Bright Spots In Gold, Base Metals, Despite The Downturn

Like most sectors of the global economy, Manitoba’s mining industry was negatively affected by the economic downturn that gripped the world in the latter half of 2008 and in 2009. After experiencing unprecedented expenditures of $152.1 million on exploration and deposit appraisals in 2008, expenditures for 2009 are estimated at roughly $78.5 million, a 48% drop from 2008. The drop in base metal prices, market demand and a prolonged slump in stock markets made it very difficult for many junior explorers to raise working capital.

Base Metals

Vale Inco is spending $116 million to modernize its Thompson nickel refinery through the installation of automation equipment. The project will allow the company to enhance the efficiency of its current electrolytic nickel production and improve working conditions. The company also began the first phase of an initiative to upgrade its tailings management area and spent $25 million to install new tailings lines and pumps to reduce water consumption.

Crowflight Minerals started production at its Bucko Lake mine, near Wabowden, in the fourth quarter of 2008 and shipped the first nickel concentrate to the refinery in February 2009. The company has been dealing with various mining and milling issues and in November 2009 decided to temporarily suspend all operations in order to complete a number of development upgrades needed to deliver and sustain production of 1,000 tonnes per day. Full production is expected to be achieved by the second quarter of 2010. Positive results from surface and underground drilling programs have increased the proven and probable reserves at Bucko to 3.71 million tonnes of 1.45% nickel, an increase of 22% in contained nickel from the 2007 feasibility study. Crowflight also has at least four other satellite nickel deposits in the Wabowden area that are within trucking distance of the mill.

HudBay Minerals continued to receive positive drilling results at its Lalor deposit, near Snow Lake. In January 2009, HudBay announced drilling at Lalor had encountered a new and separate (from the sulphide lenses) gold zone which returned significant results including 36.9 metres of 13.83 grams gold per tonne and 134.9 grams silver. In September 2009, the company announced it had discovered another new zone of copper-gold-rich mineralization, where drilling intersected 13.35 grams gold and 5.33% copper over a 34.5-metre interval located lower in the stratigraphy than the previously announced zones. These two new zones significantly enhanced the economic potential of the project; so much so that in October 2009, HudBay approved $85 million for phase-one development of a production ramp from its Chisel North mine located 3 km away from Lalor. As of October 2009, the zinc-rich base metals zone contained an indicated resource of 12.3 million tonnes averaging 8.7% zinc and 0.66% copper, plus precious metal credits.

The company also continued to drill in the vicinity of present and past-producing mines in the Flin Flon and Snow Lake area.

Rockcliff Resources conducted a 13-hole winter drill program at its Reed Lake, Eel and Jackfish properties southwest of Snow Lake. The company reported drilling at Jackfish intersected significant copper-nickel values. Geological and geophysical surveys were conducted in the summer over high-priority areas at the Lon, Rail and Reed Lake properties. Drilling that began in the fall at the Rail zone intersected high-grade copper-gold mineralization, including 4.7 metres grading 9.02% copper, 1.62% zinc and 3.46 grams gold per tonne.

A four-hole drill program conducted by VMS Ventures at its Puella Bay property, southeast of Snow Lake, helped identify a large alteration zone that the company believes may host mineralization. A ground geophysical survey, aimed at defining conductors at the margins of the alteration, was later carried out. VMS conducted geological mapping and sampling programs at the Puella Bay, Sails Lake and Morton Lake properties, all in the Snow Lake area. In November, VMS started a phase-one drill program at the Tower zone on its Reed Lake project. The Tower zone is located within 1,500 metres of the company’s Discovery zone, which has produced significant copper-zinc results. Initial drill results from the Tower zone included two holes that returned near-solid sulphide with disseminated copper-zinc mineralization, and drilling indicates that the Discovery zone stratigraphy extends through the Tower zone area.

Victory Nickel announced positive results from a feasibility study for its Minago nickel deposit north of Grand Rapids. The study was based on mining open-pit reserves only and it concluded that capital costs for development of an open pit and concentrator would be $596 million. The study incorporated proven and probable reserves of 25.2 million tonnes grading 0.43% nickel with average annual ore production of 3.6 million tonnes over a seven-year production life. The study also included the production of frac sand, which could be a byproduct of processing part of the overburden. The company plans to conduct 6,000 metres of drilling in 2010 to increase reserves.

