Blackhawk puts three drills on Minago

During a recent interview with The Northern Miner, Black Hawk President Gary Hughes described his company’s work program at the Minago property, where reserves are estimated at 2.2 million tons grading 1.64% nickel.

“We’ve raised about $1.5 million in flow-through funds and hope to have nearly 20 holes completed by year end,” said Hughes.

With three drills turning on the property, that shouldn’t be a difficult task, although Hughes admitted “it will be a lot easier drilling once the ground is frozen.” The company hasn’t been getting the amount of footage it had expected, but Hughes was confident the situation will improve when winter freeze-up sets in. “We’re in quite a swampy area,” he said.

The first hole drilled in this fall’s program intersected 124 ft of 1.53% nickel, and was described by Hughes as “probably the best hole ever pulled on the property.”

On that news, the company’s share price leaped by more than $1 to a high of $3.10 before falling back to the $1.70 level more recently. Shares of Black Hawk had been trading at around 36 cents back in June.

The Minago property, which takes its name from a nearby river, hosts at least five closely spaced zones or lenses of nickel mineralization in the main deposit area. The current drilling program is designed to prove up enough reserves in the main deposit to justify underground exploration work via a ramp or shaft. Another area known as the north limb deposit is also being tested.

Previous owners, including Canamax Resources and Granges Resources, drilled a number of holes on the property and conducted extensive geophysical survey work during the 1970s. The deposit lies under about 250 ft of dolomite sedimentary strata.

Geologically, the nickel zones consist of finely disseminated pentlandite and millerite — two high grade nickel minerals — within five steeply dipping lenses. The mineralization contains a low percentage of iron-bearing sulphides (pyrrhotite) — a characteristic which would produce a “smelter friendly” concentrate if the deposit is eventually developed, Hughes explained.

“The concentrate grade is critical,” he noted, adding that previous metallurgical studies on the Minago material have indicated that a 20% nickel concentrate grade could be achieved from the mineralization containing at least 1.3% nickel.

Other pluses for the Minago project include its proximity to highways, powerlines, and a smelter, Hughes said. Situated 140 miles south of Thompson, and one mile west of Highway 6, the deposit lies in a well-known nickel producing area.

“We haven’t really proved up an orebody yet,” cautioned Hughes, whose previous experience includes 20 years as a mining engineer with Sherritt Gordon Mines. The company will be spending about $750,000 by year end on the Minago bet, and hopes to be in a position to make an underground decision early next year.

“I’m not much of a promoter,” Hughes told The Northern Miner. “If you have a good project, you don’t have to be a good promoter.”

He sees the Minago deposit as a likely candidate for future production and predicted that if mined, it could break even at a nickel price as low as $2 per lb.

A rough calculation by The Northern Miner, assuming a 1.33% nickel grade with 20% dilution and a 65% recovery rate, would give 14 lb of nickel in concentrate per ton of ore mined. To break even, i.e., cover a $42 per ton mining and milling cost, the 14 lbs of nickel would have to fetch a price of $3 per lb.

On the financing side, Black Hawk enjoys the backing and monetary resources of merchant banker DCC Equities, which owns 57% of the junior company’s 11.2 million shares outstanding (fully diluted).

“The company made a strategic decision to go after nickel this year,” said Hughes.

If the Minago deposit is eventually developed, it would not be a big producer, Hughes agreed, about 10-30 million lb of nickel per year could be expected from the property.

“It won’t upset Inco or Falconbridge too much,” he said, adding that, “a big nickel producer can make sure a small guy doesn’t get into the business, if times are tough.”

Black Hawk also has an option to earn a 55% interest in a graphite property 14 miles south of Perth, Ont., from Lode Metals (VSE). The agreement calls for Black Hawk to spend $1.25 million on exploration before September, 1991. Metallurgical tests are being conducted on material from that property.

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