Alexis goes two camp

As the old adage goes, the best place to find a mine is in the shadow of a headframe. The odds, then, seem stacked in favour of Alexis Minerals (AMC-V, AXSMF-O), which is poking around behind some 60 such structures in the historic Val d’Or and Rouyn-Noranda mining camps in northwestern Quebec.

The company’s 212-sq.-km land package in Val d’Or is the camp’s largest, and boasts eight formerly producing gold and base metal mines. Historic production out of the camp amounts to 700,000 tonnes each of copper and zinc, 18.4 million oz. gold, and 50 million oz. silver.

In 2004, Alexis signed an option deal to acquire 17 gold and base metal properties from Aur Resources (AUR-T, AURRF-O). The 110-sq.-km package straddles 25 km of strike extension of the favourable Val d’Or formation, which hosts the formerly producing Louvicourt, Dunraine No. 4, Manitou-Barvue and Louvem base metal deposits. It stretches from the Sigma-Lamaque mine to the Bevcon mine in the east.

More recently, Alexis consolidated the Aurbel property by acquiring Aur’s 50% stake along with the 1,400-tonne-per-day Aurbel gold mill by paying $2 million; it owes another $1 million. Aur retains a 2.5% net smelter return royalty on the property. Alexis also forked over $550,000 for Aur’s exploration office in Val-d’Or.

An independent insurance evaluation pegged the mill’s replacement value at $35.8 million, and estimated market value at $8.8 million. It has been idle since 1998, and Alexis figures it’ll cost around $3 million to rehabilitate. Thereafter, recommissioning would take around six weeks.

The Aurbel property covers around 100 sq. km. of the Bourlamaque batholith, and hosts the advanced Lac Herbin quartz-vein gold project, 1.8 km northwest of the mill. It is also home to the past-producing Ferderber and Dumont gold mines, which produced 1.6 million tonnes grading 7 grams gold and 1.2 million tonnes of 6.5 grams gold per tonne, respectively, between 1979 and 1994.

Lac Herbin

Alexis’ efforts are currently focused underground at Lac Herbin, 10 km northeast of Val d’Or, where inferred resources stand at 1.07 million tonnes running 7.3 grams gold per tonne, for around 250,000 contained ounces gold. That gold is contained in quartz-chlorite-pyrite (and occasionally tourmaline) veins hosted in eight zones along shears crosscutting the batholith. Several of the mineralized zones occur at or near the intersection of shear structures that dip steeply to moderately south.

The company’s confidence that it can double existing resources seems well founded, especially with the recent discovery of a new style of flat, quartz-tourmaline-pyrite-gold tensional veins adjacent to the S1 West (S1W) zone. A pair of recent holes there cut a system of the stacked, shallow-dipping veins containing sulphides and visible gold. Results, with higher-grade gold assays to 34.3 grams, include 32.5 metres averaging 2.5 grams gold, including 22.8 metres of 5.13 grams, and 20.4 metres of 2.61 grams.

Alexis says the new style of mineralization could significantly boost resources at Lac Herbin. Exploration drifting on the 200 level cut the veins some 60 metres south of the discovery hole; mapping suggests the system could measure up to 7 metres thick.

Similar tensional veins were common in the Sigma and Lamaque deposits, but weakly developed in the adjacent Dumont and Ferderber mines. Alexis also notes that eventual production from the latter two mines exceeded reserve estimates calculated two years into production by 192% and 44%, respectively.

Alexis plans more exploration drilling on the tensional veins (dubbed “flat swarms”) once the current delineation drilling program wraps up. Drifting to facilitate ongoing bulk sampling has already encountered a huge flat swarm. The veins will not be included in a resource estimate currently being updated, as they have yet to be fully delineated.

So far, around 3,500 tonnes of material have been excavated from the Hangingwall (HW) and S1W zones; a total of 20,000 tonnes will be collected. Alexis says grades have been better than expected. The bulk sample will be sent through Richmont Mines’ (ric-t, ric-x) nearby Camflo mill in October to confirm grades, cutting factors, metallurgical characteristics and mill recoveries in anticipation of a feasibility study later in the year.

The discovery of the tensional veins was accompanied by that of the Bonanza zone, 120 metres north of the S1 East shear. Chip samples from the shear-hosted vein, which measures up to 1.2 metres wide, returned up to 299.5 grams gold over 0.6 metre and 127 grams gold over 1 metre; both samples contained visible gold. The zone has been traced for some 35 metres, and was cut by six of seven recent drill holes; four of those contained visible gold.

Drilling has also boosted resources in the S1W zone, with recent intersections highlighted by up to 17.3 cut grams over 1.8 metres, 5.5 grams gold over 2.3 metres, and 5.1 grams over 1.5 metres.

