More Investment Leads To More Discoveries In Yukon

The Yukon mineral industry experienced much success in 2008.

Exploration spending is estimated at $110 million and several advanced exploration projects returned significant drill results, highlighting the under-explored potential of these properties even at an advanced stage of exploration.

Yukon’s untapped mineral potential was shown by several major new discoveries made on exploration properties this year. Mine development money was spent at the Minto copper-gold-silver mine where the mill underwent a phase 3 mill expansion to 3,200 tonnes per day, and at the Wolverine zinc-silver-copper- gold-lead deposit where development has begun and production is scheduled for the third quarter of 2010.

There were more than 150 active hard rock exploration projects in Yukon: 73 projects recorded expenditures of greater than $100,000, and 22 spent more than $1 million. The remaining projects were regional or grassroots generative projects.

Mining and Development

Capstone Mining’s Minto mine has proven to be a low-cost producer, has expanded mill capacity, increased resources and made new exploration discoveries that will continue to increase the mine’s life. Resources at Minto have increased by 140% to 11.4 million tonnes of 1.77% copper, 0.66 gram gold per tonne, 6.85 grams silver in the measured category, plus an indicated resource of 7.83 million tonnes grading 0.91% copper, 0.29 gram gold, and 3.24 grams silver; and an inferred resources of 15.07 million tonnes grading 0.88% copper, 0.25 gram gold, 2.61 grams silver, based on 2006 and 2007 drilling programs.

Resources are currently being upgraded based on a highly successful 2008 drilling campaign that drilled 120 holes for a total of 23,840 metres. Production at Minto for 2008 is forecast to be 24.9 million kg (55 million lbs.) copper, 693,530 grams (22,300 oz.) gold and 10.14 million grams silver (326,000 oz.) silver. Cash costs of production to the end of the third quarter of 2008 were US$1.37 per lb., but these costs are expected to drop to US$0.98 per lb. due to higher copper production, reduced stripping requirements, and a connection to the main Yukon electrical power grid (which means less fuel would be used). Production for 2009 is forecast to be between 60 and 65 million lbs. copper.

Yukon Zinc was acquired by Jinduicheng Molybdenum Group, with 95%, and Northwest Nonferrous International Investment Co. (5%) and is now operated as a private company. Jinduicheng is the largest producer of molybdenum and associated products in Asia and reportedly the world’s third-largest molybdenum producer. It is publicly traded on the Shanghai Stock Exchange after a recent US$1.3 billion initial public offering. Jinduicheng’s operations are concentrated in Shaanxi province, China. Northwest represents the Shaanxi state geological bureau. In terms of revenue and technical capacity, Northwest is one of the top five exploration and mining bureaus in China. Yukon Zinc’s main asset is the Wolverine volcanogenic massive sulphide deposit, which the company is developing with a production target of the third quarter of 2010. Resources at Wolverine are 4.46 million tonnes grading 12.14% zinc, 354.8 grams silver per tonne, 1.16% copper, 1.69 grams gold, and 1.58% lead in the measured and indicated category, plus another 1.69 million tonnes of 12.16% zinc, 354.4 grams silver, 1.23% copper, 1.71 grams gold, and 1.24% lead in the inferred category. Development activities during the year included upgrading the access road into the project, preparation of the site for building the camp and other work in the tailings pond area.

Western Copper’s Carmacks Copper project is waiting for Quartz Mining and Water Use licences that would allow the company to go ahead with building a mine. The company will make a production decision once it has the final permits. Carmacks is a copper oxide deposit with resources of 12 million tonnes grading 0.86% oxide copper in the measured and indicated category. The project will be developed as an open-pit, acid heap leach operation with a solvent extraction/electrowinning (SX/ EW) processing facility. Carmacks is slated to produce, on average, about 14,500 tonnes of LME Grade A copper cathode annually.

Exploration

The under explored potential of the Yukon is demonstrated by the quality of new discoveries that underwent drilling for the first time in 2008. A more detailed summary of mineral exploration in 2008 is available on the Yukon Geological Survey’s website at www.geology.gov.yk.ca.

A significant new gold discovery was made by Underworld Resources on the White Gold property, 90 km south of Dawson City, which was drilled for the first time in 2008. Two near-surface gold mineralized zones — the Golden Saddle and Arc — were intersected in drilling. Both zones are open in all directions. The discovery hole on the Golden Saddle zone returned an impressive 4.03 grams gold per tonne over 19.58 metres, and the discovery hole on the Arc zone intersected 1.18 grams gold over 28.5 metres. Drilling has traced continuous gold mineralization at Golden Saddle from surface for 450 metres along strike and to 170 metres down dip with gold grades and thickness in the same range as the discovery hole. The highest-grade intersection at Golden Saddle returned 5.6 grams gold over 21.58 metres while the thickest intersection returned 50.7 metres grading 3.10 grams gold. Mineralization consists of quartz veins and breccia zones hosted in low-angle structures.

Atac Resources made a major new discovery of skarn and replacement- style gold mineralization on its Rau property, east of the Keno Hill area in central Yukon. The discovery was made following up on a regional stream-sediment survey sample of 150 parts per billion (ppb) gold plus elevated tungsten. Following conventional soil geochemistry and variable time-domain electromagnetic (VTEM) airborne surveys, the property was drilled for the first time in 2008; the discovery hole returned an intersection of 68.7 metres grading 1.24 grams gold in replacement-style mineralization in a carbonate horizon. Several intersections returned values in the same range as the discovery hole with the highest grade intersection assaying 2.92 grams gold over 46.4 metres.

