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Vol. 19, No. 8 Week of February 23, 2014
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Capital markets take grim toll on miners

Metals prices start to climb as juniors strive to weather prolonged downturn; cash-rich producers to seek growth opportunities

Curt Freeman

For Mining News

The over-all mood at the recent Cordilleran Roundup mining convention in Vancouver, B.C. was more restrained than in previous years, but also more realistic due in large part to the prolonged downturn in risk capital mining markets. It seems the industry has transitioned from the denial stage accompanying the declines of 2013 to an acceptance and determination stage that always precedes a return to market vitality.

In a recent public release by financial giant Ernst and Young, the magnitude of the 2013 downturn was summarized: The market capitalization of Canadian-domiciled mining companies decreased by 45 percent over the course of the year. Lack of investor confidence, sliding commodity prices and asset write-downs all contributed to the grim tally for 2013. In addition, companies were reluctant to raise equity through stock sales because of their low stock prices and the extreme dilution that they would suffer by selling shares at what, for many, were five- and 10-year lows. As a consequence, proceeds raised during 2013 totaled roughly $6.9 billion, down 49 percent from sums raised during the same period in 2012. However, Ernst and Young felt that growth opportunities existed. They expect mid-tiers and producers with cash flexibility to take advantage of inorganic growth opportunities and felt that junior mining companies with good quality, de-risked projects will attract buyer interest. In a possible sign that the bottom has been reached, as I write this summary, gold and silver prices have reached their highest levels since early November 2013, while copper, zinc and lead prices have shown modest increases in 2014. Light at the portal of the adit?

Western Alaska

Teck Resources LTD. and partner NANA Regional Corp. announced fourth quarter and year-end 2013 results from its Red Dog mine. In the 4th quarter the mine produced 141,900 metric tons of zinc in concentrate and for the year the mine produced 504,100 metric tons of zinc in concentrate. Zinc ore grade for the year was down unchanged at 17.0 percent and mill recoveries were up slightly to 84 percent. The mine also produced 25,400 metric tons of lead in concentrate during the fourth quarter and 96,700 metric tons of lead in concentrate for the year, levels that were slightly lower compared to the year-previous quarter but up over full year 2012 production. Lead ore grade for the year decreased to 3.96 percent, while mill recoveries increased slightly to 64.9 percent compared to 2012. Operating profit after depreciation, amortization and price adjustments for the fourth quarter was US$94 million, compared with US$153 million in 2012. Operating profit after depreciation, amortization and price adjustments for the year was US$364 million, compared with US$384 million in 2012. In the fourth quarter of 2013, certain customers drew zinc from consignment inventories, deferring delivery of zinc from the fourth quarter of 2013 to the first quarter of 2014. Mill throughput for 2012 was a record 3.85 million metric tons due in part to softer ore, which also contributed to the better recoveries for zinc and lead. . During 2012 the mine paid partner NANA Development Inc. and the State of Alaska royalties of US $120 million versus royalties of US$137 million in the year-previous period.

NovaGold Resources Inc. provided a year-end 2013 progress report on its Donlin gold project, a 50:50 joint venture with Barrick Gold. The company indicated that the permitting process on its Preliminary Draft Environmental Impact Statement continues on-time and within budget. During 2013 the company held 14 public scoping meetings in various Yukon-Kuskokwim villages and in Anchorage. The company also continued its workforce initiatives, community outreach and social engagement efforts throughout the region. The company’s efforts were recently recognized as it was awarded the Employer of the Year Award from the National Association of State Workforce Agencies. In 2013, project expenditures were US$29.2 million compared to US$33.9 million in 2012. During 2014 project expenditures of US$24 million are expected, with the primary focus being advancement of the project permitting process through the completion of the Preliminary Draft Environmental Impact Statement in late 2014 for agency review. This event will be followed in 2015 by issuance of the draft Environmental Impact Statement for public review.

Millrock Resources Inc. announced that it has entered into a Binding Letter Agreement with Alaska newcomer First Quantum Minerals Ltd. whereby the company has granted First Quantum an exclusive right to enter into an Option to Joint Venture Agreement on Millrock’s Alaska Peninsula project, located in southwest Alaska. First Quantum will fund an initial exploration program estimated to cost US$600,000. The program will include regional geochemical sampling, geological mapping, prospecting and airborne magnetic surveys, which are to be carried out in summer of 2014 by Millrock. First Quantum may also elect to increase the expenditure to fund drilling of several holes. Subject to exercise of the exclusive right by November 30, 2014, First Quantum will have an option to earn up to an 80 percent joint venture interest in the property through a two-stage option agreement. The Alaska Peninsula project is comprised of mineral lands owned by Bristol Bay Native Corporation and includes several known porphyry copper prospects, including Kawisgag, Mallard Duck Bay and Bee Creek prospects. Welcome to Alaska First Quantum Minerals Ltd!

Interior Alaska

Kinross Gold Corp. announced year end 2013 results from its Fort Knox mine. Total 2013 production was up significantly over 2012 totals. The mine produced 421,641 ounces of gold at a cost of US$561 per ounce versus 359,948 ounces of gold produced at a cost of US$663 per ounce in 2012. During 2013 the mill processed 21,634,000 metric tons of ore grading 0.82 grams per metric ton gold. Mill recoveries were 83.7 percent for the year. During 2013 the mine placed 29,751,000 metric tons of ore grading 0.29 g/t gold on the valley leach facility. The 17 percent increase in total production was due primarily to higher mill head-grades and an increase in ounces recovered from the leach pad as a result of the commissioning and ramp-up of the second carbon-in-column plant, partially offset by a decrease in metric tons of ore processed. Capital expenditures at the mine increased to US$135.3 million in 2013, primarily due to the purchase of new haulage equipment.

