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Vol. 15, No. 35 Week of August 29, 2010
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Columnist tips hat to mine developers

Explorers, miners often fail to appreciate contribution of those who specialize in converting what could be into what should be

By Curt Freeman

For Mining News

In the last month, several of Alaska’s major metal mines reported strong operating numbers; one company released a preliminary economic assessment and three new mineral exploration companies acquired exploration interests in Alaska.

While the functions of explorers and producers are quite different, the symbiotic relationship between the two ends of the mining cycle is unequivocal: exploration would not exist without production and production would eventually cease without exploration. The middle ground between the explorers and the miners, known as the development stage, is occupied by an oddly thick-skinned, often thin-haired animal that takes exploration data and forms a mine plan around it. I heard a mine development engineer once say that mine development work is like playing five-card stud with only three cards – something is always missing. The explorers think this development beast is entirely too conservative in his estimates, while the miners are certain this same development beast wears permanent rose-colored contact lenses. So perhaps the most critical stage of the mining cycle is the one most vilified and mistrusted by the two extremes?

As a tribute to that beast, this month’s column is a salute to those of you who take what could be and turn it into what should be for those who make it into what it always was!

Western Alaska

Teck Resources Ltd. announced second quarter results from its Red Dog mine. During the quarter the mine produced 137,900 metric tons of zinc in concentrate. Zinc ore grade decreased to 18.1 percent, while mill recoveries remained steady at 83.5 percent. The mine also produced 31,300 metric tons of lead in concentrate. Lead ore grade decreased slightly to 5.3 percent while mill recoveries decreased to 64.6 percent. The mine posted a $31 million operating profit for the quarter, down significantly from the $40 million profit in the year previous period. The decreased operating income was attributed mainly to lower zinc ore grades. The mine plans to ship 1,025,000 metric tons of zinc concentrate and 235,000 tons of lead concentrate from the port facility this shipping season. The company also commenced production from the Aqqaluk deposit in late May as it made its planned transition to mining of the Aqqaluk deposit.

TintinaGold Resources announced initial drilling results at its Kugruk copper-gold-iron project on the Seward Peninsula. Initial drilling targeted the Billiken prospect, a 3-kilometer-long highly magnetic zone which also shows high gravity, low resistivity and high induced polarization geophysical responses. Drilling encountered massive magnetite and copper sulfide mineralization within a complex assemblage of prograde garnet-pyroxene exoskarn, actinolite-chlorite retrograde alteration, endoskarn, and variably altered granodiorite dikes. Alteration overprints a protolith of marble and quartz-feldspar to graphitic schist. Significant drilling results include 22 meters grading 0.065 parts per million gold, 2.6 parts per million silver, 0.44 percent copper and 48.8 percent iron in hole KU10-003 and an additional 31.3 meters grading 0.104 parts per million gold, 4.1 parts per million silver, 0.30 percent copper and 12.1 percent iron in hole KU10-003. Mineralization is associated with widespread skarn alteration on surface and in drill holes over an area 7 kilometers by 3 kilometers, and its geophysical signature extends at least 15 kilometers along strike. The entire area is covered by wind-blown silt and tundra with only sparse outcrops. Additional drilling and surface work is under way.

Cedar Mountain Exploration Inc. announced commencement of an initial work program on its Kelly Creek project on the Seward Peninsula. The Phase One sampling program is budgeted at $600,000 and is focused on evaluating the high priority gold geochemical anomalies that occur within prospective stratigraphy over a 15 kilometer by 5 kilometer fault-bounded corridor. Limited soil and stream sediment sampling programs conducted in the past have identified several prospects within the bounds of the property consisting of coincident gold, arsenic, antimony, and mercury anomalies. A coherent gold-in-soil anomaly with continuous elevated gold assays of greater than 25 parts per billion was traced for nearly 2 kilometers. In 1984, Anaconda Copper Mining Co. completed three drill holes (140 meters) within a portion of the anomalous area, producing drill intercepts of 1.07 g/t gold over 23.5 meters and 0.83 g/t gold over 32 meters. Approximately 4,000 soil, stream sediment and rock samples will be collected during the 2010 program.

