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Exploration spending on the rise Monthly Alaska mining update: Field programs off to early start, exploration budgets up at Fort Knox Curt Freeman Petroleum News Contributing Columnist
The clouds of war in Iraq have cleared and the mining industry seems to be getting back to the business at hand. Given the early breakup being experienced around the state, field programs are kicking off earlier than normal with drilling, ground geophysics and general reconnaissance work already in progress at several properties.
Permitting at Greens Creek and Pogo have taken off and are well advanced while increased exploration budgets at Fort Knox suggest a return to more aggressive exploration in the near future.
A recent presentation by Doug Silver of Balfour Holdings underscores part of the reason for the renewed exploration fervor, for gold at least. His findings indicate that major gold discoveries peaked in 1987 (yes, 1987) and have declined every year since then. At the same time production from the world’s largest producer has declined from a peak of 9.3 million ounces in 1993 to about 7.5 million ounces last year.
According to Silver, nine major gold producers control 70 percent of the market value of all gold companies while small producers, which represent nearly half of all companies producing gold, make up only 6 percent of the market value.
Acquisition of these smaller producers by the larger ones is unlikely because their acquisition adds little to the overall value of the super-giants.
Exploration spending has been reduced significantly during the last five years and the rampant consolidation of the industry via mergers and acquisitions has resulted in even less exploration spending by fewer and fewer companies.
What does it all mean?
To quote Doug Silver: “Exploration is no longer a discretionary expense.” That is good news for Alaska.
Western Alaska Teck-Cominco’s Red Dog mine saw increased production in the first quarter of 2003 but continued low zinc prices contributed to a $6 million loss during the quarter.
For the quarter, the mine generated 144,000 tonnes of zinc and 29,000 tonnes of lead in concentrate versus 141,700 and 25,400 tonnes of zinc and lead, respectively, in the first quarter of 2002.
The mine sold 147,200 tonnes of zinc during the first quarter. Zinc prices average 36 cents per pound, identical to prices in the first quarter of 2002.
Average zinc grade mined was 21.2 percent, unchanged over grades mined in the first quarter of 2002.
NovaGold Resources (70 percent) and Placer Dome (30 percent) reported updated resources at the Donlin Creek project. The revisions represent a 62 percent increase in the measured and indicated classes of resource while inferred resources rose 138 percent over previous estimates.
The measured and indicated resource categories (using a 1.5 gram per tonne cut-off grade) have increased to 11.1 million ounces of gold grading an average of 3.0 grams of gold per tonne.
In addition, the inferred resource has increased to 14.3 million ounces of gold grading 3.1 grams of gold per tonne. Within this amount is a higher grade resource that includes 4.7 million ounces grading 5.1 grams of gold per tonne of measured and indicated material and an additional inferred resource of 6.8 million ounces grading 5.5 grams of gold per tonne using a 3.5 grams per tonne cut-off.
The joint venture is on track to complete the project preliminary feasibility study in the fourth quarter of 2003.
NovaGold said that TNR Resources has terminated its option on the Rock Creek project near Nome to concentrate its efforts on NovaGold’s Shotgun deposit north of Dillingham (see below).
NovaGold is moving the Rock Creek project forward on a 100 percent basis to determine production feasibility. An independent economic assessment study and updated resource estimate for the project is expected by mid-summer.
Two diamond core drills began operations at Rock Creek in early April as part of a planned 10,000-meter drill program designed to complete infill drilling to a density sufficient for a feasibility study and production decision in 2004.
The first phase of the program (in progress) will include approximately 2,000 meters of drilling, followed by the remaining 8,000 meters to be completed by the end of 2003.
Current resource estimates at Rock Creek include a total measured and indicated resource of 555,000 ounces grading 2.74 grams of gold per tonne gold with an additional inferred resource of 563,000 ounces of gold grading 2.48 grams of gold per tonne using a 1 gram per tonne cut-off grade.
Metallurgical test-work at Rock Creek has shown it to have favorable metallurgy with more than 92 percent recovery using conventional cyanidation with an average of 67 percent of the gold recovered using a relatively coarse grind (-65 mesh) and inexpensive gravity methods.
