal voiced its condemnation of the EPA comportment by saying, “A basic precept of American democracy is that petitioners before their government receive a full and fair hearing. The Obama Environmental Protection Agency is in urgent need of that remedial civics lesson.” Both state and federal officials have demanded an investigation into EPA’s apparent skullduggery so we have not heard the last of this issue.

Redstar Gold Corp. announced it had arranged a non-brokered private placement of up to 55.13 million units at a price of US6 cents per unit to raise gross proceeds of US$3.31 million. Proceeds from the placement will be used to advance the company’s Unga gold project and for general working capital.

Interior Alaska

Kinross Gold announced first quarter 2014 results from their Fort Knox mine. The mine produced 83,588 oz at a cash cost of US$570/oz versus 93,252 oz at a cash cost of US$558 in the year previous period. The mine’s production declined compared with first quarter 2013 performance primarily due to lower grades. The company expects higher production costs over the next three quarters as the operation enters a phase of the mine that has more operating waste. The mill treated 3.3 million metric tons of ore grading 0.66 grams per metric ton gold with a mill recovery of 84 percent. The heap leach saw additions of 2.79 million tons of ore grading 0.27 g/t gold.

Contango ORE Inc. announced favorable preliminary metallurgical results from the Peak zone at the approximately 750,000-plus-acre Tetlin gold-copper-silver project near Tok, Alaska. SRK Consulting of Anchorage, Alaska, was retained to develop and oversee this first-ever metallurgical testing at Peak zone and SGS Metallurgical Operations of Vancouver, British Columbia conducted the laboratory tests. Preliminary metallurgical tests were conducted on drill core samples from the Peak zone and the results indicate that both gold and sulfide minerals respond to standard gravity and froth flotation treatment and that gold is not refractory in nature. The company selected three broad types of mineralization, including a high gold sample (150 g/t gold), a high-grade copper sample (5.87 percent copper) and a mixed-grade sample (23.2 g/t gold, 45.4 g/t silver and 1.29 percent copper). Two-kilogram charges of each sample were subject to grinding, gravity separation and rougher flotation of the gravity tails. The -10 mesh (<2000 microns) material was ground to a target grind time in a rod mill, and then processed through a gravity concentrator (Knelson machine). The concentrate was upgraded with a Mozley table and the combined Knelson and Mozley tails (gravity tails) became rougher flotation feed. The gravity concentrate was assayed for gold and silver. In addition to the above, a mineralogical examination was performed with X-Ray diffraction, Quantitative Evaluation by Scanning Electron Microscope, optical microscopy and chemical analysis to determine the overall mineral assemblage present in the samples, identify the gold and silver-bearing minerals present and complete a mass balance of microscopic gold and silver. Results of this work indicate that all samples achieved consistently high metallurgical recovery across the primary grind sizes that ranged from 49 to 115 microns. The proportion of contained gold recovered by gravity methods ranged from 8 percent to 30 percent with the lowest gravity recovery in the highest copper bearing sample with progressively higher percentages of gold in the gravity concentrate as gold grade increased. Primary sulfides identified in the analysis were pyrrhotite and chalcopyrite with lesser amounts of arsenopyrite, silver-bearing mineral and sphalerite. Abundant visible gold was observed in the two higher grade gold-bearing samples.

Blue Moose Exploration announced that during 2014 it plans to re-open drill pads and up to 4,500 feet of old trenches at the Goodrich porphyry copper-gold prospect at its BME project in the Ladue Mining District. In addition, at the Honks prospect the company plans to excavate 1,200 feet of new exploration trench approximately 650 feet north or, and parallel to, an 800 foot-long trench excavated in 2010.

Alaska Range

Pure Nickel Inc. announced results for a nickel deportment study completed for the Eureka Zone occurrence at its MAN nickel-copper-platinum group element project. The results indicate that the 73.5 percent of the nickel in the Eureka Zone mineralization is hosted by potentially recoverable nickel-iron sulfides (63 percent) and nickel-iron alloys (12.3 percent). Only 20 percent of the nickel is unrecoverable in silicate mineral hosts, primarily olivine and serpentine. The 126.6-meter long composite sample was collected from hole PNI-13-069 and averaged 30 parts-per-billion gold, 50 ppb platinum, 150 ppb palladium, 0.28 percent nickel, 0.12 percent copper and 0.5 g/t silver. The Eureka Zone has been identified over a 15-kilometer (nine miles) long strike length and remains open to expansion. The central 5.7- kilometer (three miles) long portion of the zone has a weighted average thickness of 203 meters and a weighted average grade of 0.23 percent nickel, 0.08 percent copper, 0.02 percent cobalt, 170 ppb gold + platinum + palladium and 0.51 g/t silver.

Southern Sun Minerals announced that it is formulating plans for its Galleon volcanogenic massive sulfide project in the Bonnifield District. The project hosts four separate massive sulfide prospects that have been identified by geologic mapping, soil and rock sampling, ground geophysics and limited core drilling. Mineralization on the property is characterized by high lead-zinc values and locally high copper values. However, the project is unique in the district because of the presence of extremely high silver-gold-arsenic-antimony values, and locally very high bismuth values. Known prospects on the property include the Galleon, Porcupine, Sixty-seven and Lynx prospects, all of which are situated on the northern portion of the property. The company is formulating plans for a program consisting of power auger soil sampling, rock sampling, detailed mapping, and a complex resistivity-induced polarization geophysical survey.