Millrock Resources Inc. and joint venture partner Kinross Gold Corp. announced an update of drilling at the Council gold project on the Seward Peninsula. Approximately 2,062 meters of reverse circulation drilling in 17 holes had been completed by late July and all samples had been sent for analysis. Initial testing of samples with X-ray fluorescence technology identified anomalous arsenic and antimony in drill samples. Additional geologic mapping, prospecting and geochemical sampling are on-going.

Millrock Resources Inc. and joint venture partner Valdez Gold Inc. announced that a $1.2 million, 4,500 meter drilling program was planned at the Council gold project on the Seward Peninsula. Results are pending.

Fire River Gold Corp. announced additional results from previously unreleased drilling at its Nixon Fork gold project near McGrath. Significant results include 13 g/t gold over 4.0 meters in hole N07U066; 20 g/t gold over 4.0 meters in hole N07U068; and 14 g/t gold over 8.2 meters in hole N07U069. The company also announced commencement of a 28,000-meter surface and underground drilling program on the project. Drilling is commencing on surface targets, particularly lateral or down plunge extensions of known mineralized zones which have the potential to provide additional resources. These types of targets include the Whalen, North Star, Mystery, Southern Cross and J5A. Following the surface program, underground drilling will begin within the Crystal decline. The drill program is designed to expand resources, particularly in the area of the 3300 zone, as well as test three to four prospective zones.

Full Metal Minerals Ltd. announced that it has entered into an option agreement with Alaska newcomer Antofagasta Minerals S.A. to explore the Pyramid copper-gold-molybdenum porphyry project, located on the Alaska Peninsula. The project is on land under lease to Full Metal from Aleut Corp., TDX Pyramid LLC and Shumagin Corp. An initial 2,000-meter core drilling program is under way. Antofagasta can earn an initial 51 percent interest by incurring $6 million in expenditures during the first four years and paying Full Metal $200,000 in cash. Antofagasta can then earn an additional 14 percent interest by preparing and delivering at its sole cost, a Scoping Study costing a minimum of $4 million. Antofagasta can then earn an additional 15 percent interest for a total aggregate of 80 percent interest by funding a feasibility study at its sole cost. The Pyramid deposit was discovered in 1974 by the Aleut-Quintana-Duval joint venture, who drilled 1,695 meters in 19 shallow holes in late 1975, identifying a resource of 125 million tons of copper mineralization grading 0.403 percent copper and 0.025 percent molybdenum in a near-surface zone consisting largely of chalcocite-enriched rock. More recent exploration by Battle Mountain Gold in the late 1980’s identified associated gold values that improved the potential of the project. The 2010 exploration program will consist of a 2,000 meter core drilling program, comprising five or six deep drill holes, targeting the potassic core of the porphyry system. Drilling in the 1970s avoided the potassic core, with the majority of drill holes less than 100 meters in length (maximum 168 meters). Welcome to Alaska Antofagasta Minerals!

Interior Alaska

Kinross Gold Corp. announced second quarter results from the Fort Knox mine near Fairbanks. The mine produced 86,270 ounces of gold at a cost of $642 per ounce. Production increased in the second quarter of 2010 when compared to the same period in 2009 (86,270 ounces versus 67,391 ounces) as a result of gold recovered in the companies Walter Creek heap leach facility. During the quarter the mill and heap leach processed 7,761,000 metric tons of ore which included 4,420,000 metric tons grading of 0.34 g/t gold placed on the heap leach pad and 3,341,000 metric tons grading 0.76 g/t gold processed by the mill. Gold recovery in the mill averaged 80 percent. Gold recovery on the heap leach pad was not released.

Teryl Resources Corp. and joint venture partner Kinross Gold Corp. announced additional drilling results from their Gil gold project near Fairbanks. Significant results in the North Gil zone include 35 feet grading 0.0788 ounces of gold per short ton in hole GVR10-568 and 50 feet grading 0.0363 oz/t gold in hole GVR10-569. Significant results in the Sourdough zone include 25 feet grading 0.030 oz/t gold in hole GVR10-563. The partners have completed 5,341 feet of core drilling and 9,456 feet of reverse circulation drilling. Additional assays for 18 holes are pending.

