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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: State eyes mining on Prince of Wales

Niblack, Bokan emerge as standout exploration projects at SE Alaska island; state investigates synergies between REE, VMS deposits

Shane Lasley

Mining News

For more than a century Prince of Wales Island has been known as a rich source of gold, copper, platinum group elements and silver. The 2,577-square-mile, or 6,674-square-kilometer, Southeast Alaska isle later gained renown for its stores of uranium and rare earth elements.

While modern explorers have investigated several of the uncounted historical mines that dot the island, Niblack and Bokan Mountain have emerged recently as standout exploration projects. Both located near the southern extent of the 135-mile-, or 220-kilometer-, long island – Niblack hosts an exciting precious metals-rich volcanic massive sulfide deposit, while Bokan Mountain is emerging as an important source of rare earth metals.

Now State of Alaska officials have decided to investigate whether synergies might exist between these two rapidly advancing projects and what role the state might play in helping to move the projects forward.

Increasing confidence at Niblack

Niblack – located 27 miles, or 43 kilometers, southwest of Ketchikan near the southern tip of Prince of Wales Island – has a history that dates back more than 100 years.

From 1905 to 1908, an underground mine at Niblack produced some 20,000 metric tons of ore grading 4.9 percent copper, 2.2 grams per metric ton gold and 30 g/t silver. Joint venture partners Heatherdale Resources Ltd. and Niblack Mineral Development Inc. are tracing the volcanic massive sulfide ore as it winds its way under Lookout Mountain.

Since Heatherdale joined the project in 2009, the Vancouver-based junior has spent more than US$15 million exploring the promising prospect. With this spending the Hunter Dickinson Inc. affiliate has earned a 51 percent vested interest in the project.

Heatherdale President and CEO Patrick Smith told Mining News that he anticipates the company will spend an additional US$10 million at Niblack by the end of 2011, boosting the company’s ownership to 60 percent.

The aggressive exploration program is significantly expanding the zones of copper-gold-silver-zinc mineralization at Niblack and is boosting the confidence of the project explorers that the precious metals-rich VMS deposit will support a mine.

“Recent work demonstrates that the system has both size and grade potential. We are increasingly confident that Niblack will support a high-grade underground mining operation in the medium term,” Smith said.

The junior’s exploration at Niblack also has provided a new understanding of the geology of the deposit.

“Beyond significant new mineral resources indicated by our work at Lookout, the information derived from drilling and other investigations has advanced our understanding and geological modeling of the overall Niblack system. Our geological team is applying this new understanding to develop targeting strategies for other deposits, with the expectation that near-term exploration and development programs will identify additional high-grade resources,” the Heatherdale CEO said.

Smith told Mining News the growing understanding of the geology at Niblack has set back the date of an updated resource estimate that includes a new geological model. Originally scheduled to be released at the end of 2010, the new resource estimate is expected to be completed by the beginning of March.

The junior’s new understanding of the geology at Niblack has turned up new exploration targets extending beyond previously envisioned mineralization. In addition to the two continuing resource expansion with two underground drills, Heatherdale plans to add a surface rig to investigate new exploration targets.

The company also plans to conduct environmental and engineering studies as it marches the project toward feasibility.

Smith said the he anticipates completion of preliminary economic assessment for Niblack later in 2011, and, if all goes well, a prefeasibility study in 2012.

More than a mine at Bokan

Exploration at Ucore Rare Metals Inc.’s Bokan Mountain deposit may not be as advanced as Niblack, but the swift development of the project is increasingly being seen as vital to securing a domestic supply of dysprosium, terbium and other heavy REEs in the United States.

“Because of its proportion of heavy rare earths, (Bokan) is the most desirable deposit to be developed in the United States,” world-renown REE expert Jack Lifton said in a speech delivered to the Alaska Miners Association 2010 annual convention in Anchorage. “For the future of this country, this development in Alaska is very important. I am hoping it comes to the attention of the national government.”

The 19-square-mile, or 30-square-kilometer, Bokan Mountain property covers the Ross Adams uranium mine, in operation between 1957 and 1972. During this time the historical mine produced 1.3 million pounds of U3O8 at a reported average grade of 0.76 percent between 1958 and 1972, among the highest average grades ever recorded by a U.S.-based uranium mine.

