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Vol. 22, No. 16 Week of April 16, 2017
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: South32 looks north

BHP Billiton spin-off joins Trilogy, NANA at Upper Kobuk Mineral Projects

Shane Lasley

Mining News

South32 Ltd., a coal and base metals miner spun out of BHP Billiton in 2015, has cut a US$150 million deal with Trilogy Metals Inc. to earn up to a 50 percent interest in the Upper Kobuk Mineral Projects, UKMP, a large land package that blankets most of the Ambler Mining District in Northwest Alaska.

South32, which up to this point was focused on the Southern Hemisphere, has eight mines in Australia, Africa and South America that produce aluminum, coal, manganese, nickel and silver.

“This will be their first venture north of the 67th Parallel, in Alaska,” Trilogy Metals President and CEO Rick Van Nieuwenhuyse said during an April 10 conference on the agreement.

Under this agreement, South32 has the option to earn a 50 percent stake in UKMP any time over the next three years by investing up to US$150 million, which is about US$50 million more than Trilogy has in the project so far. To keep this option in good standing, South32 must invest at least US$10 million into UKMP annually over the next three years.

"We believe this deal recognizes the quality of our assets,” said Van Nieuwenhuyse. “By offering to fund at a 150 percent premium to the investment made by Trilogy, the terms recognize the high-quality asset base that Trilogy has assembled at the UKMP. In terms of the option, South32 will invest up to US$30 million to explore, expand and advance the already sizeable metal endowment identified to date.”

Additionally, the Perth, Australia-based miner has agreed to reimburse Trilogy up to US$5 million per year over the next three years as the exploration company continues to carry out its plans in the district.

This means that the Ambler mining district will be a busy place this summer.

Trilogy still plans to continue a US$7.1 million program aimed at finalizing a pre-feasibility study for Arctic, a volcanogenic massive sulfide deposit that hosts some 1.65 billion pounds of copper, 2.62 billion lb of zinc, 444 million lb of lead, 610,000 ounces of gold and 45.3 million oz of silver in the inferred and indicated resource categories.

South32, in the meantime will be making its first US$10 million investment in the expansion of Bornite, a high-grade carbonate hosted deposit about 16 miles south of Arctic that hosts another roughly 6.4 billion lb of copper.

Trilogy will manage the work at both Arctic and Bornite.

NANA welcomes new partner

UKMP is a district-scale project that includes a block of state mining claims held by Trilogy that stretches 70 miles (110 kilometers) across the Ambler district and an adjacent land package owned by NANA, the Alaska Native Regional Corporation that represents the Inupiat people of Northwest Alaska.

Arctic, along with more than a dozen other VMS deposits and prospects rich in copper, zinc, lead, gold and silver are found on the Trilogy claims. Bornite and other copper-rich prospects are located on the NANA lands.

A 2011 agreement brought these two high-grade Ambler district properties together into what is now known as UKMP.

NANA, which has an option to be a 16 to 25 percent equity partner in the project or receive 15 percent net proceeds royalty from any mines developed on the 353,000-acre land package, sees the new partner with ample funds and mining knowhow as a positive step for UKMP.

“NANA looks forward to partnering with Trilogy and South32 on this new phase of exploration,” said NANA President and CEO Wayne Westlake. “Our region has benefited from responsible resource development, and we value working with companies that advance our land’s mineral potential and create shareholder value while respecting our traditional subsistence lifestyle.”

Expanding Bornite

South32 wants to pick up where Trilogy left off at Bornite, expanding the high-grade underground portion of this deposit.

“The immediate exploration focus will be to expand the known copper mineralization along the northern frontier of the Bornite deposit. With only three field seasons of exploration drilling at Bornite, we have already identified a resource in excess of 6 billion pounds of copper,” said Van Nieuwenhuyse.

Roughly 2.7 billion lb of this copper is encompassed in an open-pit resource averaging roughly 1 percent copper.

The remaining roughly 3.7 billion lb is located in a deeper underground resource that averages about 2.9 percent copper.

Already the highest grade and largest portion of Bornite, this underground deposit remains open along a 1,000-meter wide front to the north.

“During our last year of drilling at Bornite in 2013, five of the last holes drilled for exploration intercepted significant copper intervals,” Van Nieuwenhuyse said.

Hole RC13-0220, the most northeasterly these holes, cut three very high-grade intervals from 877 to 923 meters (at a 2.0 percent cutoff): 5.9 meters of 6.66 percent copper; 9.9 meters of 2.48 percent copper; and 19.7 meters of 2.24 percent copper.

Hole RC13-0224, drilled about 800 meters west of hole 220, cut five high-grade intercepts from 579 meters to 755 meters along this northern front: 19.5 meters of 3.02 percent copper; 16.8 meters of 2.36 percent copper; 39.5 meters of 2.37 percent copper; 8.6 meters of 3.26 percent copper; and 6.5 meters of 7.7 percent copper.

South32 and Trilogy have a plan to drill at least seven holes aimed at extending the 1,000-meter front a further 400 meters north.

These holes are expected to be up to 1,400 meters deep as they trace the high-grade copper further under the hillside to the north.

The 2017 program at Bornite will also include a ground gravity geophysical survey; further geochemical surveys; metallurgy; and continued hydrology studies.

Continuing Arctic plan

As drills are turning at Bornite, Trilogy will continue with its original plan to finalize a pre-feasibility study that will outline the engineering and financial parameters of developing an open-pit mine at Arctic.

In 2013, Trilogy completed a preliminary economic assessment that provided a first glimpse of what such a mine might look like.

This scoping level study outlined a 10,000-metric-ton-per-day mill at Arctic that is anticipated to produce roughly 1.5 billion lb of copper, 1.8 billion lb of zinc, 289 million lb of lead, 30.5 million oz of silver and 349,000 oz of gold over a 12-year mine-life.

The mine outlined in the 2013 PEA was based on 23.85 million metric tons of indicated resource averaging 3.26 percent (1.71 billion lb) copper, 4.45 percent (2.34 billion lb) zinc, 0.76 percent (400 million lb) lead, 0.71 grams per metric ton (550,000 oz) gold, and 53.2 g/t (40.8 million oz) silver.

Additionally, Arctic hosted 3.63 million metric tons inferred resource averaging 3.22 percent (239 million lb) copper, 3.84 percent (285 million lb) zinc, 0.58 percent (43.2 million lb) lead, 0.59 g/t (60,000 oz) gold at the time of the PEA.

Over the past two years, the exploration company has completed 6,000 meters of drilling at Arctic. While not all of this drilling was aimed at resource expansion and upgrade – some of the holes were drilled to gather geotechnical, hydrological and metallurgical data for the pre-feasibility study – they were all drilled into deposit.

Trilogy said an updated resource, which is expected to upgrade much of the inferred resource into the higher confidence measured and indicated categories, is slated to be published in the next month or so. In turn, much of the measured and indicated resources will convert to reserves once the prefeasibility study is complete, which is expected early in 2018.



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