First Star Resources announced that it plans to conduct drilling on its LMS and WP gold properties in the Goodpaster Mining District, Alaska. Initial drilling will consists of 1,500 meters of oriented diamond core drilling on the LMS property to expand the existing inferred resource calculated for the gold-bearing graphitic quartzite breccia and to identify the extent of high grade gold vein zones. Current published resources at LMS are 5.86 million metric tons containing 167,000 ounces of gold at a grade of 0.89 g/t gold using a cutoff grade of 0.3 g/t gold.

International Tower Hill Mines Ltd. announced the results from the initial 19 holes completed in its 45,000-metre summer 2010 drilling campaign at its Livengood gold project. Significant results from the Lillian Frontier area include hole MK-RC-0355 which returned 7.6 meters at 3.3 g/t gold and hole MK-RC-0362 which returned 6.1 meters at 2.9 g/t gold, hole MK-RC-0364 which returned 41.2 meters at 1.3 g/t gold in the Sunshine Infill area, and in the Core Zone Infill areas, holes MK-RC-0366 which returned 18.3 meters at 1.2 g/t gold and an additional 83.8 meters at 1.1 g/t gold and hole MK-RC-0372 which returned 80.8 meters at 1.0 g/t gold. The company also announced results from its preliminary economic assessment which indicated that the combined milling/heap leach facility would produce an average annual production of 504,000 recovered ounces of gold for 21 years, at a 1:1.07 strip ratio (ore to waste), indicating a pre-tax net present value of $813 million and an internal rate f return of 15.4 percent using a $950 per ounce gold price. Average gold recovery was 78 percent (76 percent for heap leaching and 81 percent for milling) with an average daily processing rate of 81,000 metric tons per day. Cash cost per ounce of production came in at $560 per ounce and initial capital costs were pegged at $635 million without the mill and an additional deferred capital cost of $750 million of the mill complex.

Alaska Range

Triton Gold Ltd. announced that it has signed an agreement whereby Alaska newcomer Panoramic Resources will fund $2.6 million of drilling at its Tushtena gold project in the central Alaska Range. Triton has commenced diamond drilling at the Discovery Zone prospect targeting potentially high-grade gold mineralization below extensive surface showings of gold in veins and soils. The first of four holes has been completed with the 1,600-meter program scheduled for completion in August. Under terms of the agreement Panoramic has the right to earn a 51 percent interest by funding the balance of approximately $2.6 million to satisfy a total of US$3.0 million in exploration expenditure required before June 2013. Triton had spent US$400,000 on the project and will manage exploration during the earn-in phase by Panoramic. Thereafter the parties would contribute to a joint venture in proportion to their respective interests of Panoramic Resources, 51 percent; Triton Gold, 29 percent; and underlying property owner Tushtena Resources, 20 percent. Welcome to Alaska Panoramic Resources!

Rhyolite Resources Ltd. announced that a detailed geological compilation and validation sampling of core drilled in 2001 has resulted in the identification of two prospective gold targets on its wholly-owned Paxson project in the central Alaska Range. Validation sampling in hole WG01-01 in the Shalosky zone returned 0.83 g/t gold over the 38.2 meters including a higher grade interval averaging 6.45 g/t gold over 2.1 meters. The second mineralized zone also was increased to 17.8 g/t gold over 1.3 meters. Hole WG01-02 returned 1.22 g/t gold over the 17.4 meter interval, including a 6.9-meter interval averaging 1.98 g/t gold. Mineralization is dominantly metasediment-hosted with the overall sulfide content varying from less than 1 percent to more than 10 percent. There is a strong correlation between gold, arsenic and antimony. Geological compilation work also identified a second target that has never been drill tested and which lies 3 kilometers east-southeast of the Shalosky area. Known as the Low showing, hand trenching in 2001 returned 8.6 g/t gold over 9.8 meters including a 3.8 meter interval averaging 14.3 g/t gold. Mineralization remains open in both directions under talus cover. The OTG showing, located between the Shalosky and Low showings, returned grab samples ranging in value from no significant gold up to 5.3 g/t gold. This area has never been drill tested but will require additional geochemical and geological work to determine if a drill target can be defined.

