EXPLORATION 1997 — Nord Pacific betting on gold potential in Papua New Guinea

With its lack of infrastructure and remoteness from Western administrative centres, Papua New Guinea (PNG) can be a tough place to do business, and yet the payoffs can be substantial, as was the case when major discoveries were made at Lihir and Porgera.

On a recent visit to the country, The Northern Miner was able to witness first-hand what one company, Albuquerque, N.M.-based Nord Pacific (NORPY-Q), has been doing in pursuit of such a payoff.

The company already produces copper from its 35%-held Ramu nickel-cobalt project on the PNG mainland and hopes soon to be cranking out gold from its wholly owned exploration project on the Tabar Islands, off the northeastern coast of the island of New Ireland.

The Tabar group comprises three small islands, namely Tabar, Tatau and Simberi, all of which were practically unexplored until the early 20th century. Nord has been exploring the area since 1983.

Originally, Nord explored for gold on Simberi Island under an arrangement with Kennecott, which drilled several holes to test the geological system. At the Pigiput prospect, drilling encountered an interval of 5 metres grading over 170 grams gold per tonne in sulphide material. Despite these encouraging numbers, Kennecott let the joint venture with Nord lapse, only to go on to discover, on an island some 80 km to the east, the Lihir gold deposit.

Kennecott retains a back-in right to 50% of Nord’s operation if the junior can develop a mine capable of producing more than 150,000 oz. gold per year.

To exercise the right, Kennecott must reimburse Nord 2.5 times the amount spent developing the project.

The Tabar Islands are in a structural corridor which is the locus of magmatic activity with associated gold mineralization, the most notable example of which is Lihir Island, estimated to contain 14.6 million oz. gold.

Simberi island, much like Lihir, contains oxidized weathered gold mineralization. The rocks, before alteration, were breccias, tuffs and lahars of andesitic composition, as well as mafic intrusives. The volcanic pile was overprinted by a young hydrothermal event that contained gold.

Lihir too underwent a young hydrothermal event, dated at less than a million years old, and the main deposits on the island are in an active geothermal field within a caldera. Simberi, on the other hand, does not appear to have a caldera structure, though a prominent ring of coral limestone surrounding the island is suggestive of one.

Open-pit plans

At Simberi, Nord has proved up sufficient oxide mineralization to construct a small open-pit mine, and cash flow from the mine would enable the company to evaluate the sulphide material below.

Toward that end, the company has outlined minable oxide reserves of 4.4 million tonnes grading 1.5 grams gold per tonne (equivalent to 217,000 oz.

gold) with cash costs estimated at US$207 per oz.

In December 1996, Nord was granted a mining lease covering 2,490 ha at Simberi. It had planned to produce 40,000 oz. gold annually over a mine life of five years, with capital costs projected at US$20 million.

However, current market conditions induced the company to alter its plans.

“With the gold price hanging around US$350 an oz., we’ve decided to stay the construction of the mine for the moment,” Nord President Pierce Carson told The Northern Miner. “It’s a 2-year mining lease. We could receive our water use permits by the end of March and still begin construction by the end of the year.”

In the meantime, the company will evaluate the project’s sulphide mineralization. “We are not here to only put in the oxide operation,” stressed Carson. “If it weren’t for the greater sulphide potential we wouldn’t be here.”

Nord will spend US$5 million exploring the Tabar Islands in 1997, US$2 million of which is earmarked for drilling at Simberi. To test the sulphide potential there, the company will carry out 15,000 metres of core and 10,000 metres of reverse-circulation work. Given the present state of knowledge of the gold system, the drilling could turn up a sizable sulphide resource in short order, Carson said.

Five targets

On Simberi, Nord’s five main sulphide targets — Pigiput, Samat, Botlu, Beku and Sorowar — are found in a 4-by-2-km coincident aeromagnetic and radiometric anomaly. (The orebodies in the Luise caldera on Lihir Island are in a similar coincident anomaly. The aeromagnetics indicate the presence of possible magnetic-destructive alteration, while the radiometrics point to a possible influx of potassium.)

Before drilling for sulphides on Simberi, Nord Pacific will conduct an induced-polarization survey.

The most advanced of the five targets is Pigiput, on which Kennecott has already drilled 14 core holes. Pigiput hosts oxide reserves of 591,000 tonnes grading 1.2 grams gold, whereas the North, South and East Samat areas contain an estimated 530,000 tonnes of oxide reserves at 3 grams gold (as well as sulphide mineralization at depth).

The Sorowar contains 3.3 million tonnes of 1.3 grams gold, while, at the Botlu area, Nord completed a resource calculation (not included in the reserve figure) of 1.3 million tonnes of oxide material grading 1.2 grams gold.

Carson is confident his company will succeed at Simberi. “We’ve found it, but we don’t know how big it is yet.”

Other Tabar prospects

The other islands in the Tabar group are also prospective for gold, and Nord has obtained licences to explore them. The company’s geologists are especially bullish about the Banesa target, on Tabar Island. The area is characterized by another coincident radiometrics and aeromagnetic anomaly within a circular feature.

The Tiripats and Fotombar prospects, at the northern end of Tabar, are within known, young caldera structures. On Tatau Island, Nord is investigating possible mineralization at the Tugi Tugi prospect.

To finance this renewed exploration effort for sulphide mineralization, Nord is seeking a public offering in Canada. In association with Canaccord Capital, the company is hoping to raise significant (but as yet unspecified) funding.

In a related corporate development, Nord’s shareholders have approved a reverse split of shares trading on the Australian Stock Exchange. The new shares would be equivalent to an American Depository Receipt trading on the National Association of Securities Dealers Automated Quotation (NASDAQ). In effect, the company will discontinue trading in Australia in favor of a new Canadian listing, with trading in the U.S. on NASDAQ.