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Vol. 19, No. 17 Week of April 27, 2014
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Gold prices forecast to dip in 2014

Alaska production is on track for another robust year; output could surpass stateís annual record of nearly 1.07 million ounces

Curt Freeman

For Mining News

GFMS formerly known as Gold Fields Mineral Services) recently announced their outlook for gold prices in the coming months, estimating average 2014 gold prices in the US$1,225 per ounce range. The price forecast is 13 percent less than the 2013 average of US$1,411/oz. Physical demand, including official sector purchases, came in at an all-time high of 4,957 metric tons in 2013, a 15 percent increase over 2012 and some 703 metric tons higher than the supply of new gold and scrap during the year. Excluding the scrap market, the demand increased by a whopping 34 percent. GFMS expects demand to continue to outstrip supply in 2014 but by a smaller margin than in 2013. While improving economic conditions pushed investment purchasing down in 2013, robust demand for physical gold, particularly from Asia, more than made up for the investment buying declines. The unmet demand for gold in 2013 came despite a 6 percent increase in worldwide gold production, which hit a record 3,022 metric tons (97.1 million ozs). Average mine production costs were essentially flat at US$767/oz. Most of this increase in ounces produced came from increased production at existing operations as opposed to commissioning of new mining operations. Alaskaís production is on track for another robust year, perhaps even surpassing the single-year gold production record of 1,066,030 oz, set in 1906. Thatís right Dorothy, Alaska produced 1,066,030 oz of gold in 1906!

Western Alaska

Millrock Resources Inc. announced the staking of the Lisburne zinc project in northwest Alaska. The claim blocks cover age-equivalent rock strata that lie stratigraphically above those that host Teck Resources Ltd.ís Red Dog zinc-lead-silver mine approximately 140 kilometers (87 miles) to the southeast. Stream sediment samples collected on the Lisburne project by the U.S. Geological Survey indicate strong zinc and barium anomalies on the claims. The project consists of 83 State of Alaska claims covering about 5,300 hectares (13,096 acres). The company indicated that it will be looking for a strategic partner to help it explore the project.

NovaGold Resources Inc. released its first-quarter financial results and updates for its flagship 50 percent-owned Donlin gold project. As a routine part of the environmental impact statement process, the company and partner Barrick Gold Corp., supported the alternatives analysis being conducted for all major components of the project including the mine, pipeline and transportation infrastructure. The partners also made progress in key permitting areas, including pipeline, water management, air quality, dam safety and wetlands. The EIS, the most time-consuming part of permitting under the National Environmental Policy Act, commenced in 2012 and is anticipated to take approximately four years to complete. The partners expect to spend roughly US$24 million at Donlin in 2014 for agency review and in preparation for issuance of the draft EIS for public review in 2015.

In a move that has been both praised and condemned, mining giant Rio Tinto Copper gifted its 19.1 percent shareholding in Northern Dynasty Minerals Ltd., owner of the Pebble project, to two local Alaskan charitable foundations. The shares will be divided equally between the Alaska Community Foundation to fund educational and vocational training and the Bristol Bay Native Corporation Education Foundation, which supports educational and cultural programs in the region. Prior to the gift, Rio Tinto, through Rio Tinto Fer et Titane Inc., an indirect wholly-owned subsidiary of Rio Tinto plc, owned nearly18.15 common shares of Northern Dynasty, worth about US$15.8 million at the time of gift.

Interior Alaska

Freegold Ventures Ltd. announced that it has begun assessing the high grade potential of its Golden Summit project located near Fairbanks. Historic production from the project was derived exclusively from mesothermal gold-quartz vein deposits that have seen limited exploration since the 1940s. With average production grades in excess of 34 grams per metric ton gold, no production from deeper than 125 meters below surface and limited drilling that extends mineralization in excess of 600 meters below surface. The project hosts more than two dozen past producing lode gold mines which produced at least 525,000 ozs of lode gold. These past producers include the districtís largest high-grade historic underground mines, including the Cleary Hill Mine which produced 281,000 ozs grading 44.5 g/t gold, the American Eagle which produced 60,000 ozs grading 44.5 g/t gold, the Hi Yu Mine which produced 110,000 ozs grading 54.8 g/t gold and the Newsboy Mine which produced 36,000 ozs grading 34 g/t gold. These larger mines are surrounded by over 80 documented, but virtually unexplored, high-grade lode gold occurrences that stretch over a 17-kilometer strike length within the project area. These northwest and northeast trending gold-bearing structures tend to cluster into discrete vein swarms which host the highest grade historic lode gold mines. With the exception of the Newsboy and Cleary Hill mines, none of the past-producing mines were exploited below 125 meters depth. However, Freegoldís past exploration efforts have shown that high-grade gold vein densities are not only far higher than historic records indicate, but high-grade gold mineralization extends to depths of at least 600 meters in all three of the vein swarms where deeper core drilling has been conducted. Mineralization remains open to depth in these vein swarms and the potential for deep high grade gold resources remains untested in the other vein swarms that have been identified on the project.

Southeast Alaska

Hecla Mining Co. announced preliminary production results for the first quarter of 2014 at its Greens Creek mine. The mill operated at an average of 2,252 tons per day for the quarter with production of 1.8 million ounces of silver, similar to that seen in the first and last quarters of 2013.

Coeur Mining Inc. also reported first-quarter 2014 production results from its Kensington mine. The mill processed 159,697 tons, or nearly 1,800 tons per day, a significant increase over previous quarters. The mine produced 25,428 ounces of gold grading 0.17 ounces of gold per ton with an average recovery of 94.5 percent. In order to maximize cash flow, Kensingtonís mine plan for 2014 reflects higher mining rates at gold grades more in-line with the average reserve grade of 0.163 ounces per ton.

Constantine Metal Resources Ltd. announced that it has won the right to lease the 99,257 acre Haines land block from the Alaska Mental Health Trust Authority. The Haines block is adjacent to Constantineís 16,000 acre Palmer volcanogenic massive sulfide project. The parties intend to finalize terms and conclude signing of the lease in advance of the summer field season. General lease terms are expected to include annual rental of US$25,000 per year for the initial 3 year lease term, with work commitments of US$75,000 per year, escalating US$50,000 annually. The lease is also expected to include certain production royalties. The virtually unexplored Haines block shares similar geology to the Palmer project and is considered prospective for hosting high-grade massive sulfide mineralization. The property also covers upland areas of the active Porcupine placer gold district that has estimated past production of 82,489 ounces of gold.

Heatherdale Resources Ltd. reported raising about US$1 million via private placement for its Niblack project in Southeast Alaska. Proceeds from the financing will be used in part to advance drill target generation at the projectís Dama zone. Since 2009, the company has invested some US$37 million and drilled more than 200,000 feet of core to define 5.6 million metric tons of indicated and 3.4 million metric tons of inferred mineral resources at Niblack. While possessing significant potential for expansion, the known mineral resources provide a solid basis for the initiation of engineering, environmental baseline and other technical studies necessary for project planning and permitting.



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