International Samuel Exploration and Canasia Industries completed an eight-hole drill program at their Reed Lake property. Drilling identified a stockwork alteration system containing sulphides and magnetite, but no economic grades were returned in assays. A second phase of exploration is planned.

Marathon PGM conducted winter drilling at the Ore Fault and Page zones on its Bird River property, in southeastern Manitoba. The company tested new geophysical targets adjacent to previously defined resources. Drilling returned more encouraging results, including 2.8 metres of 2.66% nickel, 2.1% copper, 15.85 grams silver per tonne and 2.03 grams combined platinum group metals (PGMs) and gold at Page. Ore Fault also yielded positive results, with a sulphide intersection assaying 2.23% zinc, 0.74% copper and 50.47 grams silver.

Mustang Minerals conducted drilling at its Maskwa nickel deposit to increase the existing resource and identify new nickel-copper-PGM resources. Drilling returned a 42.5-metre section grading 0.32% nickel and 0.05% copper. Work on the ongoing feasibility study continued with resampling and relogging of historical drill-holes to update the resource model, as well as metallurgical testing. In October, Mustang announced an upgraded open-pit indicated resource for Maskwa of 56,510 tonnes of contained nickel, a 7% increase from the project’s 2008 resource estimate.

Precious metals

An aggressive approach to exploration conducted by San Gold at and around its Rice Lake mine continued to return impressive results. In early 2008, San Gold announced the discovery of the high-grade Hinge zone lenses. A decline from surface accessed the Hinge zone lenses in April 2009 and the company extracted and processed a bulk sample of roughly 10,600 tonnes with a stope mining grade of 21.7 grams per tonne. With total operating costs coming in at US$158 per oz. gold the Hinge mine has the potential to contribute significantly to San Gold’s bottom line. Other recent surface drilling in the vicinity of Hinge has discovered three other high-grade, near-surface zones: Cohiba, L-13 and 007.

At the Rice Lake mine, results from ongoing definition and exploration drilling at depth have also discovered new high-grade gold zones parallel to the “98” vein, the Deep West zone, and new high-grade veins and broad breccia vein systems at the eastern extremity of the 26th level.

Rolling Rock Resources released results from a scoping study on the Monument Bay gold project, located in northeastern Manitoba. The report concluded that a 1,000-tonne-per-day underground mine would cost $140 million to build and have an estimated 11-year mine life. Using a cutoff grade of 5 grams gold per tonne, inferred resources stand at 2.3 million tonnes grading 9.85 grams gold.

Wildcat Exploration conducted a mappi
ng and sampling program at its Jeep property, east of Bissett. The work resulted in the discovery of four new gold occurrences, one of which returned a grab sample assaying 35.39 grams gold per tonne. In July 2009, the company began a program of overburden stripping and channel sampling to evaluate the new occurrences; the program succeeded in extending the strike length of the mineralized quartz veins.

Garson Gold released results from a scoping study of the No. 3 zone at its New Britannia mine property in Snow Lake. The study assessed the economics of mining the No. 3 zone and reactivating the 2,150-tonne-per-day New Britannia mill. This was based on mining and processing roughly 149,000 oz. of gold from 753,000 tonnes grading 6.14 grams gold. The study estimated project preproduction capital costs of $22.33 million and an average operating cost of US$362.38 per oz. gold. Alexis Minerals acquired Garson in a friendly takeover in late 2009. Alexis plans to complete independent economic and resource evaluations early in 2010 and hopes to complete a feasibility study by the middle of the year.

Copper Reef Mining conducted drilling at the Gold Rock property west of Snow Lake. The Gold Rock zone lies along strike on the same shear zone that hosts the North Star gold deposit. Drilling from Gold Rock has returned some high-grade values, including 3.2 metres of 104.4 grams gold per tonne and 1.6 metres of 81.73 grams gold. Recent drilling and known surface exposures have extended the strike length of the Gold Rock vein to 345 metres.