Northern Alaska

Goldrich Mining Co. and partner NyacAU, LLC provided an update on its 50/50 placer gold mining joint venture on the Chandalar project in the Brooks Range. The company completed haulage of equipment and supplies over the 90-mile winter trail. The primary piece of equipment delivered to the mine site was a feeder for and expanded wash plant, to be completed in stages through 2016. The upgrade will take the plant capacity from 125 loose cubic yards per hour to 600 yards per hour. Once finished, processing facilities will consist of a primary feeder system with multiple gravel screens and gold recovery tables and an expanded settling pond system for additional water management. The expanded plant is expected to be substantially completed in 2014. Long lead-time equipment will be available in the later part of 2014 and will be mobilized to the project during the 2015 winter trail. The partners indicated that they will focus on plant construction in this year and do not intend to mine new gravels in 2014. All-in development costs incurred to the end of 2013 total about US$13.7 million and the forecasted investment for 2014 is estimated to be about US$4.5 million. The company also reported that petrological studies conducted on drill core from lode prospects at Chandalar have helped refined the orogenic gold model which has been used to guide past exploration. This work indicated that all of the samples examined contain numerous accessory minerals commonly associated magma or late stage magmatic fluids. These minerals include monazite, thorite and xenotime. Some of the accessory minerals co-precipitated with gold suggesting that radiometric surveys may help define gold-bearing targets within the project area.

Southeast Alaska

Hecla Mining announced first quarter 2014 production results from the Greens Creek mine on Admiralty Island. The cash cost, after by-product credits, per silver ounce declined to US$1.58 in the first quarter of 2014 from US$5.02 in the first quarter of 2013. Mining and milling costs per ton were both down significantly in the first quarter compared to the same period in 2013. Power and treatment costs were lower than in the first quarter of 2013. Power costs were lower due to the availability of hydroelectric power. Lower power costs are the largest factor in a reduction of mining and milling costs per ton by 7 percent and 27 percent, respectively, in the first quarter compared to the same period in 2013. Because treatment costs include the value of silver retained by the smelters, first quarter treatment costs were lower as a result of lower silver prices. The average grade of ore mined during the quarter was 12.44 ounces per ton of silver, down slightly from the average grade of 12.74 oz/t that was mined in the first quarter of 2013. During the first quarter the mine produced 1,787,137 ounces of silver, 15,009 oz of gold, 4,825 tons of lead and 15,041 tons of zinc. The mill operated at an average of 2,252 tpd for the quarter and processed 202,715 tons of ore during the quarter. On the exploration front, definition and exploration drilling from two drills continues to enhance the potential of Deep 200 South, a mineralization trend that extends over 3,000 feet along strike and over 1,000 feet of dip. Drilling of Deep 200 South has defined three stacked folds of high-grade mineralization that represent up to 600 feet of down-dip continuity. Drilling of the upper fold or bench mineralization had some of the widest and highest-grade intercepts in recent history at the mine. This drilling confirms the resource model and shows the upper limb of the bench fold extends about 100 feet east beyond the current model. Significant drill intersections include 27.3 ounces of silver per ton, 0.46 ounces of gold per ton, 13.7 percent zinc, and 6.7 percent lead over 28.2 feet and 52.1 oz/t silver, 0.40 oz/t gold, 14.8 percent zinc, and 7.5 percent lead over 4.9 feet. Mineralization remains open to the south.

Coeur d’Alene Mines announced updated first quarter 2014 production results from its Kensington gold mine. The mine’s quarterly free cash flow of US$9.2 million was its highest in three years. The mill processed 159,697 tons, or nearly 1,800 tons per day, a significant increase over previous quarters. The mine produced 25,428 ounces of gold grading 0.17 ounces of gold per ton with an average recovery of 94.5 percent. All-in sustaining cost of production was US$1,005 per ounce compared to US$667 per ounce cost in the year previous period, due to lower gold grades and production levels. Kensington’s exploration efforts included four drill rigs and rang in at about US$1 million for the quarter. The mine is expected to produce 150,000 to 112,000 oz of gold in 2014.

Heatherdale Resources Ltd. announced both houses of the Alaska legislature have passed a bill authorizing the Alaska Industrial Development and Export Authority to provide up to $125 million in financing for infrastructure and construction costs at the Niblack project on Prince of Wales Island. The Niblack provision of the bill authorizes Alaska Industrial Development and Export Authority to issue bonds to finance the construction of key infrastructure for the project up to US$125 million, including a mineral processing mill and dock, loading and associated infrastructure facilities at the Gravina Island Industrial Complex near Ketchikan, and other facilities at the project site on Prince of Wales Island. The bill next goes to the Alaska Governor’s office for formal signing. The passage of the bill does not commit Alaska Industrial Development and Export Authority or the State of Alaska to any action. Alaska Industrial Development and Export Authority must still go through its conventional project evaluation and due diligence process prior to authorizing infrastructure financing for the project.

Pure Nickel Inc. announced that it has commenced exploration activity on its 100 percent owned Salt Chuck copper-gold-silver-palladium project near Thorne Bay on Prince of Wales Island. Phase 1 of the work program will consist of about 1,000 meters of diamond drilling in 8-10 holes. The program is designed to test the continuity of high-grade gold-copper mineralization encountered in drill hole NPH-12-04 which intersected 29.1 g/t gold, 14.1 g/t silver and 0.79 percent copper over 2.58 meters. The phase 1 drill program is expected to establish the trend of the mineralization such that subsequent drill programs can be designed with maximum efficiency. In addition to drilling, a soil sampling work program will be undertaken to provide more detailed infill soil data to help guide Phase 2 drilling. Phase 2 work program, pending results from Phase 2 and additional permits, will test for mineralization beneath a series of coherent, linear to curvilinear gold anomalies in soil samples that stretch from the discovery hole to the southeast and south. These anomalies are interpreted to reflect gold-copper mineralization similar to that intersected in drill hole NPH-12-04. The amplitude of the anomalies to the south and east, however, are significantly higher than those found in the vicinity of the discovery hole.



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