Duluth Complex projects move forward

SITE VISIT

Ely, Minn. — Things are supposed to be big in Texas. But don’t discount how big things are at the opposite end of the Mississippi.

Minnesota’s Duluth Complex, a multi-phase complex of mafic to felsic intrusive rocks that dominates the western end of Lake Superior, is big indeed: about 5,000 sq. km in area. And it has been known for many years to host some very large, if low-grade, copper and nickel deposits.

Reports of copper mineralization in the Complex go back to 1889, but serious exploration dates from the 1940s and continued into the 1970s. Inco, now part ofVale(RIO-N), was a major explorer in the area then, as were Anaconda Copper, U.S. Steel, Amax, and Cominco, now part ofTeck Cominco(TCK.B-T, TCK-N). The explorers of that time drilled off a series of deposits along the footwall of the Complex, where it abuts older Proterozoic rocks of the Southern Province of the Canadian Shield and Archean rocks of the Superior Province. All were big; all were low-grade; and none went into production.

One difficulty was their metallurgy. The minerals were finegrained copper and nickel sulphides, plus pyrrhotite, and while it was possible to float a bulk copper-nickel concentrate that nobody wanted, it was difficult and prohibitively expensive to separate copper and nickel into two concentrates that smelters did want. And platinum group elements were not in the early explorers’ sights, though the rocks of the Complex do have them.

Inco’s Spruce Road deposit came close to production, in 1967, as did Amax’s Babbitt deposit in the late 1970s, but both went nowhere. Iron ore miner Erie Mining stockpiled some copper-nickel mineralization from a taconite pit, but it was never processed. A 1979 moratorium on mining approvals in Minnesota administered a coup de grce to the projects.

But as markets, thinking, regulation, and technical progress have played out, the idea of the Complex as little more than a really big geochemical anomaly with good fishing has been supplanted by a real likelihood that the deposits can be exploited. The NorthMet project ofPolymet Mining(POM-T, PLM-X) is moving on a schedule that would see production in early 2009. And three other operators —Franconia Minerals(FRA-T, FRALF-O),Duluth Metals(DM-T, DULMF-O) and Teck Cominco — all have well-advanced projects at the exploration or feasibility stage.

Franconia

Franconia is largely the creation of Minnesota exploration stalwart Ernest Lehmann, who stuck out the long wait the Duluth Complex endured in years of low commodity prices or difficult metallurgy. Its property base is around Babbitt, and includes the Maturi and Spruce Road properties, both Inco discoveries from the 1950s, and the Birch Lake property, which hosts a Duval Corp. discovery from 1970. On Franconia’s watch, Birch and Maturi have been brought close to the feasibility study stage.

Under Franconia’s agreements with the Beaver Bay Joint Venture — a private syndicate headed by Lehmann — the company can earn 60% by spending US$10 million on exploration on the old Inco and Duval ground, can increase that interest another 10% for US$500,000 cash, and can bring its interest to 82% by taking the deposit to production. Beaver Bay’s interest is carried to production, and its share of funding is paid back to Franconia out of cash flow once the deposit is being mined.

Estimates in 2006 put the Birch Lake inferred resource at 100 million tonnes with grades of 0.59% copper, 0.19% nickel, 0.01% cobalt, 0.65 gram palladium, 0.32 gram platinum and 0.14 gram gold per tonne. On Maturi, an inferred resource totals 83 million tonnes averaging 0.7% copper, 0.26% nickel, 0.02% cobalt, 0.26 gram palladium, 0.05 gram platinum and 0.1 gram gold per tonne.

Birch Lake has seen most of an infill drilling campaign, slated to finish during the winter, and the Forest Service has approved a drilling program on Maturi that will keep the drills occupied into the summer. After that, Franconia expects to have enough data for indicated resources on both deposits.

Through 2008, Franconia plans to collect a 45-tonne sample for pilot-scale metallurgical testing. Bench-scale metallurgical work will seek to optimize flotation techniques for the Birch Lake material and get an initial handle on the flotation behaviour of material from Maturi, as well as test the Platsol process Polymet is using at North-Met. Baseline environmental studies and general permitting work, as well as a mine design, are also on the drawing board.

The general outline of a feasibility study on Birch and Maturi — which should start before the end of 2008 — is already mapped out, and will work around a 10,000-tonne-per-day pit at Birch Lake and an 8,000-tonne pit at Maturi, the latter coming in around the third year of production. The two pits would feed a mill producing about 1,000 tonnes of concentrate daily, which would go to a hydrometallurgical plant, probably using Platsol technology to produce cathode copper, a nickel-cobalt precipitate, and a precious metal precipitate.

