Canadian Arrow bulks up its treasury

Vancouver — Canadian Arrow Mines (CRO-V) is generating cash flow by selling high-grade nickel ore extracted from bulk sampling at the Alexo project, near Timmins, Ont.

In late 2003, the company received permission to remove a 10,000-tonne bulk sample, and in April 2004, ore began to be trucked to Falconbridge‘s (FL-T) Strathcona mill, near Sudbury. The shipments total 200-220 tonnes per day, or 4,000-5,000 tonnes per month.

So far, Canadian Arrow has reported $1.1 million in revenue for 4,000 tonnes of nickel sulphide ore and processed. Falco’s policy on payment for custom or toll milling services is that 70% be paid in advance, less full milling charges, which are withheld; the remaining 30% is payable 95 days after processing. The company has so far reported received payments of $795,000 through advances.

By the end of the second quarter, Canadian Arrow had shipped 8,154 dry tonnes grading 2.49% nickel, 0.31% copper and 0.071% cobalt.

Arrow also intends to extract a 10,000-tonne bulk sample from the Kelex zone, and has already stripped the overburden from the target areas in preparation.

To date, the company has seen a gross value of $288 per tonne for its nickel ore. An extrapolated figure of $2.9 million for the initial 10,000-tonne bulk sample represents a gross revenue figure for the company before stripping, mining, shipping and related processing costs.

If the sample from Kelex returns grades similar to those encountered in the initial sample, revenues could exceed $5 million.

Mining of the initial bulk sample at the Alexo zone only resulted in a small pit with a depth of about 30 metres. At Kelex, overburden stripping of 15-20 metres on average (up to 50 metres in certain areas) is required prior to open-pit mining of high-grade nickel sulphide pods.

Nickel sulphide mineralization is associated with a komatiitic peridotite (an ultramafic volcanic), similar to the deposits at Raglan in northern Quebec and at Kambalda in Western Australia. In this type of deposit, the nickel is contained in ultramafic magmas which flow near or to the surface. The erupting or extruded lava generally follows surface channels or conduits and can be extensive. The contained nickel must react with sulphur to form the nickel sulphide minerals, which must then settle out of the lava by gravity separation and collect in the base of the flows. Accumulation of the nickel sulphide minerals within traps or dips in the lava channel form the high-grade pods common to this type of deposit.

The Alexo project has a history that dates back to 1907. It was the first mineral deposit discovered in the Porcupine camp, which now hosts numerous multi-million-ounce gold producers and major base metal operations.

The deposit was mined from 1913 to 1919 by Mond Nickel, a predecessor company to Inco (N-T), and in 1944-45 by Harlin Nickel, a subsidiary of Noranda (NRD-T). About 55,000 tonnes were extracted with a reported grade of 4.5% nickel, 0.37% copper, and 0.23% cobalt, plus platinum and palladium. Underground workings extended to depths of only less than 40 metres.

Noranda became involved through Harlin Nickel in the late 1930s and directly acquired the project in 1952. The major conducted intermittent exploration, including drilling, through to the 1990s.

Finnish mining giant Outokumpu optioned Alexo in 1996 and subsequently, over three years, discovered the Kelex zone. The company then optioned out and transferred the Alexo property to a Timmins-based junior explorer that has since been acquired by Canadian Arrow through a vend-in.

Drilling by Canadian Arrow has so far uncovered multiple nickel sulphide lenses, associated with the Kelex zone, to a depth of about 125 metres. The company has drilled more than 60 holes on the zone outlining the lenses.

The company has also commissioned a consulting firm to complete and submit the permitting required for full mine production.

The present management of Canadian Arrow is experienced in the Timmins mining camp and used to establishing custom milling agreements with Falconbridge. President David Larche and his father and fellow director, John Larche (who helped find the Hemlo deposits in Ontario), have been a major supplier of silica flux to the Kidd Creek smelter.

Vice-President of Exploration Paul Davis is an experienced Abitibi-region nickel explorer. He also has experience in Western Australia and Finland, having worked with Falconbridge and Outokumpu, and was directly involved in six Timmins-area nickel sulphide discoveries.

Falco’s underutilized Strathcona mill receives and processes ore from four of its nickel mines and from outside operations, producing two concentrate streams: a nickel-copper concentrate, which is sent to the Sudbury smelter, and a copper concentrate, which is shipped to the Kidd Creek metallurgical division in Timmins for toll refining. The mill has an annual capacity of 3 million tonnes.

Falco is adding a nickel processing circuit at the Kidd Creek complex. With this facility in place, the company could realize a significant reduction in shipping costs for Alexoe.

Earlier this year, the company acquired its Alexo project and three other Timmins-area projects from Legendary Ore Mining, a company controlled by David Larche, through the issuance of 5.25 million shares. Additionally, the company recently completed a private placement financing of $3.7 million.

Canadian Arrow has 19.5 million shares outstanding, 39% of which are held by Larche, and has been trading in the range of 50-60.