Demand outpaces discoveries, Roundup delegates told

VANCOUVER – This year’s Mineral Exploration Roundup attracted 7,000 delegates from around the world, a new record for the annual conference hosted by the Association for Mineral Exploration British Columbia (AME BC). But in keeping with the theme, “exploring today for tomorrow’s resources,” delegates were told that new discoveries aren’t keeping pace with demand, making it tough for senior miners to replace depleted resources or expand their resource base.

Keynote speaker Don Lindsay, president and CEO of Teck Resources (TCK-T, TCK-N), said the “single most important thing” for producers today is to find four or five long-lived mines that can sustain their companies for the next generation.
“Such deposits are not always obvious,” Lindsay added. “You need to have a vision of what an orebody can become.”

Canadian companies are leading the quest for the next generation of mines and today represent half of the world’s largest exploration spenders. But as Lindsay noted, exploration budgets are typically the first thing slashed in tough times. This was the case in 2009, when spending fell 42% from an all-time high of $14.4 billion in 2008. Global spending soared to more than $12 billion in 2010 (up 109% to $322 million in B.C. alone), driven by strong demand for metals and commodities in China and other emerging economies.

“All of us in the mining industry are totally, totally dependent on the Chinese economy,” Lindsay said.

Resource companies may have more cash in the till, but still face other challenges.

“The easy stuff, the low-lying fruit, is picked,” Lindsay said. “We’re competing now for projects that are technically complex, remote and difficult to develop, or have political or permitting risks. And these types of projects often see delays.”

Indeed, most of the mineral projects featured in two popular sessions – Canadian Exploration Highlights and International Exploration Successes – fit one or more of these descriptions. Some are new discoveries in known mining camps, but others were found years, even decades ago, in remote areas or high-risk jurisdictions.

Featured in the Canadian Exploration Highlights session was the Back River gold project, which was discovered by Trigg, Woollett, Olson Consulting in 1982. Back River has long been a mine-in-waiting, with development hindered by its remote location in Nunavut, 525 km northeast of Yellowknife. Recent discoveries by Sabina Gold & Silver (SBB-T) have enhanced the project’s potential and the company is continuing exploration as part of its goal to become a mid-tier gold producer of about 200,000 oz. annually within the next 10 years.

Peter Manojlovic, vice-president of exploration, told delegates that Sabina’s recent discoveries flowed from a “bigger picture” examination of the entire mineralized system in the region, aided by data from previous exploration programs.
“And there have been plenty of past operators over the years,” he added, citing Miramar Mining, Kit Resources and Kinross Gold (K-T, KGC-N) among others.

Most of the past work focused on the Goose and George Lake gold deposits, which together host a National Instrument 43-101 compliant measured and indicated resource of 3.4 million tonnes grading 10.9 grams gold per tonne, for 1.19 million oz. gold, plus inferred resources of 3.6 million tonnes at 10.2 grams, for 1.16 million oz. gold.

Sabina acquired the project from Dundee Precious Metals in 2009, and soon after discovered the Echo zone about 2 km south of the Goose Lake deposit. The company hit the Goose property hard in 2010, with a $14-million, 40,000-metre drilling program focused on areas of iron formation with a similar geological and geophysical expression to that of the Goose deposit. This resulted in the Llama discovery, about 8 km north of Goose, followed by the Umwelt discovery 1.3 km south of Llama.

Highlights from two recent holes at Umwelt include: 8.74 grams gold over 79.9 metres, including 45.2 grams over 6 metres and 25.27 grams over 4.9 metres; and 18.95 grams over 4.5 metres and 26.43 grams over 2.9 metres.
Sabina expects an initial resource estimates for the Umwelt and Llama discoveries this year, and will continue exploration with a $40-$45 million budget. Ongoing programs will be guided by an “exploration tool box” that led to the recent discoveries and also identified multiple other targets that are yet to be fully tested.

“It’s a collection of ideas, there is no single tool or magic bullet,” Manojlovic said.

New ideas also contributed to last year’s discovery of the Lynx zone at the Musselwhite gold mine operated by Goldcorp (G-T, GG-N) in northwestern Ontario. Musselwhite is considered an orogenic gold deposit, despite a lack of evidence that it sits on a major crustal-scale shear zone. Individual zones are hosted by local shear zones largely confined to steeply dipping limbs of folded iron formation, particularly at inflection points where these steep limbs bend into the fold keels or crests.

Senior exploration geologist John Biczok told delegates that the Lynx zone “marks the first significant discovery at a flexure in the vertical mid-section of the major gold limbs.” This required revision of previous models used to guide exploration. The Lynx zone has geological similarities to ore zones mined at Musselwhite, yet has less intense alteration, “significantly higher grades” than the mine average, and “greater dimensions” than any of the known zones.

“The potential of the Lynx zone is significant,” Biczok said, noting that it remains open along strike to the north, where the discovery has opened up into an extensive area of the folded iron formation that will be further explored in 2011.

The Victoria nickel-copper-platinum group elements (PGE) discovery in Ontario’s Sudbury camp was another demonstration of exploration ingenuity in a challenging geological environment. As Catherine Farrow of QuadraFNX Mining (QUX-T) noted, the Victoria deposit was mined on a small scale to shallow depths in the past because of its high nickel and copper grades. In 2008, the company found what would become zone 1 of the Victoria discovery at 670 metres below surface, using only geological interpretation and modeling of a segment of the Worthington offset dyke.

