MINING NEWS: No winter hiatus: 2005 Alaska plans advanced, some already in full swing

This year’s projects include: continuing work at Pogo, start of construction at Rock Creek and Kensington mines, advanced development at Nixon Fork, Donlin Creek and Pebble, and resource drilling at Ambler; metals prices remain strong

Curt Freeman

Mining News Columnist

The author Curt Freeman, CPG #6901, is a well-known geologist who lives in Fairbanks. He prepared this column Feb. 20. Freeman can be reached by mail at P.O. Box 80268, Fairbanks, AK 99708. His work phone number at Avalon Development is (907) 457-5159 and his fax is (907) 455-8069. His email is [email protected] and his web site is www.avalonalaska.com.

December, January and February are normally a time when the mining industry can stop and catch its collective breath, look into its often cloudy but well-used crystal ball and prepare for the coming year. Not so the last December, January and February!

While 2004 results continued to pour in from projects large and small, plans for 2005 are well advanced and in some cases, already in full swing. Metals prices remained strong and even the most pessimistic prognosticators believe 2005 is shaping up to be a banner year for the mining industry. In most years, there are usually no more than a half dozen hot prospects that take the lion’s share of the coming year’s exploration or development capital.

The crystal ball for 2005 is so crowded with folks that I can’t see the forest for the trees. Within a year we should see the first gold pour at the Pogo mine, start of construction at the Rock Creek and Kensington mines and advanced development at the Nixon Fork, Donlin Creek and Pebble projects and resource drilling at Ambler.

Exploration activities will be populated with a large stable of gold, base metals, nickel, platinum group metals and diamond properties but will be dominated by no single commodity or geographic region. I also suspect that some metals long since written off the active list in Alaska will come back to life, most notably, molybdenum and silver.

Western Alaska

In the fourth quarter the mine produced 132,200 tonnes of zinc in concentrate and for the year the mine produced 554,200 tonnes of zinc in concentrate. Zinc ore grade and mill recoveries decreased to 21.3 percent and 84.8 percent respectively from 22.2 percent and 85.59 percent from the fourth quarter 2003.

The mine also produced 32,100 tonnes of lead in concentrate during the fourth quarter and 117,000 tonnes of lead in concentrate for the year. Lead ore grade decreased to 6.1 percent while mill recoveries increased to 66.6 percent from 6.4 percent and 65 percent, respectively, from the fourth quarter 2003.

As a result primarily of higher zinc and lead prices (average 51 cents and 43 cents per pound respectively for the quarter), the mine posted a $100 million operating profit for the quarter and a $207 million operating profit for the year.

St. Andrew Goldfields announced results from its continuing exploration and development program at the Nixon Fork mine near McGrath. Work completed included an airborne magnetic and time domain electromagnetic survey, and drilling at its J5A embayment and 2201 and 2204 zones.

Drill results include hole DH126 which returned 0.9 meters grading 13.9 grams of gold per tonne and an additional 1.5 meters grading 31.4 grams of gold per tonne, hole DH135 which returned 0.8 meters grading 38.66 grams of gold per tonne, hole DH5-04 which returned 1.3 meters grading 88.0 grams of gold per tonne and an additional 2.1 meters grading 27.4 grams of gold per tonne.

Underground drilling efforts now total 5,540 meters which included extending mineralization an additional 180 meters below the J5A zone and extending mineralization an additional 150 meters below the 2204 zone. Airborne geophysics was curtailed in the late fall due to weather conditions but data available are being used to target 2005 surface exploration efforts.

Surface trenching in 2004 also produced promising results from the Whalen zone where results included 1 meter at 19.65 grams of gold per tonne and 2.6 percent copper and 0.4 meters grading 44.8 grams of gold per tonne and plus-100 grams of silver per tonne.

In other news revised reserve and resource estimates are expected to be release for the project before the end of February.

Pending receipt of all permits, the company also is anticipating commencement of a tailings retreatment operation in mid-2005.

Northern Dynasty Minerals reported discovery of deep but higher grade copper-gold mineralization at its Pebble prospect near Iliamna. The new discovery, dubbed the East zone, has been outlined over a 2,000 foot by 2,000 foot area which remains open in all directions except the west.