The Sonora property of Northern Tiger Resources is host to yet another new gold discovery in Yukon. Drilling in 2008 consisted of 10 holes for 2,238 metres. The Nightmusic zone returned several intersections including a 4.8- metre intercept with visible gold grading 2.31 grams gold, 19.8 grams silver and 0.737% copper. The drilling was following up on a single drill hole in 2007 that intersected gold and silver epithermal-style mineralization occurring adjacent to an ultramafic body. The Nightmusic zone is characterized by an extensive soil geochemical anomaly, which extends for over 2 km along the southern contact of an ultramafic body. This ultramafic body crosses the headwaters of Sonora Gulch, an area known for producing spectacular gold-tetradymite nuggets.

Northern Freegold Resources completed an extensive program on its Freegold Mountain property including 97 holes of diamond drilling totalling 22,773 metres on five different targets in the company’s extensive road-accessible land package in the southern Dawson Range. The Nucleus zone consists of Cretaceous granodiorite sills intruding metasedimentary rocks, which were later intruded by quartz-feldspar porphyry dykes. Drilling in 2008, consisting of 13,287 metres in 53 holes, was directed at defining a NI 43-101-compliant resource in the low-grade, bulk- tonnage Nucleus zone. Early season drilling results were spectacular due to the discovery of high-grade zones consisting of massive sulphide mineralization with visible gold. Mineralization in the Nucleus zone occurs in all rock types and typically consists of: sulphide-bearing hydrothermal breccias; quartz, quartz-sulphide and sulphide veins
and stockworks; disseminated sulphides; and, the newly discovered massive sulphide skarn- type mineralization. Drill results from the high-grade mineralization include: 3.25 metres of 100.69 grams gold per tonne within 37.8 metres of 10.41 grams gold; 1.23 metres of 92.74 grams gold within 46.96 metres of 9.6 grams gold; 1.27 metres of 410 grams gold within 9.36 metres of 70.19 grams gold; 0.96 metre of 256 grams gold within 4 metres of 68.95 grams gold, plus 12.39 metres of 7.98 grams gold.

Alexco Resources continued with a comprehensive, 10,360-metre diamond drilling exploration program on its Keno Hill silver project. Over the past century, the silver mines at Keno Hill have produced about 214 million oz. (6.66 million kg) of silver at an average grade of 40.4 oz. per short ton (1,389 grams per tonne) silver, 5.62% lead and 3.14% zinc. Alexco’s 2008 exploration program includes a new 650-metre decline to access existing workings and about 2,300 metres of underground rehabilitation at the historic Bellekeno mine.

Inferred resources at Bellekeno are 537,400 tonnes grading 1,016 grams silver per tonne, 13.5% lead, 10.7% zinc, and 0.4 gram gold. Underground drilling in 2009 will upgrade resources at Bellekeno. Alexco has negotiated a silver purchase agreement with Silver Wheaton Resources for 25% of the life-of-mine silver production from the Keno Hill mines. The agreement includes a US$50 million up-front payment that will provide the company with the capital needed to place the mine into production. Alexco plans to soon make a production decision on the historical mine.

Numerous other Yukon mineral deposits were the subject of exploration, engineering and environmental studies designed to advance projects towards development decisions in the next few years. These included Western Copper’s Casino copper- gold-molybdenum porphyry deposit, Selwyn Resources’ Selwyn lead- zinc sedimentary exhalative deposit, Overland Resources’ Andrew lead- zinc-silver deposit, Yukon Gold’s Marg copper-zinc-lead-silver-gold volcanogenic massive sulphide deposit, Yukon-Nevada Gold’s Ketza River gold deposit, North American Tungsten’s MacTung tungsten skarn deposit, Eagle Plains Resources and Blind Creek Resources’ Blende silver-lead-zinc deposit and Largo Resources’ Northern Dancer tungsten- molybdenum porphyry deposit. All of these projects produced positive results, especially the Selwyn and Andrew projects, which discovered significant new areas of mineralization in exploration drilling.

Yukon’s Mineral Regime

All 14 First Nations in Yukon have been involved in land claim negotiations. The majority, including those in Whitehorse, have settled their claims. The Yukon government is establishing government-to-government relationships with all First Nations to ensure their participation in territorial resource development. This constructive approach has ushered in a new era of economic partnerships and investment opportunity by creating certainty of land tenure for mineral explorers and developers.

Perhaps the best example of this relationship is the Minto mine, located on Selkirk First Nation settlement land. Several other First Nations have signed memoranda of understanding or co-operation agreements with mining companies including the Na-Cho Nyak Dun First Nation and Alexco Resources, the Kaska First Nation and Selwyn Resources, Yukon Zinc, Yukon-Nevada Gold and True North Gems, and the Carcross-Tagish First Nation and Tagish Lake Gold.

New certainty has been given to Yukon’s mineral sector with the passing of amendments to the Quartz Mining Act and the Miners Lien Act. The claims administration and royalty sections of the Quartz Mining Act have been amended to lower exploration costs while ensuring the Yukon has royalty rates for mine development that are competitive with other Canadian mining jurisdictions. The government of Yukon continues to support and enhance the Yukon Mining Incentive Program in an effort to maintain early stage exploration during this period of uncertain economic conditions.

Recent changes in global markets make it difficult to speculate on what 2009 has in store for exploration in the Yukon. Record-setting exploration in the last few years has given Yukon investors the ability to make sound development decisions regardless of prevalent economic conditions. Yukon has captured the attention of Asia with investments in several projects by Chinese companies. As the discoveries in 2008 have shown, exploration potential in Yukon is world-class. These factors will help Yukon retain its position as a prime target for mineral exploration, mine development and production in future years.