NovaGold also said it has initiated an independent economic assessment study on its Nome placer gold project. This assessment will determine the feasibility of resuming placer gold production from the same area that has historically produced more than 4 million ounces of gold over the past 80 years.
The project contains an estimated 2.2 million ounces of resource based on more than 7,000 drill holes. The planned evaluation will refine the economic operating parameters for the deposits as well as define the scope of work for additional engineering that would be necessary for a production decision.
TNR and NovaGold plan to resume exploration at the Shotgun gold project north of Dillingham. Previous drilling at the project defined an inferred resource of 980,000 ounces grading 0.93 grams of gold per tonne at a 0.5 gram per tonne cut-off.
The mineralization at Shotgun is similar to one of the target areas at the Donlin Creek.
This year’s efforts at Shotgun are designed to evaluate the potential for additional mineralization outside the current resource base.
Several priority exploration targets with similar geophysical and geochemical signatures to Donlin have been identified on the property. NovaGold and TNR are currently in the planning stages for the 2003 exploration program with anticipated expenditures in excess of US$900,000.
Eastern Interior Kinross Gold presented its annual exploration update in early April and indicated company-wide exploration expenditures of $21 million in 2003, nearly double that seen in 2002.
Exploration activities in the Fairbanks district include continued in-pit reserve expansions at both operating mines in the area, Fort Knox and True North, as well as exploration drilling at Kinross Gold’s Ryan Lode and NOAA prospects and at its Gil joint venture project with Teryl Resources Corp.
The company also reported year-end 2002 resource estimates for its Fort Knox operations where proven and probable reserves stood at 97,158,000 tonnes grading 0.86 grams of gold per tonne (2.678 million ounces). Measured and indicated resources (not including proven and probable reserves) stood at 21,667,000 tonnes grading 1.02 grams of gold per tonne (712,000 ounces) while inferred resources were 6,900,000 tonnes grading 0.7 grams of gold per tonne (160,000 ounces).
Teryl said joint venture operator Kinross Gold had begun 2003 exploration drilling on the Gil gold project in the Fairbanks District. The 2002 drill program tested portions of the North Gil and Main Gil deposits and the Sourdough Ridge prospect.
The 2003 drill program is designed to upgrade the currently defined resources and expand the mineralization at the Main Gil and North Gil zones, as well as extend those mineralized zones to the east and the northeast.
In addition, the program includes exploration of the Sourdough Ridge and Skarn grid prospects to determine their potential to host economic mineralization.
Freegold Ventures Ltd. reported additional results from three diamond core holes from the Cleary Hill mine area on its Golden Summit project in the Fairbanks district.
Results include 23.5 feet grading 0.030 ounces of gold per ton in hole CHD03-2 and 12.5 feet grading 0.067 ounces of gold per ton in hole CHD03-3.
Drill results confirmed the presence of quartz veins and stockwork zones in a vein swarm extending across a north-south distance of 400 meters from the Wyoming mine on the south to the Cleary Hill mine on the north.
To date, drilling and surface trenching have identified at least 17 mineralized structures in this area. Mineralization is hosted in highly altered schists containing widespread disseminated and high-grade gold mineralization. Additional drilling, planned for this month and June, will be designed to extend the vein swarms along strike to the east and west.
Public meetings were held in late April on Teck Cominco-Sumitomo’s draft environmental impact statement on the Pogo deposit. Support for the preferred alternatives outlined in the draft EIS was nearly universal.
The public comment period is scheduled to end May 13.
The partners expect construction and development permits to be issued in the fourth quarter of 2003. Details of the draft EIS can be found at www.pogomineeis.com. Alaska Range Nevada Star Resources reported completion of a $1.5 million private placement to be used to conduct exploration on its MAN copper-nickel-platinum group element project in the central Alaska Range.
Plans for 2003 include ground geophysics with follow-up drilling later in the year.
These efforts will be concentrated on one or more of the six prospects on the project: Canwell, Dunite Hill, Rainy, Fish Lake, Broxson and Eureka.