While similar in mineralization and alteration style to the adjacent Pebble deposit, mineralized intervals at the East zone occur beneath post-mineral Tertiary volcanics at depths exceeding 2,300 feet below surface. Highlights of the 2004 East zone drilling include hole 4188 which returned 152.4 meters grading 0.65 grams of gold per tonne, 0.57 percent copper and 0.032 percent molybdenum, hole 4284 which returned 114.5 meters grading 0.65 grams of gold per tonne, 0.62 percent copper and 0.022 percent molybdenum, hole 4292 which returned 163.7 meters grading 0.86 grams of gold per tonne, 0.61 percent copper and 0.020 percent molybdenum, hole 4300 which returned 132.1 meters grading 0.98 grams of gold per tonne, 0.66 percent copper and 0.017 percent molybdenum, hole 4301 which returned 65.5 meters grading 1.00 grams of gold per tonne, 0.73 percent copper and 0.016 percent molybdenum and hole 4303 which returned 85.8 meters grading 0.87 grams of gold per tonne, 0.75 percent copper and 0.018 percent molybdenum.

The company also announced discovery of another copper-gold system 15 kilometers southwest of the Pebble deposit. A single core hole targeting a 3.5 kilometer by 1.0 kilometer induced polarization geophysical anomaly returned 51.8 meters grading 0.22 grams of gold per tonne, 0.22 percent copper and 0.018 percent molybdenum. Additional drilling is planned in this area in 2005.

Northern Dynasty expects to have a revised resource estimate completed in the first quarter of 2005 that will include all of the 2004 drilling completed in the Pebble and East areas. The company also released a wad of new drill hole data from 2004 but I’ll spare you the details and just quote the best hole (4189) which returned 64.3 meters grading 0.73 grams of gold per tonne, 0.81 percent copper and 0.081 percent molybdenum.

Northern Dynasty also announced plans to evaluate a phased electrical power transmission development plan with Homer-based Homer Electric Association for the planned Pebble copper-gold-molybdenum deposit north of Iliamna. The plan calls for a phased delivery schedule that would allow smaller initial electrical supply that would then be upgraded to provide power at a level capable of sustaining a 200,000 ton per day milling operation.

The power evaluation program is a phase one plan that would involve either a 210 mile overland power transmission line or a 45 mile submarine power cable with an additional 70 mile overland line. This line would carry approximately 100 megawatts of capacity.

Stage two would provide additional power using a then-best available technology plan. Electrification of villages along the power line route would also be evaluated as part of the development plan. The companies plan to include the findings of this study in the Pebble feasibility study planned for completion in late 2005.

Liberty Star Gold announced plans to conduct additional exploration at its Big Chunk copper-gold-molybdenum deposit north of Iliamna. The phased exploration program will involve four months of ground induced polarization geophysical surveys, drilling of 70 to 100 holes and collection of an additional 3,000 geochemical samples. Drilling efforts will be directed at the White Sox prospect, discovered by the company in 2004 and at other high priority geochemical and geophysical targets. Plans call for a start-up as soon as the seasonal thaw is completed.

Full Metal Minerals announced that it had signed an agreement with Bristol Bay Native Corp. to explore 565,000 acres of fee simple lands on the Alaska Peninsula. The agreement covers a portion of Alaska that is highly prospective for high and low sulfidation state gold and copper-gold mineralization. The last significant exploration conducted on these lands was in the 1980s.

The agreement calls for a one year selection period during which Full Metal must evaluate the land package and spend a minimum of $150,000 on the ground. The company then has the right to nominate selected portions of the package for upgrade to an exploration lease which will include minimum exploration expenditures of $4.4 million over seven years and cash payments totaling $175,000 over the same period.

Upon completion of a positive feasibility study the company will pay a 2.5 percent net smelter return production royalty for all non-precious metals produced and for precious metals, a sliding scale production royalty pegged to the gold spot price that varies from 2 percent for gold prices less than $300 per ounce to 5 percent at prices in excess of $500 per ounce. The company plans to conduct exploration on this newly acquire block of lands in conjunction with adjacent lands recently acquired from Aleut Native Corp.

Geocom Resources announced that it had completed 1,006.8 meters of drilling on its Iliamna copper project near Lake Iliamna. The four hole program was designed to expand on the mineralization discovered during the 2003 drill program and test geophysical anomalies delineated by a three-dimensional induced polarization geophysical survey carried out earlier in 2004.

Assays are pending however pyrite-chalcopyrite-pyrrhotite-molybdenum mineralization was intersected in all four holes. In conjunction with the two holes drilled in 2003, the mineralized area now covers a minimum of 700 meters by 1,500 meters.

