Dynasty gets what it bargained for at Pebble

Even though the main deposit at the Pebble copper property is considered a plum in itself, it was really the exploration potential of the surrounding 250-sq.-km land package in Alaska that sustained the principals at Hunter Dickinson Inc. (HDI) through years of negotiations with property owner Teck Cominco (TEK-T).

“It was the attraction of the bigger sulphide system that really got us involved in the project,” says Bruce Youngman, vice-president of Northern Dynasty Minerals (NDM-V), the public vehicle through which Hunter Dickinson is financing the exploration. “We were excited about the potential for multiple discoveries on the property. That was the driving force behind our interest in the project.”

Now it looks as though HDI is getting what it bargained for. A 41-hole wildcat drilling program by Northern Dynasty intersected three new zones of mineralization (T.N.M., July 22/02), confirming that the historic Pebble deposit is part of a larger system that typifies producing copper porphyry districts such as Highland Valley in Canada, Cadia in Australia and Collahuasi in Chile.

The mineralized system coincides with an 89-sq.-km induced-polarization (IP) anomaly that stretches southwest from the main deposit and overlaps with moderate-to-strong copper, gold and molybdenum geochemical anomalies.

Cominco discovered the Pebble deposit more than a decade ago while investigating the results of an IP survey. Mineralization occurs within a Late Cretaceous intrusive complex consisting of stocks, dykes, sills and irregular bodies of diorite, granodiorite and breccia. The intrusions are emplaced in sedimentary rocks that are also mineralized.

Gold is associated with copper sulphides, such as chalcopyrite and bornite that, along with molybdenite, occur with pyrite as fracture fillings, disseminations, veins and veinlets. The copper-gold mineralization is, in turn, associated with potassic alteration that is open in several directions, including at depth.

Pebble contains an inferred resource of 1 billion tonnes grading 0.3% copper and 0.34 gram gold per tonne, including a high-grade core of 54 million tonnes running 0.54% copper and 0.46 gram gold. At these grades, the deposit needs to be bigger — or have satellite deposits — in order to be feasible.

The three new zones, lying up to 16 km southwest of the main deposit, include a copper-gold-molybdenum porphyry similar to the Pebble deposit, a copper-gold skarn, and a high-grade gold zone that may represent part of a sulphidic stockwork system.

Northern Dynasty discovered the new porphyry this spring when two holes collared on a discrete chargeability response 12 km southwest of the Pebble deposit returned wide intervals of mineralization. The results included 64 metres grading 0.3% copper and 0.2 gram gold per tonne in hole 34 and 160 metres grading 0.32% copper and 0.33 gram gold in hole 38. The holes were spaced 450 metres apart.

The junior encountered the skarn 5 km farther west on a kilometre-long, east-west-trending gold-copper anomaly that remains open in both directions. Hole 37 intersected 79 metres grading 0.4% copper and one gram gold, including 6.5 metres grading 1.7% copper and 3.6 grams gold.

Skarns, which form when molten rock comes in contact with a rock rich in calcium carbonate, are commonly associated with porphyry copper systems. “The skarn is particularly important as it may provide, or at least contribute to, the higher-grade sweetener that the project needs,” says Lawrence Roulston, editor of newsletter Resource Opportunities, who has been following the Pebble project closely over the past year.

Dynasty hit the stand-alone gold mineralization just 5 km south of the Pebble deposit. Hole 25 returned 28.8 grams gold over 6.1 metres within an 800-by-800-metre gold-in-soil anomaly that had returned high-grade gold in a previous Cominco hole collared 350 metres away from the Dynasty hole.

Closer look

Intrigued by the impressive gold results, Dynasty plans to take a closer look at the stand-alone gold mineralization and its association with the remainder of the porphyry system.

“There will be a broader emphasis now on looking for multiple deposit types rather than just the porphyries,” says Mark Rebagliati, consultant and project manger for the Pebble project. “We’ll be addressing the new discoveries, some gold intercepts that the Cominco team identified over the years but didn’t follow up, and other features that have never been addressed.”

A second, 141-hole program, designed to delineate the three discoveries and find other new zones, is under way.

The deal that Hunter Dickinson hammered out with Cominco (before the zinc producer merged with Teck) was years in the making and consists of two separate option agreements. Under the first agreement, Dynasty has until the end of November 2003 to explore the whole Pebble property before deciding whether to exercise its option to acquire a 100% interest in the 36 claims that host the main deposit. To complete this deal, Dynasty must pay Teck Cominco US$10 million in cash or shares and purchase HDI’s 20% interest in the claims by issuing shares.

Once the first option is exercised, Dynasty can earn a half-interest in the surrounding “exploration lands” by completing 18,182 metres of drilling before the end of November 2004. Although Dynasty is already well on its way to fulfilling the drilling commitment, the junior can extend the earn-in period by two years by issuing 100,000 shares for each year. After Dynasty completes the earn-in, Teck Cominco must either form a 50-50 joint venture or sell its half-stake in the exploration lands for US$4 million and a 5% net profit interest.

“The Hunter Dickinson group has a 20-year history of discovering copper-gold porphyries”, says Rebagliati. “We undertook a three-or-four-year search worldwide for other areas where we could duplicate that [success], and Pebble kept coming up on the short list. It took us some time, but we were able to acquire an agreement and then apply the experience we’ve gained.”

Youngman compares the system at Pebble to the Cadia district in New South Wales, where mineralization is associated with potassic alteration and occurs in gold-copper porphyries, sheeted and stockwork quartz-sulphide veins, stratabound disseminated mineralization and skarns. Last year, the Cadia Hill mine produced 300,255 oz. gold and 26,781 tonnes copper for owner Newcrest Mining. Recent exploration in the district has uncovered several geochemical anomalies that mirror the signatures of the established Cadia deposits.

The Pebble property is also attractive from a logistical standpoint. The area lies just 95 km by road from an ice-free, deep-water port, has a moderate climate and relief. Electricity and natural gas are available. More importantly, the surrounding communities — most of them aboriginal — appear to support the project.

“We’ve been in constant communication with the Bristol Bay Native Association, and they fully support our presence there,” says Rebagliati. “They’ve had the experience of working with Teck Cominco at Red Dog, and they’ve become very supportive of the mining industry because of the employment it generates.”

— The author is a Toronto-based freelance writer specializing in mining and environmental issues.