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Vol. 16, No. 9 Week of February 27, 2011
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Stats reflect mining’s impact on Alaska

High wages, larger payouts in taxes, royalties to public and private stakeholders attest to industry’s importance to state economy

Curt Freeman

For Mining News

There are some new stats out regarding mining’s impact on Alaska that the McDowell Group Inc. produced for the State of Alaska. For 2010, the Alaska mining industry accounted for 3,500 direct jobs and 5,500 indirect jobs. The industry paid US$350 million in payroll with the average salary totaling US$95,000 per year, which is double the statewide average for all sectors. Mining salaries were higher than all other sectors except for the oil and gas sector. The industry paid US$58.9 million in rents, royalties, taxes and other fees to the State of Alaska and paid local governments US$13 million in taxes. Alaska Native corporations received US$145.9 million in payments from the mining industry, three times the amount paid the previous year. A total of US$83.4 million of this royalty was redistributed to other Alaska Native regional and village corporations as part of ANCSA royalty-sharing agreements.

In 2010 the mining industry paid the Alaska Railroad US$25.2 million in fees for moving coal, sand and gravel, while US$29.3 million was paid to the Alaska Industrial Development and Export Authority for user fees on its facilities. The industry also paid US$1 million to the Alaska Mental Health Trust for rents, royalties and construction materials sales. Statewide the mining industry spent US$225 million on exploration projects and another US$250 million on development projects, while producing US$3 billion in gross mineral production, a 24 percent increase over 2009 levels. The export value of Alaska mineral products was US$925 million, accounting for about 28 percent of Alaska’s total exports.

So yes, we do make a difference!

Western Alaska

Teck Resources Limited and partner NANA Regional Corp. announced fourth-quarter and year-end 2010 results from its Red Dog mine. In the fourth quarter, the mine produced 130,200 metric tons of zinc in concentrate and for the year the mine produced 538,000 metric tons of zinc in concentrate. Zinc ore grade for the year was 18.2 percent, while mill recoveries increased slightly to 82.8 percent. The mine also produced 17,300t lead in concentrate during the fourth quarter and 109,900t of lead in concentrate for the year. Lead ore grade for the year decreased slightly to 5.4 percent, while mill recoveries decreased significantly to 57 percent. Operating profit before depreciation, amortization and price adjustments was C$548 million in 2010, compared with $402 million in 2009. Operating profit after depreciation, amortization and price adjustments was C$505 million in 2010, compared with C$399 million in 2009. Zinc and lead production in the fourth quarter were 14 percent and 52 percent lower, respectively, than in the fourth quarter of 2009 due to a planned annual maintenance mill shutdown during the quarter and lower ore grades as the operation transitioned from Main pit to Aqqaluk pit mill feed. The 2010 concentrate shipping season was completed Oct. 22 following the shipment of 1.035Mt zinc concentrate and 235,000t of lead concentrate. This compares with 1.025Mt of zinc concentrate and 220,000t of lead concentrate for the 2009 shipping season. During 2010 the mine paid partner NANA Inc. and the State of Alaska royalties of C$197 million versus royalties of C$144 million in the year-previous period.

Zazu Metals Corp. announced the completion of a non-brokered private placement of $7,974,252. The company plans to use part of these proceeds to take the Lik lead-zinc-silver deposit through a feasibility study toward a production decision. In addition to the feasibility work on the Lik South deposit, the company also intends to conduct exploration drilling on the contiguous Lik North deposit, which already hosts a high-grade inferred resource.