Disseminated porphyry-style and fracture-controlled copper-gold mineralization were intersected in both a granodiorite and the enclosing metamorphic country rocks. Fracture-controlled mineralization appears to post-date disseminated copper-gold mineralization and is controlled by flat-lying fractures containing narrow quartz veins. These flat fractures and veins also appear to be a principal control on the distribution and intensity of the alteration zones.

Eastern Interior

Significant trenching results included trench GET00-30650 which returned 30 feet grading 0.245 ounces of gold per ton, trench GVT04-01 which returned 15 feet grading 0.255 ounces of gold per ton and 30 feet grading 0.055 ounces of gold per ton. Plans for 2005 have not yet been released.

Freegold Ventures reported the results from the exploration drilling on the Tolovana prospect at the Golden Summit project in the Fairbanks District. The program consisted of 3,584 feet of diamond core drilling in seven holes. Significant results included five feet grading 0.559 ounces of gold per ton in hole TLD0401, 10.5 feet grading 0.079 ounces of gold per ton in hole TLD0401, 1 foot grading 0.521 ounces of gold per ton in hole TLD0401, 13.5 feet grading 0.052 ounces of gold per ton in hole TLD0402, 4.5 feet grading 0.310 ounces of gold per ton in hole TLD0402, 1 foot grading 1.263 ounces of gold per ton in hole TLD0402, 17 feet grading 2.93 grams of gold per ton in hole TLD0403, 40 feet grading 3.03 grams of gold per ton in hole TLD0404, an additional 59.5 feet grading 1.66 grams of gold per ton in hole TLD0404, and 5 feet grading 2.51 grams of gold per ton in hole TLD0406.

The drill program covered targets along a 550-meter strike length of the Tolovana prospect.

Gold mineralization occurred in sericitically altered metasediments of the Fairbanks Schist and within quartz stockwork veins in garnet and biotite-rich schists tentatively correlative with upper plate rocks of the Chatanika Terrane. Gold was associated with south-dipping quartz-veins, poly-phase stockworks and vein breccias containing elevated arsenic and sporadic anomalous lead, antimony and tungsten. The high grade mineralization intercepted in hole TLD0401 (5 feet grading 19.15 grams per tonne) is hosted in Chatanika Terrane rocks that are correlative with similar rocks mapped in trenches.

Drill hole and trench data suggest the Chatanika Terrane on the Tolovana prospect is structurally bounded and dips 25-35 degrees to the south. Prior to the 2004 work at Tolovana, the Chatanika Terrane was not known to exist in this part of the Fairbanks District.

Despite these results, Freegold Ventures said Meridian Gold has terminated its joint venture option on the project.

Freegold indicated it intended to continue its efforts to explore the deep potential of high-grade prospects on the property, including the Cleary Hill, Tolovana, Dolphin and Newsboy prospects. Large diameter core drilling and ground electromagnetic and gravity surveys have been recommended.

Golden Spirit Minerals announced plans to conduct additional work on its Ester Creek project in the Fairbanks District.

Efforts will focus on soil and stream sediment sampling and prospecting to help define a second phase drilling program. Efforts in 2004 identified a 2 mile by 0.6 mile area in which at least one gold-bearing vein was traced for 800 feet along strike and in which alteration suggests good potential for other mineralized veins.

Select Resources announced acquisition of the Shorty Creek gold-silver-copper project in the Livengood District from Fairbanks-based Gold Range Ltd.

The road-accessible 34 square-mile property was discovered and drilled for copper and molybdenum in the early 1970s and was briefly active in the late 1980s as a copper-gold prospect. Terms of the acquisition were not announced.

Select’s president and chief operating officer is long-time Alaskan Harry Noyes. Welcome back to Alaska Harry!

Teck-Pogo announced plans to form its previously announced Mine Stakeholder Group that is designed to oversee the mine’s compliance with environmental regulations at the currently being constructed Pogo mine near Delta Junction.

The seven person group will be chosen by Alaska Department of Natural Resources Commissioner Tom Irwin and will meet twice yearly to review and comment on environmental compliance at the $250 million gold mine operation. Interested parties should submit a resume to Ed Fogels, Department of Natural Resources, Suite 900D, 550 West 7th Ave., Anchorage, AK 99501.

Rimfire Minerals reported preliminary results from work conducted by joint venture partner AngloGold USA Exploration on the ER, Eagle and Beverly prospects in the Goodpaster District.

Work at ER included 12.6 line kilometers of natural source audio magneto-telluric ground geophysics, 234 soil samples and three diamond drill holes totaling 997 meters.