Southeast Alaska Kennecott (70.3 percent) and Hecla (29.7 percent) announced the beginning of a 45 day public comment period on their proposed tailings impoundment expansion at the Greens Creek mine on Admiralty Island.
The partners are seeking to expand the impoundment to 61.3 acres from its current maximum size of 29 acres. This will increase its life span to allow 20-25 years of capacity at current production rates.
The comment period closes June 9. Details of the draft environmental impact statement can be found at www.greenscreekeis.com.
Alaska newcomer Bravo Ventures Group has acquired the right to earn a 100 percent interest in the Woewodski Island project from Olympic Resource Group, a private Petersburg-based corporation.
Bravo can earn a 100 percent interest in the property over a five-year period, by expending $2 million in exploration and development, issuing 400,000 shares to the property owners and carrying the holding costs of the claims.
Olympic will retain a variable net smelter return royalty.
Mineral showings on the island occur within a 600 kilometer long belt of Late Triassic volcanic and sedimentary rocks which host world-class massive sulfide deposits at Greens Creek, Alaska and Windy Craggy, British Columbia. More than 10 different syngenetic volcanogenic massive sulfide and gold quartz vein targets have been identified on Woewodski Island.
Significant mineralization has been identified at the Lost Lake prospect where previous drilling identified a geological resource of more than 500,000 tons of 8.1 percent zinc, 0.6 percent lead and 2.26 ounces of silver per ton, East Lake prospect where past drilling has intercepted values up to 4.2 grams of gold per tonne and 4.7 percent zinc over 3 meters, the Mad Dog prospect (aptly named after a well-known Alaska geologist) where surface samples returned values up to 8.1 ounces of silver per ton, 8.9 percent zinc and 2.2 percent lead over 8 meters, the Brushy Creek prospect where recent drilling returned values up to 1.4 ounces of silver per ton, 3.25 percent zinc and 0.41 grams of gold per tonne over 7.3 meters and the Mad Dog II prospect where past drilling intercepted up to 3.86 grams of gold per tonne, 0.43 percent copper and 2.9 percent zinc over short intervals.
In addition, several significant gold prospects are known to exist on the island including the Helen S., Maid of Mexico and Maid of Texas where limited past production occurred and the J36 and Harvey's Creek prospects. Individual quartz veins up to 2 meters wide are hosted in argillite, basaltic volcanics and altered granodiorite. Sampling of these occurrences by Olympic Resources returned significant gold values including 31.5 grams of gold per ton, 21.9 grams of gold per ton, 10.15 grams of gold per ton and 6.3 grams of gold per ton.
Regional airborne geophysical surveys sponsored by the U.S. Bureau of Land Management and the City of Wrangell have identified a number of high priority conductivity and magnetic anomalies for future follow-up.
Welcome to Alaska Bravo Venture Group! Northern Alaska Silverado Gold Mines Ltd. reported that underground mining on its Nolan Deep Channel deposit ceased in early April leaving 40,000 cubic yards of gravel at surface for processing during the summer. Underground operation in the frozen gravels at this deposit is scheduled to begin again in September.
The company is upgrading current wash plant facilities to allow production rates of 75 cubic yards per hour.
Silverado also plans to begin open cut production from its Wool Bench deposit located near its current operations and will conduct surface drilling programs to define potential resources at Mary’s Bench, Workman Bench and Lower Nolan Bench.
Delineation drilling is also planned for the Nolan Creek Deep channel and Slisco Bench with the goal of moving these prospects to the pre-production stage by the end of the summer season. Other National Mining Association President Jack Gerard recently outlined a series of disturbing trends in the nation’s minerals industry.
These include a 43 percent decrease in minerals investment between 1997 and 2001, a reduction in U.S. exploration spending to only 7.9 percent of worldwide totals, a decline of 79 percent in the number of active mining claims since 1992, a decline of 73 percent in new mining claims filed since 1996, a decline of 66 percent in the number of mining operations, and a decrease in mining-related jobs of 35 percent since 1991.
U.S. dependency on mineral imports has increased nearly 700 percent since 1993.
You draw your own conclusions.
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