Caribou Copper Resources Ltd. announced the results of its recently completed trenching program at its Caribou Dome project in the Valdez Creek District. Significant results include 2.69 percent copper over 2 meters in Trench 1, 3.23 percent copper over 3 meters, in Trench 3, 4.03 percent copper over 7 meters in Trench 4, 1.7 percent copper over 7 meters in Trench 7 and 3.78 percent copper over 2.5 meters in Trench 11. The trenching program exposed copper mineralization in nine trenches in the eastern portion of known surface mineralization. These trenches intersected lodes 3, 7 and 8, which have received minimal past exploration. Trenching extended mineralization approximately 215 meters horizontally eastward and 90 meters of vertically from the previously drilled lodes. The mineralization is contained primarily within two thin black shale and limestone horizons enclosed within a package of intermediate to mafic volcanic and intrusive rocks. Mineralization consists primarily of chrysocolla and malachite in fractures and shears within black shale.

Millrock Resources Inc. announced that it has entered into an agreement with Alaska newcomer Brixton Metals Corp. for the exploration of Millrock’s Monte Cristo and St. Eugene properties in the Kahiltna region of southern Alaska. Under terms of the agreement, Brixton can earn a 100 percent interest in the Monte Cristo claim group in return for a cumulative $5 million in exploration expenditures, US$350,000 in cash payments, 1.5 million Brixton shares and 1.5 million Brixton share purchase warrants with an exercise price of US$1 per share over a four-year term. The target is a large intrusion-related gold or porphyry copper-gold deposit. Extensive alteration zones with strongly anomalous gold and copper values were detected. Additional work is presently under way to further characterize the alteration and better define the new mineral discoveries. Welcome to Alaska Brixton Metals Corp.!

Full Metal Minerals Ltd. announced commencement of a 1,000-meter drilling program at the Grizzly-Butte copper-gold porphyry project in the Talkeetna Mountains. Drilling will target a horseshoe-shaped copper anomaly with values greater than 280 parts per million copper that measures 2,500 meters from east to west and up to 700 meters in north-south dimension. A high of 4,020 parts per million copper occurs within the widest portion of the anomaly, and is associated with an area of potassic alteration. In total, 350 soil samples were collected during 2010, with 17 percent returning in excess of 280 parts per million copper. A total of 190 rock chip samples were collected on the property, of which 26 assayed greater than 0.1 percent copper, with two greater than 1.0 percent copper. Recently completed geologic mapping has identified a potassic altered diorite intrusive unit, with classic phyllic altered halo. Disseminated copper and gold mineralization has been identified within the heart of the alteration zone, as well as within sediment replacement bodies. Induced polarization-resistivity surveys were completed over four lines totaling 14 line kilometers. A coincident induced polarization high and resistivity high with a radius of 600 to 800 meters occurs within the heart of the soil anomaly and the potassic altered intrusive units

Harmony Gold Corp. announced that it continues working toward the objective of developing the Lucky Shot gold project in 2011. The company expects to reach the following milestones in the third quarter of 2010: complete a resource estimate for the Coleman deposit; complete all required environmental baseline studies for environmental permitting; complete the engineering, design and reclamation plans for the final mine design; complete the metallurgical testing for environmental permitting and a more definitive gold recovery process; complete the electrical design work; prepare an air permit; and complete dispersion modeling of the emissions from the operation and submit the full mine permit applications. At present the mill construction is 80 percent complete.

