Vancouver Armed with a new $5 million financing, Hunter Dickinson-led junior Northern Dynasty Minerals (NDM-V) is ramping up exploration efforts over the 89 sq. km sulphide system on the Pebble gold-copper system in southwestern Alaska.
Situated 380 km southwest of Anchorage, the Pebble deposit was discovered in the late 1980s by Cominco (now part of Teck Cominco (TEK-T).
“We are developing an entire district of gold-copper porphyries,” says company Co-Chairman Robert Dickinson, “the most advanced of which is the Pebble deposit.”
Earlier this year, Northern Dynasty tabled an independent resource estimate that enhanced the economic potential of the Pebble deposit. The study, by Australian-based Snowden Mining Industry Consultants, nearly tripled the tonnage in the higher-grade core of the deposit to 141 million tonnes grading 0.48% copper and 0.67 gram gold per tonne (the previous estimate was 54 million tonnes grading 0.54% copper and 0.46 gram gold). Using a 0.7% copper equivalent cut-off, the inferred resource comes in at a favourable 271.3 million tonnes grading 0.43% copper and 0.59 gram gold. Overall, using a 0.3% copper equivalent cut off, the inferred mineral resource now stands at 1 billion tonnes grading 0.3% copper and 0.4 gram gold per tonne, which is in line with the earlier estimate of 1 billion tonnes grading 0.3% copper and 0.34 gram gold per tonne.
“Comparing the 271 million tonnes at 0.86% copper equivalent to other mines that have come on stream in recent years like Kemess South in northern British Columbia (200 million tonnes grading 0.22% copper and 0.63 gram gold), Cadia in Australia (204 million tonnes grading 0.17% copper and 0.73 gram gold) and Bato Hijau in Indonesia (914 million tonnes grading 0.52% copper and 0.41% copper), the Pebble deposit is much more robust, ” states Dickinson.
An early stage economic model for the deposit, using a 0.7% copper equivalent cut off and with the company funding the entire project cost, shows an before tax rate of return of 11.7%. The scenario, which uses US$0.90 per lb. for copper, US$350 per oz for gold and US$4.50 per lb. for molybdenum, envisions a 90,000 tonne per day concentrator cranking out 265.2 million lb. of copper and 470,556 oz of gold per year for the first 9 years of a 20 year mine life. Cash production costs are slated to hit US$0.54 per lb. of copper and US$141.4 per oz of gold. Capital costs ring in at US$927.3 million with a 2.5 year construction period and sustaining capital of another US$122.5 million.
“We have a world class production profile with a chance to develop a major mine,” adds an excited Dickinson.
Over the winter, Northern Dynasty laid out the 110 drill holes collared on the resource lands and developed a geological model for the mineralization. The results indicate that the pebble deposit is intruded by a series of small stock with at least three of them marking the mineralizing source. Several priority areas within and adjacent to the deposit were indentified including two newly identified mineralized granodiorite porphyry stocks within the deposit. The company also determined that the higher-grade material actually occurs at the carapice of the stocks in both the intrusive and surrounding volcanic country rocks.
“The Pebble deposit hosts dramatically more good-grade resources than previously recognized,” says Dickinson, “and we now plan to move the project rapidly toward prefeasibility for a large-scale mining venture.”
Regional
The results from last year’s 11,300 metre drill program surrounding the Pebble deposit also boosted the economic promise of the region.
“We drilled 68 holes to see if the sulphide system around the pebble deposit was pregnant, and indeed it was,” continues Dickinson.
The program led to the discovery of three new distinct types of potentially economic mineralization south of the historic deposit.
The first new discovery lies 12 km southwest of the Pebble deposit, where hole 34 cut 64 metres grading 0.3% copper and 0.2 gram gold per tonne at a down-hole depth of 21.3 metres. Moving 450 metres to the north, hole 38 hit 160 metres grading 0.32% copper and 0.33 gram gold at 35.4 metres down-hole.Subsequent drilling outlined a mineralized zone some 1 km long and up to 600 metres wide with the zone still open along strike and at depth. All 16 holes drilled into the new find show classic copper-gold-molybdenum porphyry-style mineralization but lack the sills and dykes commonly observed in the Pebble deposit.
