North Am. Palladium inks Lynn option

North American Palladium (NAP-T) and Rare Earth Metals (REM-V) have signed a definitive agreement to explore for nickel-copper deposits in the Lynn Lake area of Manitoba.

Through the agreement with Rare Earth, Lac des les Mines, a subsidiary of North American, gets an option to earn 65% of Rare Earth’s interest in a 28-sq.-km land package covering five gabbroic intrusions in the Lynn Lake area. Rare Earth, in turn, has an agreement with privately owned Strider Resources to earn 100% of the property by spending $750,000 by May 2009. Strider retains a 3% net smelter return.

North American is funding an airborne magnetic and electromagnetic survey over the property to identify structural and intrusive features that might be prospective for nickel and copper mineralization. Nickel-copper deposits in the Lynn Lake area were mainly pipe-like bodies in gabbro plugs.

The Lynn Lake work is one of several exploration and development projects North American Palladium has become involved in. In May, North American and Ursa Major Minerals (UMJ-T) struck a deal under which North American can earn a 45% interest in the Shakespeare nickel-copper-platinum deposit by putting $1.5 million into a feasibility study and by securing financing to develop the project.

Shakespeare, 70 km west of Sudbury, has an indicated resource of 12 million tonnes at average grades of 0.35% nickel, 0.36% copper, 0.02% cobalt, 0.34 gram platinum, 0.38 gram palladium, and 0.19 gram gold per tonne. A pre-feasibility study by Micon International put the minable reserve at 7.3 million tonnes with 0.37% nickel, 0.39% copper, 0.02% cobalt, 0.37 gram platinum, 0.4 gram palladium and 0.2 gram gold per tonne.

Falconbridge (FAL-T) retains a 25% interest in Shakespeare and a back-in right for a total of 50%. Dilution clauses in the option agreement would bring that figure down to 14% if the expected feasibility program is done, which would bring North American’s interest to 51.6% and Ursa’s interest to 34.4%.

Recent drilling at Shakespeare revealed previously unknown mineralization on the western extension of the deposit, where a vertical hole intersected 68.4 metres at average grades of 0.42% nickel, 0.49% copper, 0.03% cobalt, 0.43 gram platinum, 0.45 gram palladium, and 0.23 gram gold per tonne. Further west, another hole cut 10.3 metres grading 0.3% nickel, 0.27% copper, 0.03% cobalt, 0.29 gram platinum, 0.28 gram palladium, and 0.15 gram gold per tonne.

Infill drilling in the same program largely confirmed previous estimates of grade and width in the known resource.

North American also has an option to earn a half interest in Ursa’s Agnew Lake property, which adjoins Shakespeare, by spending $1 million on exploration over three years, starting with a $300,000 program in 2005-2006. The 76-sq.-km property includes the former Agnew Lake uranium mine, but that is excluded from the agreement.

Another of North American’s other exploration interests is the Bird River property in eastern Manitoba, about 40 km east of Lac du Bonnet. There, it has started a 1,200-metre drill program to test nickel-copper targets on the Bird River gabbro sill.

Its deal with Gossan, through subsidiary Lac des les Mines, lets it earn a 50% interest in the project from the Winnipeg-based junior by spending $2.5 million on exploration by the end of August, 2008. Gossan gets $400,000 cash. North American earns a further 15% for funding a final feasibility study and a further 10% by arranging project financing.

On the operating side, North American’s Lac des les palladium-platinum mine northeast of Thunder Bay will fall short of forecast production by about 15% this year, the result of continued trouble with the mill. Mill availability hovered around 87% in the first half of the year, and average daily throughput was around 13,000 tonnes in a mill with nameplate capacity of 15,000 tonnes per day.

Maintenance and repairs to the ball mill have allowed the operation to run about 15,500 to 16,000 tonnes daily in July.