Xstrata, Barrick table new Kabanga resource (February 15, 2007)

Its a deposit thats been kicking around for decades, but seems to be getting more respect of late.

Partners Xstrata (XTA-L) and Barrick Gold (ABX-T, ABX-N) have substantially expanded the resource of the Kabanga sulphide nickel deposit in northwestern Tanzanias Kagera belt, and the results are good enough that operator Xstrata will spend another US$95 million to complete a prefeasibility study.

Kabanga is about 40 km south of Ngara, near the border with Burundi, and about 240 km west of the main regional centre of Mwanza.

Kabanga now has an indicated resource of 9.7 million tonnes grading 2.37% nickel, 0.32% copper, 0.19% cobalt, 0.04 gram gold per tonne, 0.07 gram platinum per tonne, 0.09 gram palladium per tonne and 1.04 grams silver per tonne.

An additional 36.3 million tonnes grading 2.8% nickel plus similar by-product grades lie in the inferred category.

The resource is divided between four zones: Main (subject to 18,500 metres of drilling); North (114,900 metres); Tembo (19,600 metres); and MNB (4,300 metres).

This compares with the previous, global resource estimate of 26.4 million tonnes of inferred material grading 2.6% nickel.

(For comparison, prior to mining, the reserves of the Voiseys Bay Ovoid deposit in Labrador totalled 32 million tonnes of 2.82% nickel, 1.54% copper, and 0.14% cobalt.)

Barrick acquired Kabanga in 1999 as part of its takeover of Sutton Resources and its prized Bulyanhulu gold deposit in Tanzanias Lake Victoria Goldfields district. Kabanga is 385 km west of Bulyanhulu and 100 km northwest of Barricks 70%-owned Tulawaka gold mine.

While Bulyanhulu had been its primary focus, Sutton had been carrying out work at Kabanga in a joint venture with Anglo American, building on such work as the United Nations efforts at Kabanga in the early 1980s.

After its Sutton acquisition closed, Barrick kept its work at Kabanga pretty low key for several years as it concentrated on building its Bulyanhulu gold mine, the first-ever large underground mine built in Tanzania.

While high-grade, Kabanga had some significant drawbacks at that time: nickel prices had fallen through the floor; the infrastructure in northwestern Tanzania was minimal; and it was very close to the Democratic Republic of the Congo, which was in the mired in a vicious civil war that often spilled across its borders.

Former Sutton Chairman James Sinclair even offered to buy Kabanga from Barrick, but was turned down.

What a difference a few years make: today, nickel has more than quintupled in price, there is basic infrastructure in western Tanzania thanks to all the new gold mines, and the DRCs civil war has ended.

Falconbridge entered the picture in early 2004 with an agreement to jointly explore Kabanga with Barrick. It was a perfect partnership: Barrick contributing the deposit and its extensive mining experience in Tanzania and Falco, its multifaceted nickel expertise.

Just over a year later, Barrick and Falco struck a deal giving the latter a half interest in Kabanga by paying US$15 million in cash upfront and committing to undertaking US$50-million worth of work (which has now been completed).

Under the 2005 agreement, if Falco ever wanted to bring the project to production, it would have to fund the first US$95 million of development, which it has now pledged to do.

We are very pleased with the progress occurring at Kabanga, which is among the world’s most attractive nickel projects,” said Ian Pearce, CEO of Xstrata subsidiary Xstrata Nickel, in a statement.

Xstrata notes that diamond drilling is ongoing with ten drills on-site, with several objectives: to upgrade resources to measured and indicated categories in the North zone so theres enough data to support a feasibility study; to expand and upgrade the inferred resources at the newly discovered Tembo zone, 2 km north along strike of North; to evaluate regional targets; and to undertake geotechnical work.

The partners have envisioned an underground mine that would annually handle 2 million tonnes of ore and produce up to 35,000 tonnes nickel-in-concentrate.

In preliminary studies carried out in the 1990s, the Kabanga sulphides were said to exhibit good metallurgical response and good metal recoveries to concentrates.