Moving 5 km west of hole 38, hole 37 tested a 1-km-long gold-copper soil geochemical anomaly and cut a broad zone of chalcopyrite-pyrrhotite skarn-style mineralization, yielding 0.4% copper and 1 gram gold over 79 metres at 14.9 metres down-hole. Included in this section was a higher-grade portion running 1.7% copper and 3.6 grams gold over 6.5 metres. Moving 1.5-2 km north, four scout holes returned narrow sections of up to 0.7% copper and 5.2 grams gold.
Some 5 km southwest of the Pebble deposit, hole 25 tested an 800-by-800-metre gold-in-soil anomaly and returned an impressive 28.9 grams gold over 6.1 metres. The mineralization is hosted in a biotitic pyroxenite and lies 350 metres southwest of a previous Cominco hole, which returned 33.9 grams gold over 1.5 metres. Additional drilling returned 15.3 grams gold over 3.1 metres in hole 62.
All three styles of mineralization occur within a 22-by-6-km multi-phase intrusive corridor at the southeastern edge of the Kaskanak batholith and are associated with a late Cretaceous intrusive complex.
The junior is in the midst of a 15,000 metre drill program designed to expand the higher grade resources as well as to follow up the new discoveries.
The first priority of the new drill campaign is to upgrade and fully delineate the higher-grade gold-copper resources within the Pebble deposit. The first few holes of the program will utilize oriented-core methods to determine the dominant mineralized fracture orientations in order to determine the most appropriate angle to drill the deposit. Out of the 110 historic holes only 7 were drilled at an angle.
“The angle holes were 13.6% higher in grade than the vertical holes,” states Dickinson.
Copper porphyry success
The Hunter Dickinson group is no stranger to discovering and advancing large copper porphyry deposits.
“The hallmark of this group is success with copper-gold porphyries,” says Dickinson. “Our first project was Continental Gold at Mt. Milligan (65 km west-southwest of Mackenzie, BC), which was taken over for $182 million, or $20 per share back in 1988.”
From there, the group went on to discover, develop, and permit the Kemess South deposit under the El Condor Resources banner.
“We had a 60% interest and our shareholders were taken out at $7 per share for a total project value of $170 million,” adds Dickinson.
According to Dickinson, “Pebble is 5 or 6 times more robust then these projects and we have the technical and management team to move it forward.”
The group also holds the past producing Gibraltar copper mine in McLeese Lake, BC under Taseko Mines (TKO-V).
The Hunter-Dickinson group of companies first became involved in the Pebble project back in 2000 when management recognized the prospects for additional discoveries within the large alteration system associated with the deposit. The group inked a deal with Cominco, and subsequently staked additional ground southwest of the original claims and ran a geophysical survey, which expanded the existing anomaly to a 21-by-9 km area. The accumulated data enabled company geologists to define six large coincidental geochemical and geophysical target areas over the 258-sq.-km project. Pebble marks the largest and northernmost anomaly. With the ground tied up and the targets in place, HD assigned the project to Northern Dynasty late in 2001.
Under the deal, the junior can purchase the 36 claims covering the Pebble deposit by paying Teck Cominco US$10 million in cash or stock by Nov. 30, 2003, and purchasing HD’s 20% interest in shares at its independently ap
praised value. Once the purchase is complete, the junior can earn a half-interest in the surrounding property by completing 18,290 metres of drilling before Nov. 30, 2004. A 2-year extension is available at a cost of 100,000 shares per year. At that time, Teck Cominco can elect to enter into a 50-50 joint venture or sell its remaining half-interest to Northern Dynasty for US$4 million and a 5% net profits interest. In December 2002, the junior issued 200,000 shares to the major in exchange for a one-year extension on the purchase agreement to Nov. 30, 2004.
Boosting the junior’s financial clout to advance the project is a $5 million private placement taken by London-based group, Shambhala Gold. The deal includes 6.94 million units priced at $0.72 each. A unit holds one share and one warrant, which is exercisable at $0.90 until June12, 2004. At the end of the day, Shambhala would hold a 26% stake in Northern Dynasty, slightly less than the 37% held by current management. With the potential exercise of the associated warrants ($6.25 million), current dilutables ($3.5 million) and $850,000 in cash, Northern dynasty has the prospects of $15.6 million to advance the Pebble property.
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