Cedar Mountain Exploration Inc. announced updated results of its 2010 work program on the Kelly Creek gold project on the Seward Peninsula. New assay data upgrade extensive gold-in-soil anomalies within a large and mostly untested gold district. The soil anomaly at the Kelly Creek prospect continues to the southeast to the headwaters of Erin Creek where it remains open. The total anomaly length is over 2.2 kilometers as now known. The anomaly is scheduled to be drilled at several locations in 2011. At the Fox prospect area three soil anomalies were outlined. Detailed soil sampling scheduled to be done early in the 2011 season is expected to define drilling opportunities on each of these anomalies. The Wolf prospect now includes a well-defined, 1.2 kilometer-long soil anomaly associated with the high-angle Ruff fault. This anomaly is scheduled to be drilled in 2011. The Wolverine prospect soil anomaly is now 1.7 kilometers long and open down-slope to the southeast. The anomaly is scheduled to be drilled at several locations in 2011. The Bear prospect area has weak gold but stronger arsenic, antimony and mercury anomaly associated with a contact between graphitic schist and calcareous metasedimentary rocks. The 2010 sampling in this area was very broadly spaced and more detailed sampling is scheduled for the 2011 season. In addition, reconnaissance soil sampling in 2010 identified two new anomalous areas that need detailed soil grid surveys in 2011. Nine soil samples at the Moose prospect, a schist-marble contact zone 3.6 kilometers southeast of the Wolverine prospect, contained 11 to 377 parts per billion and averaged 97 ppb gold. These samples contain 112.5 to 1195 parts-per-million arsenic, 4.56 to 12.95 ppm antimony, and 0.15 to 0.7 ppm mercury. A single sample collected in a similar geologic setting at the Jaeger occurrence, 6.8 kilometers southeast of the Wolverine prospect, contained 100 ppb gold. This sample contained 3,030 ppm arsenic, 11.75 ppm antimony and 0.05 ppm mercury. The company also staked additional ground contiguous to the 89,600-acre, or 36, 275-hectare, Kelly Creek property bringing the total claims on the property to 658 covering 105,280 acres, or 42,624-hectares.

Alaska newcomer Invenio Resources Corp. announced that it has entered into a preliminary agreement with C.W. Properties LLC to acquire an option to earn a 100 percent interest in the Ganes Creek gold project in the Ophir District. Mineralization at Ganes Creek consists of intrusive related gold showings and high grade gold in shears and veins along or in close proximity to the Yankee Creek/Ganes Creek fault zone. The last program completed on the project was between 2007 and 2008 and consisted of 32 kilometers, or about 20 miles, of trenching, geological mapping and continuous chip sampling of the trenches, detailed mapping and structural analysis of the geologically complex areas and 84 kilometers, or 52 miles, of ground geophysics. Under the terms of the agreement, Invenio can acquire a 100 percent interest in the project by making staged cash payments totaling $425,000, issuing 500,000 common shares and incurring $4 million in exploration expenditures over the next four years. C.W. Properties LLC will retain a 3 percent net smelter returns production royalty with Invenio having the right to purchase 1 percent of the royalty for $2.0 million. Welcome to Alaska Invenio Resources!

Fire River Gold Corp. announced results obtained from an additional 15 holes from their 28,000-meter drill program at the Nixon Fork mine. New significant intercepts include hole N10U-024 returning grades of 160.5 grams per metric ton gold over 2.8 meters and 31.4 g/t gold over 1.0 meters in hole N10U-016. The company has purchased a second underground diamond drill. The two drills are working together to define near-term production targets in the upper portion of the mine. Later, the company plans to have one drill focus on ore definition for production and the second diamond drill for drilling exploration targets. The company also announced the results of a preliminary economic assessment evaluating the feasibility of resuming underground mining at Nixon Fork. The study indicated that the current resource is sufficient to sustain a two-year operation producing at the rate of 150 metric tons per day with an average mined grade of 30.1 g/t gold, using an average cut-off grade of approximately 15 g/t gold. Gold recoveries were estimated at 90 percent on start-up, ramping to 95 percent at optimum production levels. No revenue was assumed from sales of copper or silver, although past operators received significant revenue from these byproduct metals. The mineral inventories in this report (101,249t grading 30.2 g/t gold) are based on the most current resource estimate completed in 2010, which do not include the results of ongoing definition and exploration drilling performed since that resource estimate was completed. Capital costs to resume production are estimated to be US$6.3 million with a projected payback of three months. Operating costs are estimated at US$434/t or US$447 per ounce for the first two years of operations. Three mining methods were identified as suitable for the mine: longhole open stoping, cut-and-fill, and shrinkage stoping. During the first year, mining only occurs in the 3000 and 330 zones of the Crystal Mine. The Mystery Mine begins production in month 18.

