Feasibility, local support augur well for Arctic Platinum project
With a mandate to grow and diversify geographically, management of South Africa’s
Drilling at the Arctic Platinum project, a joint venture with
“If the project continues the way it is going, it will, I am sure, contribute quite materially to the full value of Gold Fields,” says Chris Thompson, that company’s chairman and chief executive officer.
Two years ago, Gold Fields formed the Arctic Platinum Partnership (APP) with Outokumpu in north-central Finland, with the former acting as operator. The project area comprises 390 sq. km within a larger, 9,500-sq.-km area of interest. In January, the South African major completed a 51% earn-in acquisition after spending more than US$13 million on exploration.
The project area is part of a 125-km-long regional crustal contact dividing early Proterozoic volcanic and sedimentary rocks of the Svecofennide greenstone belt from Archean rocks that include gneisses, granites and older greenstone belts. Layered, mafic-ultramafic intrusions are localized along this major geological feature.
Outokumpu first targeted the area in the 1960s, looking for extensions of its chrome operations at Kemi. During the 1980s, the company explored specifically for copper-nickel-PGMs, amassing a database of more than 1,100 drill holes. A number of mineralized occurrences were identified in several early Proterozoic mafic-ultramafic intrusions, including the Portimo complex and Penikat intrusion. These two areas have distinctly different styles of mineralization.
A lot of Outokumpu’s drilling was done in clusters around higher-grade intercepts. More than 700 holes in the Penikat complex defined three reef-type PGM horizons. These reefs consist of conformable-to-igneous layering that strikes in a northeast direction and dips, moderately to steeply, to the northwest. The reefs at Penikat are geologically analogous to those of the Merensky Reef at the Bushveld complex in South Africa or the J-M Reef at the Stillwater complex in Montana.
The Portimo mafic layered complex hosts fault-displaced mafic intrusive bodies. Outokumpu generated four prospects, two of which, Konttijarvi and Ahmavaara, occur as broad zones of lower-grade, disseminated copper-nickel-PGM sulphide mineralization at the base of the Konttijarvi-Suhanko intrusion.
These two targets were the initial focus of resource definition drilling by the APP under the operatorship of Gold Fields. In summer 2001, the joint venture unveiled a 6-million-oz. PGM resource for the two deposits, contained in 117.5 million tonnes grading 1.19 grams palladium, 0.28 gram platinum and 0.11 gram gold per tonne, plus 0.19% copper and 0.08% nickel. The combined PGM resource is equivalent to 1.58 grams palladium-platinum-gold.
The estimate was prepared by Snowden Mining Industry Consultants based on a combined PGM cutoff grade of 0.5 gram per tonne. Preliminary studies suggested that a significant portion of the resource is minable by open-pit methods at an overall stripping ratio of between 2-to-1 and 3-to-1.
Based on 322 core holes totalling 28,000 metres, the Konttijarvi deposit contains a measured, indicated and inferred resource of 43.4 million tonnes grading 1.42 grams palladium, 0.39 gram platinum and 0.1 gram gold, plus 0.15% copper and 0.06% nickel.
Ahmavaara was drilled with 163 diamond drill holes totalling 19,171 metres for a total resource of 74.1 million tonnes grading 1.05 grams palladium, 0.22 gram platinum and 0.12 gram gold, plus 0.21% copper and 0.09% nickel.
If the lower cutoff is increased to 0.9 gram PGM, the combined resource of the two deposits falls to 5.2 million oz. in 85.4 million tonnes grading 1.91 grams palladium-platinum-gold.
The mineralization is hosted in a laterally extensive stratabound zone at the base of the Konttijarvi-Suhanko intrusion. Ranging from 30 to 60 metres thick, the near-surface mineralized zones extend over a strike length of more than 2 km. Ahmavaara occurs as a showing on the western end of the Suhanko intrusion, which is exposed over a strike of 18 km. The western margin of Ahmavaara is bounded by a northwest-striking fault that continues to Konttijarvi, which occurs in an isolated fault-bounded segment.
Both deposits dip 30 from surface, though Ahmavaara flattens out over a large area, starting at a depth of between 100 and 150 metres. Each of the deposits has been drilled to a depth of 200 metres.
‘Sturdy economics’
After scoping studies suggested that the project could produce more than 400,000 oz. PGMs per year, yielding “sturdy economics at prices below US$350 per oz. for palladium and platinum,” Gold Fields initiated a bankable feasibility study. The study, due in September 2002, is going well, says Managing Director Ian Cockerill, adding that no major technical problems are evident. In the study, the Konttijarvi and Ahmavaara deposits are referred to collectively as the Suhanko project.
