The Labrador Trough straddling eastern Quebec and western Labrador is attracting attention from a handful of companies hoping to break into the iron-ore mining business. Among the interested parties is
Adriana’s most advanced asset is the Lac Otelnuk iron property, 170 km north of Schefferville, Que. The company also holds claims covering a sizable portion of the Muskox Intrusion in the Northwest Territories, where platinum group metals (PGMs), copper and nickel are the targets of interest. PGMs are noble metals, so the attraction there is understandable — but iron?
Barclay says the company set out to find a quality project that could generate early cash flow, and Lac Otelnuk fit the bill. “It’s a unique opportunity and a potential mine,” he adds, pointing out that it’s one of the few advanced projects not tied up by established players in the iron-ore business.
The rationale for the acquisition was China’s increased appetite for steel. In 2000, global seaborne iron-ore demand was below 500 million tonnes. Demand is expected to reach about 800 million tonnes by 2007. Experts suggest China’s share of the seaborne iron-ore market will exceed 45% by 2007, up from 34% in 2004.
Beley says other companies, and the investment community, are paying attention to iron-ore opportunities too. Calgary-based
The Quebec side of the Trough has been much less active than western Labrador in recent decades, but Adriana hopes to change that by advancing Lac Otelnuk to feasibility. Given current market conditions, Barclay says there would be “no problem” finding a buyer.
“We believe we would be able to deliver iron-ore pellets at the bottom end of the cost curve,” he adds.
The property hosts two magnetite iron-formation taconite deposits drilled and defined by a previous operator in the 1970s. Both are within a mineralized system that extends for at least 25 km on strike on the optioned ground. The company recently staked claims to expand the project to cover about 45 km of favourable iron formation.
The North zone hosts 623 million tonnes of 25.08% magnetic iron (33.92% soluble iron) over an average true thickness of 15 metres. The South zone hosts 1.14 billion tonnes of 25.76% iron (33.06% soluble) over an average true thickness of 30 metres. The company notes that these estimates are based on historic work and aren’t yet compliant with National Instrument (NI) 43-101 reporting standards.
“Even so, we’re comfortable with the numbers and the quality of previous work,” Beley says. “We’re fortunate too, that the 1970s drill core has been perfectly preserved. We should be able to make good use of the original data.”
Watts, Griffis and McOuat (WGM) recently prepared a NI 43-101 report that recommended a 2-phase work program totalling $5 million for the project. The first phase would include a scoping study, and at least 8,500 metres of drilling to allow for a NI 43-101-compliant indicated resource estimate. The second phase would be a preliminary feasibility study, or advanced scoping study, budgeted at $2.5 million.
Adriana’s goal is to define a 600- million-tonne deposit grading 23-25% magnetic iron, with a weight recovery of 33-35%, and concentrate grading 67% soluble iron. This would support a mine and processing complex rated at 30 million tonnes per year that would produce about 10 million tonnes of iron pellets annually, over a 20-year mine life.
Metallurgical test work from the 1970s using surface, core and a limited bulk sample, returned concentrates grading 65.1% to 70.6% soluble iron, with weight recoveries up to 41%. Adriana notes that these are “acceptable results for taconite deposits.”
The company plans a mini-bulk-sampling program in the second phase of its proposed program, whereby 50-100 tonnes of representative iron formation mineralization will be collected and tested.
As for infrastructure, the project is 170 km north of Schefferville, the northern terminus of a railway line that once served the direct-shipping iron-ore mines of the Iron Ore Co. of Canada (IOC). These mines ceased operations in 1982, though IOC has other mines in Labrador that continue to operate.
Lac Otelnuk is accessible only by air at present, but Beley believes increased activity in the region could lead to joint infrastructure initiatives, such as extending the rail line beyond Schefferville.
“We intend to talk to the neighbours and see what we can do together.”
Adriana can earn 100% of the core Lac Otelnuk project by spending $4 million on exploration before the end of 2009, and by issuing 2 million shares in stages. The vendor retains a 2.5% royalty on gross revenue from production, with advance royalties of $150,000 starting on the first anniversary of the recent option agreement. Half the royalty can be purchased for $5.5 million anytime before 2015.
Adriana also plans to continue exploring its MIE project in Nunavut, which draws its name from the Mackenzie Igneous Event, one of the world’s largest continental-type magmatic events. Work will focus on the Muskox Intrusion, the largest known magma channel for the Mackenzie Igneous Event.
Rare geological events such as these created the world’s two largest such complexes, Bushveld and Noril’sk-Talnakh, in South Africa and Russia, respectively, which both host large PGMs and nickel-copper deposits. Adriana is looking for similar deposits at the MIE project, with another target being “Voisey’s Bay-type” nickel deposits.
Gordon Addie, Adriana’s vice-president of exploration, says he waited 19 years for ground covering key portions of the Muskox Intrusion to come open for staking. When the time came, he organized and led a clandestine staking initiative that beat out the competition.
Specifically, Addie had his eye on the McGregor Lake area, which he believes represents “a corridor of opportunity” for accumulation of sulphides containing copper, nickel and PGMs. The McGregor Lake and All Night Lake properties, which together comprise the MIE project, cover the northern half of the exposed portion of the Muskox Intrusion.
Previous operators have spent more than $20 million to explore and drill portions of the Muskox Intrusion, but no significant economic deposits were found.
“This area has been an enigma since it was first discovered by Samuel Hearne in the 1700s,” Addie says, adding that a “geologically intensive” exploration program designed to fully explore the project’s potential will continue next year.
The company has already done considerable work, including sophisticated inverse modelling of previously compiled geophysical and geological data, and analysis of three deep stratigraphic holes drilled by the Geological Survey of Canada, that could turn previous geological models on their ears. Specifically, the company believes the western flank of the intrusion breached a large sedimentary basin that may have provided a large area for metal-bearing fluids to have accumulated. Ongoing geophysical surveys combined with satellite imagery, data modelling and other geological work are aimed at identifying potential structural traps where copper, nickel and PGM mineralization could accumulate.
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