Interior Alaska

Kinross Gold Corp. announced year end 2010 results from its Fort Knox mine. Total 2010 production was up 33 percent over 2009 totals due to the full year contribution of the heap leach production. The mine produced 85,139 ounces gold in the fourth quarter at a cash cost of US$547 per ounce while year-end totals were 349,729 ounces gold produced at a cost of US$550 per ounce. During the fourth quarter the mill processed 6.350Mt ore grading 0.72 g/t gold. Mill recoveries were 77 percent for the fourth quarter. As planned, production for the full-year 2011 is expected to be less than 2010 due to lower grades, as most of the mining activity will be focused on capitalized stripping, and as a result, the majority of ore processed will be sourced from stockpiles. The company also tabled year-end 2010 resource updates that included proven and probable reserves of 253.4Mt grading 0.44 g/t gold, equivalent to about 3.58M ozs gold. Kinross Gold also announced that the Fort Knox mine operations have passed a major safety milestone in reaching an amazing 4 million man-hours without a lost time accident. Congratulations to the 500 employees at Fort Knox!

Teryl Resources Corp. announced the receipt of the 2010 Gil joint venture annual report from 80 percent owner and JV partner Kinross Gold Corp. The 2010 exploration program consisted of 14,977.5 feet of drilling, including 27 reverse-circulation drill holes totaling 9,546 feet, and 11 core holes, totaling 5,431.5 feet. Gold mineralization within the joint venture area has been traced along the Main Gil Trend for approximately 3,000 feet. In the North Gil Zone, exploration work has outlined mineralization across a 2,000-foot trend. The 509 Trend, located on Sourdough Ridge, has been traced along strike for 2,000 feet. Mineralization along the Northern Calc-silicate unit, located in the northern portion of Sourdough Ridge, has been traced to the east for 600 feet. Three drill core samples subjected to cyanide leach tests indicated 80 percent recovery from a 12.5 millimeter feed size. For 2011 a systematic trenching program, followed by drilling, is recommend. Target areas include the northeastern extension of the 509 Trend, specifically, the eastern slope of Lohr Ridge, the Northern Calc-silicate Unit, and the calc-silicate unit located between the North Gil and Main Gil areas.

International Tower Hill Mines Ltd. announced results from the final 27 holes drilled in its 70,000-metre 2010 drill program at the Livengood gold project. Results were highlighted by hole MK-RC-0470, which intersected 13.7 meters of 5.45 g/t gold at a depth of 395 meters, providing further evidence of a new deeper zone of higher grade mineralization directly beneath the southwest portion of the existing resource area. Other holes drilled beneath the current resource depth of 300 meters to intersect the higher grade zone of mineralization include hole MK-RC-0458, which intersected 12.8 meters at 2.6 g/t gold, hole MK-RC-0452 which intersected 189.0 meters at 1.0 g/t gold; and hole MK-RC-366, which intersected 83.8 meters at 1.1 g/t gold. The company plans to carry out additional deeper in-fill and step-out core drilling to focus on testing the geometry, continuity and extent of this new deep zone of higher grade mineralization. This effort commenced earlier this month as part of a 45,000-meter winter drilling program planned for 2011. Higher grade mineralization continues to be found within the existing Money Knob deposit that could form the basis of high-grade starter pits in a potential open-pit mining scenario. The latest result to demonstrate this is in-fill hole MK-RC-0467, which intersected 71.63 meters of 2.47 g/t gold, including 15.24 meters of 9.11 g/t gold. The company also intersected 6.1 meters 0.6 g/t gold in a single wildcat hole (hole MK-10-73) drilled 4 kilometers northeast of the Money Knob deposit. The company will carry out approximately 10,000 meters of district-wide exploration drilling in 2011 dedicated to evaluating new discovery targets. Tower Hill also indicated that AngloGold Ashanti (U.S.A.) Exploration Inc., a subsidiary of AngloGold Ashanti Ltd. has exercised its right to maintain an 11.5039 percent equity interest in the company through the purchase of 230,764 common shares. This top-up agreement dates to International Tower Hill’s original acquisition agreement on the Livengood project.

