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Vol. 15, No. 22 Week of May 30, 2010
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Alaska climbs higher in Fraser rankings

State makes impressive showing among 72 mining jurisdictions worldwide; industry response to annual index results lacks enthusiasm

Curt Freeman

For Mining News

The annual Fraser Institute “Report on Mining Companies, 2009-2010” was recently released to a thundering silence. Several oddball items may help explain the lackluster response, but Alaska fared well in the survey of 333 companies working in 72 jurisdictions worldwide.

Alaska ranked 18th out of 72 under the policy potential index, which measures the regulatory attractiveness of a jurisdiction. Not unreasonably, Alaska was beaten by some mining heavyweights like Chile, Quebec, Nevada and South Australia. Using current regulatory and land use policies, Alaska’s mineral potential jumped to 9th place, while the state skyrocketed to 2nd place when rated on best management practices and no land use restrictions when considering mineral potential.

Who was first in this fantasy-world classification: would you believe the Democratic Republic of the Congo? No, I’m serious, really. But wait, there’s more: Alaska was 5th behind Quebec, Nevada, Chile and Saskatchewan in the composite index, which is weighted 40 percent mineral policy and 60 percent mineral potential. All in all, Alaska scored a bit better in most categories compared to the year-previous survey. We can all sleep better now.

Western Alaska

Best news of the month: Teck Resources Ltd. announced that some of its Red Dog mine permit issues have been resolved and that necessary permits are in hand to allow its Aqqaluk deposit to be brought into production on schedule. Until the remaining legal issues are resolved, the mine will continue to operate under existing permits.

Cedar Mountain Exploration Inc. announced that it has raised $2 million to go toward exploration of its Kelly Creek gold project on the Seward Peninsula. Details relating to 2010 plans were not released.

Alaska newcomer Valdez Gold Inc. announced that it has signed a joint venture agreement on Millrock Resources Inc.’s Bluff project on the Seward Peninsula. Under the terms of the agreement Valdez has the right to earn a 55 percent interest in the project by incurring US$3 million in qualified expenditures over a three-year period, making a cash payment to Millrock of US$50,000 and issuing 300,000 common shares of Valdez stock on signing, making a cash payment of US$100,000 and issuing 300,000 common shares of Valdez by December 31, 2010, and making a cash payment of US$150,000 and issuing 300,000 common shares of Valdez on December 31, 2011. After earn-in, Valdez would have the option to increase its share to 75 percent by spending an additional US$3 million over three years, making further staged cash payments totaling US$600,000 and issuing 1.1 million common shares of Valdez by the end of the fifth year. Details relating to 2010 plans were not released. Welcome to Alaska Valdez Gold Inc.!

NovaGold Resources and Barrick Gold announced that a feasibility study revision has been initiated at the Donlin Creek gold project to consider the possible construction and operation of a natural gas pipeline to supply project power. The 2009 project feasibility study estimated Donlin Creek’s total cash costs for the first full 5 years of operation at US$394/oz using a combination of diesel and wind as the source of on-site power generation. The partners have since completed preliminary optimization studies to evaluate the potential of bringing natural gas to the project. These studies indicate that using natural gas to generate on-site power may result in a reduction of power costs, which represent approximately 25 percent of the projected total operating costs at the project. The plan envisions construction of a 12-inch diameter underground pipeline over a 525 kilometer route from upper Cook Inlet to the proposed mine site. Gas from the pipeline would be used to produce electricity at site. The partners also announced approval of a supplemental budget for 2010 of US$18.7 million bringing the total 2010 budget to US$47 million. The 2010 work program will complete the majority of the environmental and engineering studies required to review the pipeline option and revise the feasibility study and mine plan based on on-site power generation using gas. The pipeline studies and feasibility revision will take 12 to 18 months to complete.

The State Department of Natural Resources announced that it had finished its review of the Pebble project’s water use permits and has reinstated theose permits. This action will allow partners Northern Dynasty and Anglo American plc to continue drilling on the project. The permits were under review because the partners extracted drilling water from 45 unpermitted sources over the last 3 years. The reinstated permits require a comprehensive water use plan to be developed and carry a fine of US$45,000.

Fire River Gold Corp. announced additional results from previously unreleased drilling at its Nixon Fork gold project near McGrath. Significant results include 3.7 ounces of gold per ton over 16.7 feet in hole N07U048, 2.2 oz/t gold over 4.6 feet in hole N07U047, 1.4 oz/t gold over 13 feet in hole N07U033, 0.83 oz/t gold over 15.5 feet in hole N07U037, 2.28 oz/t gold over 15.8 feet in hole N07U050 and 1.47 oz/t gold over 16.5 feet in hole N07U052. Results are pending for 79 additional underground holes drilled in 2007 and 2008.