The zone has been traced for more than 100 metres of strike and around 150 metres down-plunge. It remains open along strike and downdip, with a large chunk of the zone situated immediately east of the surface drill-indicated resource. Drifting has so far cut an additional 90 metres of vein mineralization up to 4.5 metres wide.

Delineation drilling of the zone, which Alexis says resembles the Dumont deposit, continues; raising and sub-level drifting is also planned. In addition, drilling will test for a potential strike extension from the Ferderber mine, and below current resources.

Hangingwall zone

Meanwhile, the Hangingwall (HW) zone’s down-plunge extent has been doubled to 200 metres, and now strikes for 160 metres. It remains open at depth and to the east, with indications the mineralized package may continue down-plunge of the shear-vein structure.

A recent round of 29 holes on the zone is highlighted by 12.6 cut grams over a true width of 4.8 metres, 16.2 grams over 3.5 metres, 14.3 grams over 1.8 metres, and 10 grams over 2.6 metres. The remaining holes generally returned 1 to 9 grams gold over intervals of 1 to 7 metres; six holes failed to cut significant mineralization.

Ongoing drifting continues to encounter strong, continuous mineralization over a 70-metre strike length and widths of up to 3.5 metres. Raising and sub-level drifting will soon begin. Alexis is preparing an updated inferred resource estimate for the zone, which it says resembles the Beaufor deposit.

Selected results from the smaller Lac Herbin (LH), S1E, and S3 zones include 15.4 grams over 1.5 metres, 9.3 grams over 4 metres, and 9.4 grams over 2 metres, respectively.

Ongoing work at Lac Herbin is in anticipation of a feasibility study later this year, with a production decision to follow by the end of the year. A scoping study in early 2005 concluded that Lac Herbin could support a 500-tonne-per-day underground operation to produce around 35,000 oz. gold annually at a cash cost of US$224 per oz. over 5.3 years. The study was based on a gold price of US$400 per oz., and pegged capital costs to bring the mine to production at US$4.4 million. Production startup is envisaged in 2007.

Lac Pelletier

Meanwhile, in the nearby Rouyn-Noranda camp, Alexis has wrapped up a review of historic data derived from some 42,656 metres of surface and underground drilling, more than a kilometre of ramp development, and nearly 300 metres of lateral drifting.

Based on its reinterpretation, Alexis figures measured and indicated resources at 1.2 million tonnes running 6.1 grams gold per tonne, for around 242,000 contained ounces gold. Another 491,140 tonnes of inferred material runs 5.2 grams, for 81,637 contained ounces. The estimates employ a cutoff grade of 3 grams gold.

In the 1990s, former operators Soquem (a Quebec Crown corporation) and a subsidiary of Mining Italianna pegged measured and indicated resources at 484,799 tonnes running 7.84 grams gold, based on 5-gram cutoff.

Aligning the cutoff grades, Alexis’ measured and indicated figure slips to 618,514 tonnes at 8.2 grams gold per tonne. The inferred resource comes to 175,242 tonnes of 7.45 grams.

The increase in tonnage and contained gold arises from Alexis’ revised model of Lac Pelletier, which is more steeply dipping than Soquem had envisaged. Alexis says its new model clarifies the relationship between many previously unrelated mineralized intersections.

Alexis’ vice-president of exploration, Philippe Cloutier, figures that had Soquem completed its trenches on the northern portion of the project before it started drilling, it would have caught on to the orientation of the zones and conducted its program much differently.

Alexis says its new model is supported by a historic hole, which has been reinterpreted to represent a 3.15-metre section of 3.44 grams from the projection of zone 4-2.

The property straddles several structural splays emanating from the Cadillac-Larder Lake break. Gold mineralization is contained in quartz-pyrite veins and shears. The known gold zones remain open at depth and along strike.

An ongoing 15-hole, 4,500-metre drill program from a barge on the lake is designed to push out zones 3 and 4 to the north and east. So far, around 11 holes have hit the target mineralization within metres of where the company’s model predicted.

Looking ahead, Alexis has applied for a transfer and modification of existing permits to reopen the ramp and dewater the underground workings. It figures dewatering should take around three months; underground exploration and drifting would follow.

Alexis envisages Lac Pelletier starting up at an annual rate of 20,000 oz. in 2008. Ore would accompany Lac Herbin material through the Aurbel mill (Alexis will also look for custom milling opportunities to supplement mill feed). The company plans to link Lac Pelletier up to a nearby highway so ore wouldn’t have to be trucked through the adjacent residential area.

Combined annual production from Lac Herbin and Lac Pelletier is pegged at 55,000 oz., with cash operating costs forecast at US$250 per oz. Based on a gold price of US$400 per oz., the twin-mine scheme would generate US$6.5 million in annual cash flow; and a 27% internal rate of return (IRR). Cash flow would jump to US$16.8 million, and IRR to 77% at a gold price of US$600 per oz.