Alaska Range

Millrock Resources Inc. announced that Teck American Inc., a subsidiary of Teck Resources Ltd., has elected to proceed with the first option on Millrock’s 100 percent owned Estelle project. Teck has approved an exploration program and budget of $3.4 million for 2011 with Millrock acting as manager of the 2011 exploration program. Plans include drilling at the Oxide Ridge, Shoeshine, RPM and Stoney prospects. At the Shoeshine and Oxide Ridge prospects surface mineralization is spatially associated with porphyritic intrusive rocks, quartz stockworks and hydrothermal breccias. At RPM rusty, pyritic hornfels sediments with anomalous gold indicate a possible auriferous intrusion at a shallow burial level. The Stoney prospect is a high-grade, polymetallic vein occurrence with geophysical indicators pointing to the possibility of nearby porphyry mineralization. If Teck completes the recently approved expenditures, it will have earned a 55 percent interest in the project and will have the right to earn an additional 10 percent interest by incurring an additional $5 million in exploration expenditures and making cash payments to Millrock of US$400,000.

Alix Resources Corp. announced revised mineral resources for its Golden Zone project in the Valdez Creek Mining District. The revised estimated resource in the main Breccia Pipe now indicates the deposit to contain, at a 1 g/t gold cut-off, 3,169,331t of measured and indicated material averaging 3.02 g/t gold, 16.48 g/t silver and 0.08 percent copper. This resource contains 279,166 ozs gold, along with 1,523,657 ozs silver and 3,233t copper. The newly revised precious metal resource estimate increased roughly 8 percent and copper totals rose about 3 percent higher than those estimated in a 2005 resource estimate. The majority of the planned +$1 million summer 2011 exploration program will focus on a major reconnaissance program working on the three other identified mineral corridors on the project. In addition, prospect-level work will be completed on several of the known prospects, including a porphyry/breccia pipe target at the GAS prospect, the high-grade Wells vein at the Riverside prospect and the newly discovered Cohio prospect, a gold skarn target at the North Long Creek prospect. The 2011 work also will include limited work on the Breccia Pipe in preparation for an anticipated pre-feasibility study to be undertaken next winter. A deep hole will be drilled through the Breccia Pipe itself to probe for porphyry copper-gold mineralization below the pipe and to collect samples from the upper portion of the pipe for future metallurgical testing.

Southeast Alaska

Ucore Rare Metals Inc. recently found itself in the news even though the company released no new data. Ucore commented on a letter from Alaska Sens. Lisa Murkowski, R-Alaska, and Mark Begich, D-Alaska, and Colorado Rep. Mike Coffman, R-Colo., sent to Secretary of Defense Robert Gates requesting that the U.S. Department of Defense document its increasing reliance on Chinese supplies of strategic rare earth elements utilized in U.S. weapons and advanced technology systems. Among other things, the letter asserts that the Defense Department needs to catalogue current domestic sources of rare earth elements should Chinese supplies become unavailable. Recent reports from the U.S. Geological Survey indicate that Ucore’s Bokan Mountain project is among the three largest domestic rare earth deposits in the country and the only one enriched in heavy-rare earth elements. The company recently laid out its development strategy, which includes production of a dysprosium-rich, heavy rare earth element concentrate sourced from its Bokan Mountain project and construction in the United States of a metallurgical refining complex to recapture the value-added segment of the rare earth-processing chain.

Heatherdale Resources Ltd. announced results for 20 new underground holes completed in the 2010 drill program at the Niblack volcanogenic massive sulfide project. Highlights include: hole U090 with 44.1 feet of 1.51 percent copper, 1.71 g/t gold, 4.73 percent zinc, and 26 g/t silver; hole U095 with 15.1 feet of 2.44 percent copper, 2.78 g/t gold, 1.65 percent zinc, and 64 g/t silver, U103 with 38.3 feet of 3.76 percent copper, 5.36 g/t gold, 14.33 percent zinc, and 111 g/t silver, including 14.7 feet of 7.01 percent copper, 10.59 g/t gold, 20.48 percent zinc, and 191.93 g/t silver. Two underground drill rigs were deployed in 2010, and are currently working to expand the precious metals enriched mineralized body located adjacent to the Lookout Zone.

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