As a mining method, Franconia had originally planned room-andpillar stoping, but Lehmann told The Northern Miner that an open-stoping method, like long-hole or vertical retreat, could work if the mineralized zone is thick enough. The zones dip very gently, around 10. A decision on that will await the final feasibility study. Whatever method is used, there is “very little development (needed) outside the orebody,” says Brian Gavin, Franconia’s president.

Franconia now has a fully compliant resource estimate on its Spruce Road deposit, to go with estimates already in hand for Birch Lake and Maturi. Spruce Road, one of the earliest of the discoveries in the district, has been known since 1948 and was a main focus of American Copper and Nickel Co., Inco’s U.S. subsidiary, in its efforts through the 1950s and 1960s.

The estimate on Spruce Road is actually two overlapping calculations, one for an open-pit resource down to 450 metres depth and the other for an underground resource between 50 and 513 metres depth. Both were calculated from 220 historical surface drill holes.

The surface resource is an indicated 377 million tonnes at grades of 0.39% copper and 0.14% nickel, based on a cutoff grade of 0.26% copper equivalent (which consulting firm Scott Wilson Roscoe Postle defined as the copper grade plus 2.59 times the nickel grade). At the same cutoff grade, there is an additional inferred resource of 28 million tonnes grading 0.23% copper and 0.09% nickel.

A conceptual open pit around the resource showed a stripping ratio of 0.88.

Assuming underground mining instead, the consultants calculated an all-inferred resource of 124 million tonnes grading 0.59% copper and 0.21% nickel, based on a cutoff grade of 0.5% copper.

Spruce Road is covered by Franconia’s agreement with Beaver Bay, but underlying that is a deal with Vale Inco that gives the big nickel producer a 7.5% interest in net distributable earnings. Franconia is also paying Vale Inco’s landholding costs while it earns in.Meanwhile, Franconia’s infill drill program on Birch Lake is over 80% complete, with results confirming or exceeding resource grades. Using a barge towed into place on Birch Lake, Franconia drilled multiple wedged holes from seven locations on the water this year, providing infill coverage in the northern part of the resource. It also drilled a number of holes on land. The mineralization is deep, most recent intersections being 500 to 700 metres below surface.

The mineralized intersections in recent drilling have proved to be mostly 20 to 40 metres thick, which probably represents around 90% of true thickness. Some, though, have been much wider, including three holes (BL07-11 and two wedge holes from it) collared on a peninsula on the south shore of the lake. There, a 76.6-metre intersection graded 0.67% copper, 0.19% nickel, 0.58 gram palladium, 0.24 gram platinum and 0.13 gram gold per tonne, and a 70.7-metre intersection ran 0.73%
copper, 0.21% nickel, 0.6 gram palladium, 0.29 gram platinum and 0.15 gram gold per tonne. The third intersection, 71.3 metres long, graded nearly as high as the other two.

In general, the recent holes drilled from the water or near the shoreline have showed wider intersections, with some land holes only cutting 6 to 9 metres of mineralization. Grades, however, have held up well even in the narrower zones.

Teck Cominco continues work at its Mesaba deposit between North-Met and Birch Lake. The program consists of infill drilling and some metallurgical testing; the resource already known at Mesaba — 1.2 billion tonnes grading 0.43% copper and 0.09% nickel, plus minor gold and platinum group elements, believed to total around 0.3 to 0.4 gram per tonne, mostly palladium — was reasonably well established in 2002, although it hasn’t been brought into compliance with National Instrument 43-101 yet.

In a third-quarter conference call, Teck chief executive Don Lindsay told research analyst John Tumazos that there was “nothing material to report” on Mesaba, and that there “won’t be for some time.”

Nokomis project

Duluth Metals, the easternmost of the area’s operators, plans to drill right through the winter, having budgeted a 60,000-metre drilling program for its Nokomis project (previously called the Maturi Extension), east of Maturi and south of Spruce Road. That project has an indicated resource of 347 million tonnes grading 0.62% copper, 0.2% nickel, 0.01% cobalt, 0.31 gram palladium, 0.14 gram platinum and 0.08 gram gold per tonne, plus inferred resources of 108 million tonnes, with average grades of 0.65% copper, 0.18% nickel, 0.01% cobalt, 0.41 gram palladium, 0.19 gram platinum and 0.1 gram gold per tonne ( T.N.M., Aug. 20-26/07).