Southeast Alaska

Hecla Mining announced second-quarter 2010 production from the Greens Creek mine on Admiralty Island. The cash cost per ounce of silver for the quarter was a negative US$4.56 per ounce of silver. The average grade of ore mined during the quarter was 12.4 ounces of silver per ton. During the second quarter the mine produced 1,831,279 ounces of silver, 17,880 ounces of gold, 6,535 tons of lead and 19,481 tons of zinc. Total production costs for the quarter were US$2.75 per ounce of silver produced. Tonnage milled rose to 2,252 tons per day and capital expenditures during the second quarter totaled US$4 million. On the exploration front, definition and exploration drilling of the NWW zone in the northern part of the mine have defined and extended two distinct limbs of a major folded orebody for over 200 feet down dip. Variable widths of massive sulfide up to 42 feet have been intersected on the two limbs of the fold. The drill intercepts contain higher than expected grades of precious metals such as: 0.72 ounces of gold per ton and 75.6 ounces of silver per ton with base metals over 2.6 feet. The closest previous holes above this area grade 0.27 ounces of gold per ton and 33 ounces of silver per ton plus base metals over 41 feet in the upper limb and 0.28 ounces of gold per ton and 4.9 ounces of silver per ton with base metals over 7.7 feet on the lower limb. Drilling from the 1147 Drift targeted the projection of the 200 South zone to the south and west. The first three holes completed included a 13-foot section of massive sulfide that graded 0.25 ounces per ton gold, 2.1 Drilling from the 1147 Drift targeted the projection of the 200 South zone to the south and west. The first three holes completed included a 13-foot section of massive sulfide that graded 0.25 ounces of gold per ton, 2.1 ounces per ton silver, 2.1 percent lead and 23.3 percent zinc. The second hole intersected a 30-foot interval of baritic ores and silicified argillite with elevated silver grades, 2.1 percent lead and 23.3 percent zinc. The second hole intersected a 30-foot interval of baritic ores and silicified argillite with elevated silver grades.

Coeur d’Alene Mines Corp. announced second quarter 2010 production from its Kensington gold mine north of Juneau. Production started ahead of schedule and is on track for targeted 2010 production of approximately 50,000 ounces The process plant is operating at design tonnage of 1,250 short tons per day, ahead of schedule. Recovery rates during the initial month of ramp-up were consistent with plan and expected to climb as processing of higher-grade ore begins The first two gold concentrate shipments have been sent to China National Gold Corp., the first arrangement of its kind between a Chinese state-owned corporation and a U.S. precious metals mine. Annual average gold production is expected to be approximately 125,000 ounces over the initial 12.5-year mine life. Projected average life-of-mine cash operating costs are US$490 per ounce. The company also noted that exploration in the mine area was restarted in the second quarter. The main focus of this work was on the Horrible vein structure, a prominent, gold-bearing quartz vein and vein swarm situated about 650 meters west of the current production. A total of 9,941 feet of core drilling was completed at Horrible in the second quarter. Drilling has cut multiple quartz-vein structures down-dip and on-strike of the known zone. Drilling will continue on Horrible and other nearby targets in the third quarter.

Constantine Metal Resources Ltd. announced results for the first three drill holes for the ongoing 2010 drill program at the company’s Palmer copper-zinc-gold-silver volcanogenic massive sulfide project near Haines. Significant results include the RW Zone where step-out hole CMR10-35 intersected 7.1 meters grading 2.10 percent copper, 1.52 percent zinc, 0.18 g/t gold and 16.8 g/t silver, including 4.15 meters grading 3.13 percent copper, 0.62 percent zinc, 0.23 g/t gold and 23.9 g/t silver. The intersection expands the RW Zone 45 meters along strike to the west-northwest. At the South Wall Zone I, step-out drill hole CMR10-34 intersected 10.4 meters of precious metal-rich baritic massive sulfide mineralization grading 0.30 percent copper, 4.18 percent zinc, 0.42 percent lead, 0.87 grams of gold per tonne and 81.6 grams of silver per tonne. This intersection extends South Wall Zone I mineralization 70 meters up-dip and expands the total vertical extent of South Wall mineralization to 430 meters. The South Wall includes three distinctive stratigraphically stacked zones that occur on the steep limb of a large anticlinal fold. The RW Zone occurs on the opposite fold limb and is stratigraphically equivalent to the South Wall. The presence of massive sulfide on both sides of the fold indicates a sizeable massive sulfide system, with zones on each limb offering excellent opportunity for further expansion.

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