Liberty Star Uranium & Metals Corp. announced additional geophysical results from its Big Chunk copper-gold project near Iliamna. A recent airborne geophysical survey has suggested 6 to 7 geophysical signatures that are compatible with porphyry copper systems. The survey has defined resistivity features that resemble typical potassic-altered cores and pyritic-propylitic halos over known porphyry systems. The company continues to seek joint venture partners to drill these porphyry anomalies.

Interior Alaska

Kinross Gold posted first-quarter 2010 production results from its Fort Knox mine. The mine produced 69,640 ounces at a cash cost of US$524 per ounce versus 48,626 ounces of gold at a cash cost of US$672 per ounce during the same period in 2009. The significant production increase came in part from 660,000 metric tons of new heap leach ore placed on the pads during the first quarter and a higher head grade during the current quarter. The mine processed 3,969,000 metric tons of ore grading 0.71 grams per metric ton gold with a mill recovery of 80 percent.

Unfortunately, the company also reported that an electrical problem caused failure of a pumping system that allowed 305,370 gallons of water to spill within the mill. This water contained traces of sodium cyanide. The mill containment system kept all but 30,000-35,000 gallons of water within the mill. The remaining water spilled onto the gravel pad outside the mill. This gravel was excavated and placed in the heap leach facility and Kinross initiated ongoing soil and water monitoring.

International Tower Hill Mines Ltd. announced additional drilling results from its 20,000-meter 2010 winter drilling campaign at its Livengood gold project. Significant results include hole MK-RC-0321, which returned 32 meters at 0.85 g/t gold; hole MK-RC-0328, which returned 21.24 meters at 2.88 g/t gold and an additional 77.72 meters at 0.77 g/t gold; hole MK-RC-0329, which returned 28.95 meters at 0.83 g/t gold; hole MK-RC-0334, which returned 71.63 meters at 1.11 g/t gold; hole MK-RC-0338, which returned 19.81 meters at 4.43 g/t gold; hole MK-10-58, which returned 29.24 meters at 1.26 g/t gold; hole MK-RC-339, which returned 21.3 meters at 2.20 g/t gold; and hole MK-RC-345, which returned 128 meters at 1.32 g/t gold. These holes continue to expand and fill in the drilling gap between the Sunshine Zone and Core Zone. The company also announced that it has hired Fairbanks native Karl Hanneman as its new project manager. Prior to spending the past 12 years working with Teck at both the Pogo and Red Dog mines, Karl spent much of his professional career developing and mining placer gold and exploring for lode gold in the Livengood District. Welcome back to Livengood, Karl!

International Tower Hill Mines also announced that it plans to transfer its non-Livengood project assets to a new public company, Corvus Gold Inc. This new company, which will have US$3 million in the treasury at start-up, will take control of Tower Hill’s North Bullfrog project in Nevada as well as its Chisna, Terra, LMS, and West Pogo projects in Alaska. Under terms of the divestiture, each current Tower Hill shareholder would receive one new share of Tower Hill and one-half share of Corvus for each current Tower Hill share. The divestiture is designed to allow the new company to focus on exploration while Tower Hill focuses on development of its flagship Livengood gold deposit.

Tri-Valley Corp. reported completion of an independent technical report identifying a large porphyry copper-gold-molybdenum system at its Shorty Creek project near Livengood. The report indicates that the Shorty Creek project porphyry system covers an area approximately eight miles in diameter. Work recommended includes follow up drilling along with additional reconnaissance exploration and ground geophysics.

Alaska Range

International Tower Hill Mines Ltd. announced acquisition of the Ahtell porphyry copper prospect from Alaska Native regional corporation Ahtna Inc. The Ahtna lands add an additional 75,520 acres to the existing 87,940 acres of Alaska State mining claims that make up the Chisna project. Under terms of the agreement, Tower Hill has exclusive rights to explore the subject lands for a six-year period, and the option to enter into a mining lease to develop and mine the lands. The agreement calls for annual option payments of US$1.00-US$1.25 per acre and annual minimum exploration expenditures of US$4-US$8 per acre along with Ahtna-shareholder training and hiring provisions and US$10,000 per year scholarship payments to the Ahtna Heritage Foundation. Additional terms, including increased exploration expenditures, advanced royalties and a working-interest back-in right apply once the exploration agreement has been converted to a mining agreement.