That resource will ultimately be recalculated, as drilling continues on the project. The indicated resource is based on a 200-metre drill grid — a figure that sounds sparse to those reared in the erratic world of gold mineralization, but which seems to be adequate in a deposit where sampling variograms — the variation of grade with distance — show breaks at distances more like 300 metres. (Franconia’s drilling has shown similar results.) The geology, too, is predictable: “the stratigraphy really holds together,” says Duluth geologist Paul Albers.

And it’s holding together over quite a distance, as early drill results from the eastern part of the Extension property showed in October. The calculated resource is defined over a 2.3-km strike length in the western half of the property, with the resource envelope underlying perhaps a third of the property. The first two holes in the eastern part of the property cut 27 metres and 32.2 metres of mineralization, the first at grades of 0.45% copper and 0.14% nickel, plus 0.59 gram palladium, 0.27 gram platinum and 0.16 gram gold per tonne, and the second at 0.78% copper and 0.29% nickel, with 0.88 gram palladium, 0.44 gram platinum and 0.28 gram gold.

That was followed by hole MEX-67, which intersected 39.6 metres grading 1.04% copper and 0.28% nickel, with 0.58 gram palladium, 0.23 gram platinum and 0.15 gram gold per tonne. Later holes, with copper grades clustering in the 0.5% to 0.7% range, intersected anywhere from 7 to 49 metres of sulphide mineralization.

Infill drilling has largely confirmed the resource grades. Two recent holes in the middle of the resource area intersected 9 metres grading 0.74% copper and 0.28% nickel, plus 0.47 gram palladium, 0.22 gram platinum and 0.09 gram gold, and 22.9 metres grading 0.59% copper, 0.23% nickel, 0.41 gram palladium, 0.18 gram platinum and 0.08 gram gold per tonne.

While the primary picture of all the Duluth Complex deposits is a large gabbro body with disseminated iron, copper and nickel sulphides, there are some massive sulphide bodies along the footwall contact of the complex, documented in most of the known deposits. Another characteristic that fits the classical magmatic sulphide model is how sulphide content rises in embayments in the footwall.

“All the holes that are in those funny things, they’re boomers,” says project manager David Oliver, pointing at a cross-section of the Maturi Extension.

Conforming with the classical model doesn’t mean, though, that the footwall marks an impermeable floor for the sulphide melt. The Duluth geologists make a practice of drilling 60 metres into the footwall granites — which often show signs of having been liquefied by the hot gabbro that intruded them — to be certain there is no mineralization beyond the base of the gabbro.

“In some cases we got sulphides into the footwall as far as 400 feet,” Albers recalls.

With this in mind, Duluth geologists split and sample the full length of every 25th hole to keep a handle on mineralization above and below the “fertile” gabbro zones.

Duluth’s preliminary economic assessment for Nokomis is now in preparation, based on the current resource figure and on results of recent metallurgical testing. SGS Lakefield, Duluth’s metallurgical consultants, tested a 252-kg sample of cores from eight drill holes and confirmed recoveries of 95% of the copper, 72% of the nickel, 86% of the platinum, 87% of the palladium and 73% of the gold to a bulk copper-nickel concentrate. That concentrate had a grade of 12.2% copper and 3% nickel, with 2.6 grams platinum, 6.1 grams palladium and 1.2 grams gold per tonne.

The head material had graded 0.75% copper, 0.24% nickel, 0.19 gram platinum, 0.43 gram palladium and 0.12 gram gold per tonne, and the best recoveries came on feed milled to allow 80% to pass a 0.1-mm opening. It had a grinding work index of 16.3 kilowatt-hours per tonne, making it a medium-hard rock — a result consistent with other tests on Duluth Complex mineralization. The mining virtues of a hard, competent rock are balanced by higher energy consumption when it goes to the mill.

Applying the Platsol hydrometallurgical process to the bulk concentrate recovered from 97.6% to 99.6% of the copper, nickel, and platinum group metals in the concentrate, and 84%of the gold, giving net recoveries of 95% of the copper, 72% of the nickel, 84% of the platinum, 85% of the palladium and 61% of the gold in the test material.

Importantly, in light of past problems finding smelters to take bulk copper-nickel concentrates of Duluth Complex mineralization, a two-stream concentrating process produced separate copper and nickel concentrates with similar recoveries to the bulk concentrate, though the process worked better with some regrinding.

Another 1.2 tonnes of material from 12 drill holes is going to Lakefield for additional testing.

“We’re burning money, but we’re burning money for a good reason. . . we’re moving it forward,” says Rick Sandri, Duluth’s president.

Forward, after a long time: what was once big, but not very promising, can now see some pretty bright daylight up ahead.