So far, the study has focused on metallurgical responses of the Suhanko mineralization. Tests have firmed up the grade of the concentrate and screened for any deleterious elements that may come through to concentrate. The work is also trying to determine whether this concentrate can be treated at existing smelter facilities.
The Suhanko project is close to tide water and within 200 km of Outokumpu’s Harjavalta copper-nickel smelter, which Gold Fields says may be capable of handling platinum group concentrate, with some modification.
“Work to date has shown us that there are no metallurgical black holes,” states Cockerill. “We started the initial phases of the environmental impact assessment and have had some hearings in Finland, and I think the response from the local community has been very favourable.
“We have also firmed up our proposed mining costs, and some of the metallurgical costs as well,” he adds. “The costs are all very much in line with, if not better than, some of those outlined in the original scoping study.”
Gold Fields is using prices of around US$325 per oz. palladium and US$400 per oz. platinum in its feasibility work. “We’re testing at lower prices,” says Thompson, “because we’re well aware that market sentiment suggests palladium prices may be headed lower.”
Ford writedown
Palladium is mainly used in catalytic converters, which curb emissions in automobile exhaust systems, and, to a lesser extent, in electronic components and dentistry. Early this year, Ford Motor Co. took a US$1 billion writedown of its PGM stocks, which it acquired at historically high prices triggered by the uncertainty of supplies from Russia. Canaccord Capital analysts estimated Ford held 1.6 million oz. in PGMs, including 1.4 million oz. palladium, enough to cover its demand for the whole of 2002.
In a recent filing with the U.S. Securities and Exchange Commission, Ford said its engineers had validated a breakthrough in catalyst design during the fourth quarter of 2001, which will help reduce the company’s usage of palladium. Ford projected its 2002 usage will be 50% lower than in 2000. Accordingly, Ford has revised its stocking requirements and is in the process of reducing excess inventory by selling into the market to the extent that the market can absorb the palladium in an orderly fashion. Ford may also cash settle-forward precious metal contracts in lieu of taking physical delivery.
Russians
“Throw the Russians into the mix [sellers at plus US$400 per oz. palladium], along with weak demand for platinum and palladium in Japan, and PGM prices look to be moving lower, or sideways at best,” states Canaccord’s Brian Christie.
Cockerill says the Suhanko operation is designed to make sure it is viable at a low palladium price, but the project is not en
tirely dependent on palladium: “Fairly healthy cash flow is expected to stem from platinum, gold, nickel and copper values as well.”
Gold Fields is also encouraged by drilling in the SK area, 20-30 km northeast of the Suhanko project, which has outlined an additional 5.1 million oz. PGMs in an inferred resource of 30.3 million tonnes grading 3.9 grams palladium, 1.1 grams platinum and 0.2 gram gold, plus 0.14% copper and 0.11% nickel.
“It’s much higher-grade [than Suhanko], somewhat narrower in expression and with a similar metallurgical response,” says Cockerill.
The resource estimate incorporates three areas along the SK Reef, including Siika Kama, Nutturalampi and Kuohunki. Snowden Mining used a lower cutoff grade of 2 grams PGMs to calculate the resource, which was based on 16,700 metres of drilling, including 12,500 metres drilled by APP and 4,200 metres of earlier drilling by Outokumpu along a 6-km-long aggregate strike length.
The SK Reef occurs as a stratiform reef in the Narkus intrusion of the Portimo layered complex. It has been traced in outcrop and shallow drilling over 10 km. The SK Reef dips 20-40 and has been tested to a maximum depth of 300 metres. The drilled sections have an average reef thickness of 4.9 metres. Additional PGM mineralization occurs above and below the reef and can extend up to 15 metres into mineralized footwall gabbro.
A scoping study is currently evaluating a stand-alone mining operation on the SK Reef and the impact of milling the higher-grade material as supplementary feed to the Suhanko project.
The APP is rapidly moving toward a production decision at Suhanko and has begun to assess what sort of impact its production forecast will have on the market.
Gold Fields was formed in 1998 from the merger of the gold assets of Gold Fields of South Africa and Gencor. An expansion drive to add offshore ounces has taken it to Australia and Ghana, and operations in these two countries now account for some 35% of the company’s yearly gold production base of 4.5 million oz.
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