“It was a completely blind discovery, undetected by geochemical and geophysical techniques,” Farrow told delegates. “Every hole was a geological adventure.”

The adventure came to a screeching halt with the market meltdown in late 2008, but resumed in mid-2009 to follow-up an anomaly at the bottom of the last zone 1 hole. This drilling revealed zone 2 and associated off-hole anomalies. Follow-up drilling of these anomalies led to the discovery of zone 4, with one hole hitting 94 metres of 2.1% copper, 3.1% nickel and 5.1 grams per tonne combined platinum, palladium and gold.

“It’s one of the best holes in the Sudbury camp,” Farrow noted.

Farrow said the Victoria nickel-copper-PGE discovery was first thought to be similar to typical Sudbury “Offset-style” sulphide mineralization, but is now interpreted to be a “Frood-style” South Range breccia belt deposit, known for their higher grades. The Victoria project is expected to move into an advanced exploration phase this year.

The Dumont nickel project in Quebec’s Abitibi region has sat undeveloped for 50 years, but after a “value-finding” exercise, Royal Nickel (RNX-T) believes it has the potential to become the fourth largest sulphide nickel operation in the world.

Tyler Mitchelson, president and CEO, points to a recent scoping study that shows an economically robust project that would generate more than $1.1 billion in after-tax net present value at a 100,000-tonne-per-day mill throughput rate. He notes that the deposit has a low strip ratio, is non-acid generating, and situated in “one of the world’s best mining jurisdictions” with good infrastructure and
low-cost power.

The deposit is large but low-grade, with total measured and indicated resources of 1.15 billion tonnes averaging 0.27% nickel, plus additional inferred resources. But Mitchelson said sulphide projects of this type are becoming increasingly attractive as future sources of nickel, given the complex technical challenges and cost overruns experienced by many pressure acid leach and other laterite projects in recent years.

“If you look at these new projects in New Caledonia, Papua New Guinea and Madagascar, not any of them have ramped up the way they were supposed to.”

Uranium exploration is Saskatchewan’s Athabasca basin is a geologically intensive exercise, but focused brain power can generate new discoveries, as recently demonstrated by Denison Mines (DNM-T, DNN-N) at its Wheeler River property.

William Kerr, vice-president of exploration, said a previous operator made three sub-economic discoveries based on the “Key Lake model” that has guided exploration for the past 30 years. Denison took over as operator in 2004, and used a combination of evolving geological models and advanced geophysical techniques, including Titan surveys, which Kerr said showed a “monstrous altered system.”

The company drilled 58 holes over the next four years as part of a “drill or die” strategy that led to the Phoenix discovery hole (1.06% U3O8 over 2.35 metres) in the summer of 2008. This discovery showed geological similarities to the high-grade McArthur River deposit, resulting in a decision to apply a McArthur model.

Kerr said the blind Phoenix deposit is the first discovery in the basin not found in outcrop, by boulder tracing or based on the Key Lake model. Subsequent drilling confirmed high-grade unconformity-hosted mineralization as predicted, including 62.6% U3O8 over 6 metres, which is believed to be the highest grade-thickness reported worldwide in the past decade.

Denison released initial resource estimates for the project in the fall of 2010. Indicated resources stand at 89,900 tonnes at 17.99% U308 plus 23,800 tonnes at 7.27% U308 in the inferred category. This estimate was based on drilling along 1.3 km of a prospective quartzite ridge structure that continues for 18 km on the property. Kerr said exploration will continue in 2011, with an estimated budget of $10 million. “We are going to unleash the hounds,” he added.

Alan Robert, project manager for Gold Canyon Resources (GCU-V), dedicated his presentation on the Springpole gold project to “the memory of Michael Levinson,” a former president who believed for decades that this project’s day would come.

Several companies have explored the enigmatic gold deposit situated 110 km northeast of Ontario’s Red Lake camp, including several majors. Robert said the deposit has some essential characteristics of an Archean orogenic gold deposit but also shares some similarities to gold deposits in the Cripple Creek region of Colorado.

“We believe it’s an alkali porphyry elephant hiding in a greenstone belt.”

Robert noted that only about 20% of the prospective alkaline intrusive complex has been explored to date. Gold Canyon’s 2010 program was aimed at testing the development potential of mineralization under Springpole Lake and filling in gaps of previous drilling. Infill and exploration drilling are continuing into 2011 as part of an ongoing program of drilling and remodeling the deposit to move it towards feasibility.

The final presentation by Aurizon Mines (ARZ-T, AZK-N) focused on its 20-year perspective in Quebec’s Abitibi belt. Exploration manager Martin Demers reminded delegates of the company’s roots in 1988, as a miner of narrow-vein gold deposits. A decade later, Aurizon acquired the dormant Casa Berardi gold mine from TVX Gold, a bold move as resources were thought to be depleted. But Aurizon saw potential for growth through exploration, as Casa Berardi was the first and one of the few blind discoveries made in the Abitibi belt (in the early 1980s) and was largely unexplored.

Aurizon invested $150 million to acquire, explore, develop and revive the mine, which has produced an average of 160,000 oz. gold annually over the past three years. Demers said exploration continues to generate discoveries, and knowledge gained as a result is being applied to a portfolio of properties in the Abitibi belt.

Next week: International discoveries at the Mineral Exploration Roundup

– The author is a freelance writer based in Vancouver and a former editor of The Northern Miner.