Two holes tested the continuity of gold-bearing quartz veins over a 350 meter strike while the third hole was located 1.3 kilometers to the south and targeted a newly defined 1.0 by 0.5 kilometer soil geochemical anomaly. Hole ER04-7 intersected a previously tested vein 25 meters down dip and 40 meters on strike to the southeast, yielding 1.2 meters of 4.12 grams of gold per tonne.

The current understanding of vein geometries indicates further potential exists down dip and to the northwest. At the Eagle prospect AngloGold completed soil geochemical surveys (485 samples), electromagnetic and radiometric geophysical surveys and nine diamond drill holes totaling 2,778 meters.

Drilling has now tested 3.3 kilometers of a 6 kilometer long gold and pathfinder element soil anomaly. The 2004 program yielded a total of 26 intersections from 0.2 to 1.5 meters in width assaying from 1.0 grams to 14.05 grams of gold per tonne.

These results suggest the presence of widespread intrusion hosted stockwork mineralization. Future exploration will target structural zones with potential for higher vein densities and accompanying gold grades. At the Beverly prospect, work targeted two gold and pathfinder element soil geochemical anomalies (1.0 kilometer by 1.0 kilometer and 0.6 kilometer by 0.4 kilometer in size), strongly anomalous silt samples and float boulder samples assaying up to 2.4 grams of gold per tonne.

Silt sampling identified two new anomalous drainages in the northwest corner of the property and soil geochemical surveys over previously defined anomalies confirmed the earlier results. AngloGold has terminated its option at Beverly and Rimfire retains a 100 percent interest in the property.

Ventures Resource Corp. has terminated its agreement with Doyon Ltd. on a large land holding extending from the Canadian border to southwestern Alaska. Doyon representatives indicated their desire to continue exploration and development of significant mineral lands via joint ventures.

Alaska Range

Piper Capital Inc. has announced that it has agreed to sell 22.1 percent of its outstanding shares to London-based Hidefield Gold PLC and an additional 22.1 percent of its outstanding shares to London-based Anglo Pacific Group PLC.

Proceeds from these transactions will allow the company to fund exploration of its Golden Zone gold-copper prospect in the Chulitna District.

In addition to participating in Piper’s private placement, Piper has agreed to grant Hidefield the right to acquire 50 percent of Piper’s interest in Golden Zone by providing $.15 million for exploration on the property by 2007.

Piper and Hidefield retain a right to earn 100 percent interest in Golden Zone for cash and stock payments, subject to a 2.5 percent net smelter return royalty retained by the property owner, Anchorage-based Mines Trust Co.

Golconda Resources Ltd. and joint venture partner Shear Minerals announced that a re-evaluation of the airborne magnetic survey flown over their Shulin Lake diamond property revealed several intrusive-style magnetic anomalies which are thought to be small stocks or pipes and dikes.

Drill hole 22, drilled in March 2004, was situated at the rim of one of these pipe-like features and material from this hole contained three micro diamonds in an 8 kilogram sample. Further samples from this hole and the two nearest holes (17 and 20) have been sent for caustic dissolution and diamond testing.

Purple and orange garnets were observed while inspecting the fusion residues from the samples submitted for micro diamond testing. Five purple garnets submitted were G-9 garnets and 12 of the orange garnets were high magnesium pyrope garnets (19-20 percent MgO) with high titanium content indicating a strong eclogitic component. Of particular importance is that a low manganese content shows that these garnets fall into the field of diamond-associated garnets.

Also, the calcium/chrome ratio is that of garnets associated with diamonds and not with graphite. Although diamond inclusion chromites and other indicator minerals had been detected before, this is the first time that pyrope garnets have been found on the Shulin Lake property.

The company followed announcement of these results with announcement of a planned $1 million exploration program for 2005 and commencement of drilling.

Northern Alaska

The second trench exposed two altered zones, 70 feet to 100 feet wide separated by 30 feet of unmineralized rock.

Gold values ranged from 0.1 gram to 1 gram gold per tonne with anomalous arsenic and antimony values. Additional geophysical anomalies remain to be tested.

Southeast Alaska

Significant permits that remain outstanding include Corps of Engineers wetlands permits, EPA discharge permits and permits from the National Marine Fisheries Service. Not surprisingly, a coalition of environmental groups has challenged the adequacy of the FEIS and has appealed to the Forest Service to reverse the decision.

Bravo Venture Group Inc. announced results from Phase II drilling at its Woewodski Island project in southeast Alaska. Five drill holes (550 meters) were completed at two of the 13 volcanogenic massive sulfide and gold prospects on the island.