Kiska Metals Corp. announced results of the first five drill holes of the spring exploration program at the Whistler copper-gold project. To date, 11 holes of a 15-hole program have been completed, testing geophysical targets over a 50-square-kilometer area with widely-spaced reconnaissance diamond drill holes. Each of these holes intersected porphyry-related alteration, including a hole at the Raintree East prospect that returned 90 meters grading 0.42 g/t gold and 0.1 percent copper. Mineralization occurs in low-density sheeted to stockwork quartz-chalcopyrite-pyrite veins hosted in andesitic volcanics. Drilling also tested new targets in the 3 by 4 kilometer Spur area almost 5 kilometers northeast of the Whistler resource area. The two holes, separated by about 1 kilometer, or five-eights of 1 mile, intersected strong peripheral-style alteration and carbonate-base metal veining, both of which suggest the presence of porphyry mineralization nearby.

Millrock Resources Inc. announced that it has signed a letter agreement with a subsidiary of Teck Resources Ltd. for a private placement financing for further exploration of Millrock’s Estelle gold project. Teck will invest C$600,000 in Millrock through the purchase of 1,363,636 units (2.8 percent of outstanding shares) at C44 cents per share. Each unit consists of one common share and one share purchase warrant. Millrock will advance the property in summer 2010 by conducting a comprehensive geological, geochemical and geophysical program that will be designed in consultation with Teck. Upon completion of the initial exploration program, Teck can earn an initial 55 percent interest in the property by incurring C$3.6 million in expenditures over two years. Teck can then earn an additional 10 percent interest by funding an additional C$5 million in optional expenditures on the property and making optional cash payments to Millrock totaling C$400,000 prior to the end of 2014.

Southeast Alaska

Hecla Mining announced first quarter 2010 production from the Greens Creek mine on Admiralty Island. The total cash cost per ounce of silver produced at Greens Creek for the quarter was negative $6.47 per ounce with total production costs of US$2.18 per ounce of silver produced. The average grade of ore mined during the quarter was 10.87 ounces of silver per ton, down significantly from the average grade of 14.12 ounces per ton that was mined in the first quarter of 2009. During the first quarter, the mine produced 1,601,655 ounces of silver, 16,862 ounces of gold, 6,680 tons of lead and 19,681 tons of zinc. The mill processed 198,124 tons of ore during the quarter. In addition to production, exploration and definition drilling was conduced in the first quarter. Drilling in the 5250 zone returned 4.2 feet grading 37.6 ounces of silver per ton while drilling encountered a 14-foot thick massive sulfide interval on the southwestern extent of the 200 South zone. Pre-production drilling in the NWW zone extended mineralization to the west and allowed this zone to move into the mine planning stage. Additional surface and subsurface drilling is planned for the NE contact zone.

Coeur d’Alene Mines reported that commissioning work has been completed on the Kensington Mine mill system and final modifications are being made to the crusher system. Underground drilling and blasting are underway at the mine and the tailings impoundment is now 90 percent complete. Construction of the underground paste backfill plant and water treatment plant are on schedule and the mine is expected to produce 50,000 ounces of gold in 2010.

Ucore Uranium Inc. announced a conceptual deposit model for the first two target exploration zones comprising the Bokan-Dotson Ridge rare earth element project. The model spans a combined strike length of 2,425 meters over the initial two target zones, and projects mineralization to a depth of 200 meters below surface. Based on a detailed analysis of drill results at the I&L and Dotson Shear Zones, the model has generated an estimated 2.7 million metric tons to 5.1 million metric tons, at a prospective grade range of 0.50 percent to 0.92 percent total rare earth oxides. The model also indicates that heavy rare earth elements comprise about 60 percent of the total rare earth concentrations in the targeted areas. Actual element grade ranges are 895-1,663 parts per million neodymium oxide, 314-584 ppm gadolinium oxide, 68-126 ppm terbium oxide, 419-773 ppm dysprosium oxide, 233-433 ppm erbium oxide, 166-309 ytterbium oxide and 2,994-5,560 ppm yttrium oxide. In addition to rare earth elements, the I&L and Dotson Shear zones contain significant estimated concentrations of non-rare earth elements, including zirconium, tantalum, niobium, and beryllium. Actual element grade ranges for these metals are 3,636-6,753 ppm zirconium oxide, 36-68 ppm tantalum oxide, 651-1,208 ppm niobium oxide and 158-293 ppm beryllium oxide. In 2010, a 5,000-meter drill program will be conducted with 4,000 meters on the combined I&L and Dotson Shear zones and the remaining 100 meters in hallow diamond drill holes along the Cheri, Geoduck and Sunday Lake trends. The company hopes to complete a Canadian NI 43-101-compliant mineral resource estimate by the end of 2010.

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