Contango ORE Inc. announced its first resource estimate at the Peak zone on its Tetlin gold project near Tok. At a 0.5 g/t gold cutoff, initial indicated resources came in at 5,970,000 metric tons grading 3.46 g/t gold, 11.0 grams per metric ton silver and 0.25 percent copper. Using the same cutoff, initial inferred resources came in at 3,850,000 metric tons grading 2.07 g/t gold, 14.28 g/t silver and 0.235 percent copper. This initial third-party resource estimate includes data from 130 drill holes totaling 27,767 meters and 1,444 down-hole survey measurements. Geochemical data from these holes include gold and multi-element results from 17,572 samples. A total of 78 of the 130 drill holes totaling 16,010 meters passed through the Peak Zone mineralized solids. Statistical analyses suggested capping of maximum values was justified, resulting in 7 gold values being capped at 75.0 g/t gold, 13 silver values capped at 252.0 g/t silver and 7 copper values capped at 5.40 percent. A block model with blocks 10 meters by 10 meters by 5 meters in dimension was created to cover the mineralized solids. Specific gravity estimates were obtained on-site from direct measurements of mineralized and unmineralized drill core. Specific gravities averaged 2.81 for unmineralized waste rock and 3.15 for mineralized rock. No economic parameters were utilized in determining the cut offs. No attempt was made to calculate separate resource estimates for oxide zone, transitional zone or sulfide zone mineralization. The Peak Zone sits within, but covers less than 1 percent of, a 6.5-kilometer by 5.5-kilometer multi-element soil anomaly known as the Chief Danny Zone, where the company is hoping to outline additional resources in future. The company also announced that it had hired Denver-based Petrie Partners Securities LLC to advise the company on its options going forward, including a merger with an existing mining concern, sale for cash, stock, or a combination thereof or continued funding of the project by the company.

Northern Alaska

NovaCopper Inc. announced a fourth quarter and year end 2013 summary of work conducted at its Bornite and Arctic deposits on its Upper Kobuk Mineral project, a partnership with NANA Inc. At Bornite, the US$14.4 million program included 4,684 meters of drilling at the Ruby Creek zone (a potential open pit target) and 3,458 meters of drilling on depth extensions of the South Reef zone and Lower Reef mineralization (a potential underground target). In addition a significant drill core re-sampling and re-assaying program at the Bornite Project included 33 historical drill holes comprising 11,067 meters of drill core, which were originally drilled by Kennecott between 1957 and 1975. The company plans to release an updated resource estimate on the Bornite project in the first half of 2014, incorporating the new 2013 drill results as well as the results from the re-assaying program. The company will continue to focus efforts on supporting the Alaska Industrial Development Export Authority in permitting the Ambler Mining District Industrial Access Road which is expected to provide access to Arctic and Bornite projects. The company also anticipates signing a memorandum of understanding with Alaska Industrial Development Export Authority in the first half of 2014 to explore the feasibility of utilizing liquid natural gas trucked from the North Slope to replace diesel as the main source of fuel to operate the Arctic processing facility.

Southeast Alaska

Hecla Mining Co. announced year end 2013 production results from the Greens Creek mine on Admiralty Island. The total cash cost per ounce of silver produced for the year was US$4.42 per ounce versus US$2.70 per ounce in 2013. The average grade of ore mined during the year was 13.04 ounces of silver per ton, up significantly from the average grade of 11.13 ounces per ton in the year previous. For the year the mine produced 7,448,347 ounces of silver, 57,457 ounces of gold, 20,114 tons of lead and 57,614 tons of zinc. The mill operated at an average of 2,206 tons per day in 2013, which is the highest daily average since the mine began operations in 1989. This higher mill throughput combined with higher grades for silver and gold accounted for the +1.1 million ounce increase in silver production in 2013 versus the year previous period. The mine is forecasting 2014 production of 6.5 to 7 million ounces of silver and 55,000 ounces of gold at a cash cost of $6.00 per ounce of silver equivalent.

Constantine Metal Resources Ltd. announced that joint venture partner Dowa Metals & Mining Co., Ltd. of Japan has approved a US$6.2 million exploration budget for the company’s Palmer volcanogenic massive sulfide deposit near Haines. Palmer is an early resource expansion stage project that is host to a 4.75 million metric ton inferred resource estimate grading 1.84 percent copper, 4.57 percent zinc, 0.28 g/t gold and 29 g/t silver. The three-rig 2014 program will be focused on expanding the South Wall and RW massive sulfide zones, which are open laterally and to depth. Drilling also will target other massive sulfide prospects on the property. There are at least 25 separate base metal and/or barite occurrences and prospects on the property, indicating the potential for discovery of additional mineralization.

Arrowstar Resources Ltd. reported that it plans to conduct exploration drilling at its Port Snettisham magnetite iron project south of Juneau. The purpose of the drill program is to determine the extent of the mineralization at depth, its mineralogy and petrology, the nature of the contact zone and the magnitude of the mineralization. With these data, an industry-compliant indicated and inferred resource estimate will be prepared. The 2014 drilling program is budgeted at US$1.2 million. The Snettisham deposit was historically explored by the Bureau of Mines in 1955 and by Marcona Corp. in 1969. Marcona conducted sufficient drilling to complete a feasibility study on the deposit and announced plans to put the property into production in partnership with Marubeni of Japan. The decline of iron ore prices in the early 1970s caused the project to be delayed and eventually abandoned.

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