Three drill holes (349 meters) targeted interlayered sulfides in argillite and andesitic tuffs at the Mad Dog prospect. These holes returned values of up to 2.83 meters of 2.2 grams of gold per tonne, 112 grams of silver per tonne, 0.50 percent lead and 10.6 percent zinc in hole MD04-07. The other two drill holes tested induced polarization, gravity and ground magnetic geophysical anomalies on the Brushy Creek prospect.

The most significant interval from this prospect was 1.82 meters of 20.5 grams of silver per tonne, 0.16 percent lead and 0.73 percent zinc in hole BR04-01.

The company also announced discovery of high-grade gold values from distinctive bluish colored quartz veins on the southwestern end of the island. Of 69 outcrop and float samples collected, 12 samples returned more than 1 gram of gold per tonne and six samples more than 10 grams of gold per tonne, including three samples with 69.5 grams, 60.9 grams and 20.6 grams of gold per tonne.

The quartz veins are hosted in multiple widely spaced, east-northeast trending sub-parallel structures up to 10 meters wide which can be traced in outcrop, float and soil anomalies over a four square kilometer area. Within the structural zones, individual veins occur as 0.3 meter to 0.5 meter thick bodies up to several meters in length. Sampling in the area of the main Blue Quartz showing has traced high-grade quartz veins, some containing visible gold, for up to 500 meters along a north-northeast trend. Compilation and evaluation of this season’s work is in progress in preparation for outlining future work on the island.

Quaterra Resources said that as soon as weather permits ground electromagnetic and gravity geophysical surveys will be completed on its Duke Island copper-nickel-platinum group element project south of Ketchikan. Follow-up drilling of the best geophysical targets will follow.

Previous airborne magnetic and electromagnetic surveys have already confirmed a number of high priority targets. The 16-square kilometer area around the Marquis (discovery) zone identified nine discrete multi-anomaly zones with strike lengths ranging from 400 meters to 1,500 meters.

Responses within these zones are consistent with those produced by massive sulfide mineralization.

Abacus Mining and Exploration has announced that it intends to form a public company under the name Niblack Mining Corp. around its 100 percent owned Niblack massive sulfide property on Prince of Wales Island.

The Niblack property is a copper-gold-zinc-silver rich volcanogenic massive sulfide prospect with a preliminary mineralized resource of 2.78 million tons grading 0.09 ounces of gold per ton, 1.17 ounces of silver per ton, 1.71 percent copper and 3.22 percent zinc. The resource is open along strike and at depth.

Initial plans for 2005 include a first phase $500,000 drill program.

Other news

Results include hole GC232 which returned 10 meters grading 2.15 grams of gold per tonne and 5.1 grams of silver per tonne, hole GC233 which returned 16.5 meters grading 3.33 grams of gold per tonne and 3.4 grams of silver per tonne, hole GC234 which returned 28 meters grading 1.15 grams of gold per tonne and 1.6 grams of silver per tonne and hole GC236 which returned 12.8 meters grading 1.87 grams of gold per tonne and 1.8 grams of silver per tonne.

The company indicated that it planned to commence a phase two, $500,000 drilling program in February on other potentially mineralized zones in the project area.

In the category “we are good, they are better” comes this story: while I was recently traveling between mining projects in eastern Nevada, I was confronted on a lonely stretch of highway by a Nevada State trooper with lights flashing. I thought he had caught me speeding (as I surely was) but no, he zoomed by me in the opposite direction while waving me to the side of the road.

A few seconds later a second trooper whizzed by, same story. Finally, a third trooper came into sight and behind him was a very wide load tractor trailer carrying the dump bed of a 220 ton mine truck.

I headed for the sage brush on the road side and after they lumbered by, a fourth trooper followed the tractor trailer rig, also with lights flashing.

It struck me then: as good as Alaska’s mining climate is, Nevada’s commands not one, two or even three troopers but four troopers in full fig to make sure a mine vehicle gets where it needs to go, on time! Now that is the definition of “Mining Friendly”!

In what looks to be the first step of a long awaited and much needed balancing of the United States legal system, the U.S. Congress recently passed a bill that limits class action suits that are decided by state courts to suits involving less than $5 million in damages and where the defendant and more than one-third of the plaintiffs are from the same state.

Federal courts would hear class action suits above $5 million where the defendant-plaintiff rule is not satisfied. While the step is welcome, it hardly addresses the abuse of the class-action suit that plagues the U.S. legal system.

Perhaps we should send them a page from Alaska’s recently enacted laws pertaining to challenges to state-issued permits?