A new scoping study to determine the preliminary economics of the deposit is under way.

Alexis inked a 3-year option deal to pick up the property from Thundermin Resources (thr-t, tudmf-o) in late 2005. Under the deal, Alexis still needs to spend $200,000 by the beginning of September, with another $300,000 to be spent over a subsequent year. The deal also includes an optional $500,000 on exploration and engineering over the following year. Thundermin retains a 2.5% net smelter return royalty (NSR); Falconbridge has an underlying 1% NSR.

Base metal strategy

Alexis is also teamed with Falconbridge in the hunt for base metals in the prolific Rouyn-Noranda camp, which historically produced 2.4 million tonnes copper, 1.9 million tonnes zinc, 19.5 million oz. gold and 94.4 million oz. silver.

The partnership paid dividends in early 2005, with the discovery of the West Ansil deposit, 1.8 km southwest of the past-producing Ansil mine. Indicated resources at West Ansil total 530,000 tonnes averaging 3.4% copper, 1.4 grams gold per tonne, 9.2 grams silver, and 0.4% zinc. Another 600,000 tonnes of inferred material runs 3.3% copper, 0.3 gram gold, 5.9 grams silver, and 0.2% zinc. The partners are examining the deposit’s potential economics before planning the next phase of exploration.

The historic Ansil mine produced some 1.6 million tonnes grading 7% copper, 4% zinc, 2 grams gold and 26 grams silver between 1989 and 1992.

Looking to follow up on their West Ansil success, the partners have begun a drill program aimed at testing up to eight targets in the camp. The program includes five holes for 4,300 metres on the Metco option target. The holes are designed to test Horne-type rhyolite and an exhalative interface. In April, a 1,064.5-metre hole encountered the South Bay exhalite deeper than expected, and yielded eight mineralized intersections with grades varying between 0.1% and 0.83% copper over widths from 0.45 to 1 metre.

Falconbridge stands to earn a 70% interest in the Metco property, 2 km northeast of the Horne mine; Metco Resources (mko-v, mtkof-o) retains a 30% interest carried through to production. Alexis, in turn, is earning a 50% interest in Falconbridge’s Rouyn-Noranda area properties by spending $16.5 million over three years. The deal also saw Alexis issue 1 million shares and 500,000 warrants to the major.

The 825-sq.-km landholdings include the past-producing Horne and Quemont deposits, the Amulet, Gallen, Ansil, Newbec, East Waite and Old Waite mines and numerous base metal occurrences and showings. It is situated 2 km northeast of the Horne mine, which produced 59.2 million tonnes averaging 2.2% copper, 0.17% zinc, 6.2 grams gold and 13 grams silver between 1927 and 1976.

Louvex

The base metal hunt also continues back in the Val d’Or camp, where Alexis is partnered with Falconbridge affiliate Novicourt (NOV-T, NOVFF-O) on the Louvex project, 1 km southwest of the Louvicourt mine. Louvicourt produced some 15.7 million tonnes running 3.4% copper, 1.6% zinc, 25.8 grams silver per tonne and 0.9 gram gold during its life.

Alexis and Novicourt are chasing down the deep P6 massive sulphide target up to 2,000 metres below surface. So far, drilling has encountered up to 800 metres of footwall alteration with copper-rich or zinc-rich stringer mineralization, plus strong hangingwall alteration. Results include 23.4 metres grading 0.43% copper, 13.5 metres of 1.14% copper, 12.4 metres at 1.48% zinc, and 4.1 metres of 1.8% zinc.

Alexis says the drilling indicates a thickening of the footwall rhyodacitic rocks, the presence of the Louvicourt mine stratigraphy, and the existence of a synvolcanic basin at depth and south of previous exploration.

Deviation problems forced the partners to abandon their latest hole, which had been intended to test to a depth of around 2,600 metres. A smaller drill previously used on successful holes is on its way back to the property.

Alexis is earning into Aur’s 55% interest in the Louvaur joint venture, which includes the Louvex and Bonnefond properties. Novicourt owns the remaining 45%.

In all, Alexis plans some 60,000 metres worth of drilling in 2006. The company is well funded with $8.1 million in cash, and no debt. It also enjoys a low-cost working environment in Quebec, where the government reimburses up to 47% of exploration spending. Alexis figures these rebates could amount to $11.7 million during 2006-2007.

Concludes Cloutier: “If the Alexis team can’t find a major deposit in these two camps in the next two years, there’s a major problem.”

Shares in Alexis currently trade at around 50; the company’s 65.1 million outstanding shares trade in a 52-week range of 32 to 73.