Duluth Metals boosts resource in Minnesota

Duluth Metals (DM-T) has added some heft to its resource estimate for the Nokomis deposit in northeastern Minnesota’s Duluth base metals complex.

An update of its National Instrument 43-101 resource estimate indicates that Nokomis has 30% more resources in the indicated category and 162% more in the inferred than in previous tallies.

At a 1% copper-equivalent cutoff grade, the updated estimate demonstrates an indicated resource of 449 million tonnes grading 0.624% copper, 0.199% nickel and 0.6 gram combined platinum, palladium and gold per tonne (at a copper-equivalent grade of 1.46%).

This results in contained metal of: 6.18 billion lbs. copper; 1.97 billion lbs. nickel; 103 million lbs. cobalt; 2.3 million oz. platinum; 5.17 million oz. palladium; and 1.21 million oz. gold.

Nokomis holds an additional 284 million tonnes in the inferred category grading 0.627% copper, 0.194% nickel and 0.718 gram combined platinum, palladium and gold (at a copper-equivalent grade of 1.5%).

This results in an inferred resource containing: 3.93 billion lbs. copper; 1.21 billion lbs. nickel; 62.8 million lbs. cobalt; 1.75 million oz. platinum; 3.94 million oz. palladium; and 880,000 oz. gold.

The updated resource estimate, which incorporates drill results up to April, includes two recently discovered high-grade areas.

The Nokomis deposit sits in the western portion of the Maturi extension properties and southeast of the town of Ely, Minn. So far Duluth has drilled only about half of the Maturi extension properties.

The Nokomis deposit lies about 400 metres below surface and extends to depths of about 1.2 km.

According to a scoping study released earlier this year, and using base case prices of US$1.75 per lb. copper, US$7 per lb. nickel, US$10 per oz. platinum, US$350 per oz. palladium and US$600 per oz. gold, the project would yield a pre-tax net present value of US$792 million at a 10% discount rate.

The pre-tax internal rate of return would be about 21% from total underground mine production based on the previous, initial resource estimate completed in 2007.

The study also envisions average annual production of 1.2 million lbs. copper, 23.8 million lbs. nickel, 430,000 lbs. cobalt, 75,000 oz. palladium, 33,000 oz. platinum and 13,000 oz. gold.

In terms of geology, the deposit forms a tabular sheet of coppernickel-platinum group metals mineralization, hosted in troctolitic rocks resting on the lower contact between the South Kawishiwi intrusion and the Giants Range batholith granitic rocks, the company says.

The Duluth base metals complex is adjacent to the Mesabi Iron range, which has been producing iron ore for over 100 years.

As a result, the Maturi extension properties have access to excellent infrastructure including coal-fired power stations that were developed to support the historic and current taconite mines, six of which are operational and supply over 70% of iron ore demand in the United States. (Taconite is a lower grade, iron-bearing rock, which was considered a waste product by highgrade iron mines.)

The Duluth mining complex is also near ports that have access to the Atlantic Ocean through the Great Lakes and the St. Lawrence Seaway. The area is served by four major railroads serving five local ports.

Of course Duluth Metals is not the only mining company operating in the Duluth complex. The region also hosts PolyMet Mining (POM-T), Franconia Minerals (FRA-V) and Teck Cominco (TCK. B-T).

But Duluth is “the largest current resource in the complex in terms of contained metals,” write the authors of an August 2007 report by Cormark Securities on the Duluth base metals complex.

The company also benefits from “experienced and aggressive management that is rapidly moving its project forward,” Cormack states.

The securities firm also notes that the Duluth complex contains “one of the largest unexploited nickel-copper-PGE resources in the world” and is “the third largest nickel resource in the world after Sudbury and Norilsk.”

Duluth Metals’ stock is currently trading at about $2.70 per share and has a 52-week trading range of $1.49-4.07. The company has 79 million shares outstanding.