The U.S. Geological Survey first recognized Bokan’s potential as a heavy rare earth prospect in a (pre-NI 43-101 and non-43-101-compliant) study of the resource completed in 1989. The agency estimated the property contains 37.8 million tons grading 0.50 percent rare earth oxides, or 374 million pounds of rare earth oxides.

Ucore exploration of Bokan Mountain, which began in 2007, quickly focused on confirming and expanding this historical estimate. A resource estimate is due out early in 2011.

“As always, our objective has been to verify the historical resource for this area as set out by the U.S. Geological Survey (formerly the US Bureau of Mines; USBM OFR 33-89,) converting these expectations to NI 43-101 compliance, before embarking on an aggressive mine feasibility and development schedule in 2011,” Ucore President and CEO Jim McKenzie explained.

Ucore recently completed a series of meetings with lawmakers in Washington, D.C., as well as State of Alaska officials based in the nation’s capital. The parties discussed the need for near term initiatives to provide a secure domestic source for strategically sensitive metals such as dysprosium and terbium.

“We’re impressed with the pro-active stance of leaders in Washington, D.C., to recapture an industry in which the U.S. was the de facto world leader not very long ago,” McKenzie said. “Ucore has the stated goal of becoming the first enterprise to commercially produce dysprosium in the form of a high purity metal for magnet alloys entirely on U.S. soil, and to do so at minimal expenditure of time and financial outlay. We believe that Bokan is the only realistic location to achieve this goal in the near term, and is increasingly acknowledged as such by key federal policymakers.”

Beyond just mining the heavy rare earth element-rich ore at Bokan, Lifton advised the State of Alaska to invest in value-added REE processing and refinement and the manufacturing of the magnets in other products made from the technological metals.

“Bring the supply chain up here. Bring a company that separates the rare earths, refines them, makes the metals, makes the magnets,” Lifton urged. “I think for US$100 million Alaska could become the United States’ center of heavy rare earth production.”

Ucore is hoping to do just that. In addition to building a mine, the explorer is endeavoring to develop “a metallurgical refining complex to recapture the value-added segment of the rare earth processing chain within U.S. borders, and to service a secure and wholly contained domestic magnet-making industry, at a location pending finalization.”

Alaska officials are hoping that such a facility might be situated on Alaska soil.

Alaska seeks synergies

Department of Natural Resources Deputy Commissioner Ed Fogels told Mining News that state officials met with Heatherdale and Ucore representatives to see if any synergies exist between these tidewater projects located about 15 miles, or 25 kilometers apart.

One common thread revealed during the meetings is that both projects may need additional room for processing facilities.

“At Niblack probably one of our biggest issues will be processing and milling,” Smith told Mining News.

He said Heatherdale would consider the option of setting up facilities at an offsite location, but would want to talk with local stakeholders before advancing the idea.

Fogels said the state is investigating whether there are any state lands nearby that could facilitate a REE production facility for Ucore and/or a milling facility for ore mined at Niblack. The deputy commissioner suggested that a brownfields site or some other state-owned lands proximal to the two tidewater projects would be ideal.

Alaska Industrial Development and Export Authority may be another way that the state could facilitate development of the two Prince of Wales projects.

The state-owned agency, which has a mission to promote economic growth and diversification in Alaska by providing various means of financing and investment, had a seat at the meetings with Niblack and Ucore.

AIDEA assists Alaska business through its ability to develop, own and operate facilities within the state, with the purpose of advancing the prosperity of a region.

The Delong Mountain Transportation System, a 52-mile road and port used to ship zinc and lead concentrates from Red Dog Mine, and the Skagway Ore Terminal, which ships about 40 million pounds of copper concentrates from Capstone Mining Corp.’s Minto Mine in the Yukon Territory, are examples of AIDEA-owned projects.

In addition to development projects, the agency provides long-term financing.

Further meetings between Alaska officials and the Prince of Wales Island explorers are tentatively scheduled for March during the Spring Alaska Miners Association Convention in Juneau.



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