London-based
The Nalunaq project is a joint venture between operator Crew, with an 82.5% interest, and
Built at a cost of US$10 million, the nearly finished Nalunaq mine is situated in southernmost Greenland, 40 km northeast of the coastal town of Nanortalik (population 2,500). The mine site is accessible by a 40-minute helicopter ride from the international airport at Narssarsuaq.
The Nalunaq deposit is at an elevation of 215 metres above sea level about halfway up the broad, glacial Chuchspir valley, and about 6 km by road from the tidewater of the ice-free Saqqaq fjord, from which Crew will be shipping ore.
Being located so close to the ocean means that the temperatures on site are relatively mild for the Arctic, with no permafrost, moderate precipitation, and temperatures ranging from 19C in July to -21C in February.
Geologically, the Nalunaq is a mesothermal, vein-type gold deposit, hosted in amphibolite-facies metabasic rocks occurring along a contact zone between a Cordillera-type marginal batholith complex, the Julianehaab two-mica granites, and the Southern migmatite complex.
Gold, often coarse-grained, is hosted by a very continuous ductile shear zone and an associated 0.1-2 metre-wide sheeted quartz vein called the Main vein. The two structures strike to the northeast and dip about 36 to the southeast.
The Nalunaq area was first explored for uranium by the Greenland Geological Survey in 1979-80, and then for platinum and base metals by Platinova Resource and Boulder Gold in the late 1980s.
Gold mineralization in the region was first reported in 1986, leading a local company named Nanortalik Minerals and a Cominco subsidiary to team up for a brief period to examine several placer gold prospects.
In 1990, NunaMinerals (then named Nunaoil and owned 50-50 by the Danish and Greenlandic governments) turned its attention to gold. The company re-assayed stream-sediment samples taken during the uranium work, carried out further sampling in southern Greenland, and discovered the Nalunaq deposit in 1992.
The next year, Nunaoil formed a joint venture with a subsidiary of Cyprus Minerals and together they tested the Main vein with 13 drill holes totalling 3,000 metres. Disappointed with the results, Cyprus then withdrew from the JV.
Undeterred, Nunaoil continued to explore, expand and develop the deposit, and took on a new JV partner in 1997: the Norwegian company Mindex.
The new partners launched a major program in 1998 that included trenching, the excavation of a 288-metre adit, bulk sampling, and the drilling of 37 diamond drilling holes totalling 5,100 metres.
That same year the non-oil and gas assets of Nunaoil were spun off into NunaMinerals, which was then wholly owned by the Greenland government.
The Nalunaq work culminated in a positive prefeasibility study in March 1999, completed by consultant H.A. Simons (MRDI). Later that year, Mindex merged with Crew.
Strathcona Mineral Services came onto the scene in 2000, designing and executing an underground development program that established the continuity of the mineralized structure.
In March 2002, Toronto-based consultants Steffen Robertson and Kirsten completed an independent review and resource estimate for Nalunaq, and SRK’s work, in turn, was reviewed by Strathcona.
SRK’s resource estimate was based on 90 drill holes totalling 15,000 metres, 2.8 km of adits and raises within the mineralized structure, and 480 bulk samples weighing 50-70 tonnes each.
With the deposit exposed along the mountainside, surface sampling was also carried out over 2 km of exposed outcrop. Another 1 km of access drifts and waste development were completed as well.
SRK delineated measured and indicated resources of 396,600 oz. gold, contained within 414,000 tonnes grading 26 grams gold per tonne in the Main vein and 70,000 tonnes of 24 grams gold in the South vein, with both sums calculated using a 1.2-metre minimum mining width and a 2-gram cut-off grade.
Inferred resources were pegged at 240,000 tonnes of 21 grams and 41,000 tonnes of 19 grams in the Main and South veins, respectively.
A full feasibility study was then swiftly completed by Kvaerner.
The Nalunaq base-case mining scenario, updated this year, envisages a 10-year mine life with initial gold production of 130,000 oz. gold per year at cash cost of US$169 per oz. — a significant boost from last year’s planned output of 90,000 oz. annually in the early years.
The updated plan allows for mining of 450 tonnes per day, or about 150,000 to 160,000 tonnes per year, starting in January 2004. The average head grade during the first two years is expected to be an impressive 31 grams gold per tonne.
It’s anticipated that the free cash flow from Nalunaq to Crew will be about US$15 million per year, or C15 per share after tax and minority interests, based on a gold price of just US$345 per oz.
Comments Crew: “Due to the high-grade, low-cost nature of the mine, the Nalunaq project has more robust economics than most gold mines.”
The Nalunaq project cleared its final major hurdle this past April, when the governments of Greenland and Denmark granted the partners a 30-year mineral exploitation licence.
One reason the capital costs of the mine are so low is that the partners decided to ship the ore offshore for toll processing — saving the US$16 million it would have cost to build their own plant.
In September, Crew and NunaMinerals signed a preliminary deal with
(Rio Narcea came upon its extra milling capacity by deciding to move from open-pit mining at El Valle to smaller-tonnage, underground mining.)
The Rio Narcea toll-processing arrangement replaces one that Crew had struck with
Another piece of the puzzle fell into place in early October, with Crew signing up Vancouver-based Procon Mining and Tunnelling to provide contract mining. Procon had already been involved in test mining at Nalunaq.
Meanwhile, the partners are also planning a new round of aggressive exploration at the mine site that they hope will replace and expand the current reserve base. They will also continue their reconnaissance work elsewhere on the large Nalunaq land package.
Crew recently decided to finance the final development of Nalunaq on its own, and will not draw upon a previously announced US$8-million project loan from Standard Bank (London), though Crew may choose to use a portion of a similar revolving credit line with Standard for working capital purposes.
Elsewhere in southwestern Greenland, Crew is exploring its wholly owned Seqi olivine deposit, situated 90 km north of Greenland’s capital city Nuuk.
Seqi is a 46-million tonne, homogenous deposit made up of 97% olivine — which can be used in iron-pellet production.
Crew reckons that a production rate of 1-2 million tonnes per year from a shallow open pit is viable.
During the summer, Crew signed an agreement with Minelco, a subsidiary of the Swedish iron-ore producer
Once the study is completed, Minelco has an option to buy 51% of Seqi by carrying all capital expenditures related to development of a mine, but with Crew retaining operator status.
For the year ended June 30, 2003, Crew posted a net loss of $18.9 million (14 per share) compared with a loss of $40.8 million (31) in 2002. Cash on hand totalled $6.7 million on June 30. Most of the recent loss resulted from the disposal of non-core assets, such as shareholdings in Metorex and Asia Pacific Resources. These disposals come as Crew reorients itself from being a multi-commodity company to one focused primarily on gold.
To save money, Crew has cut back its presence in Canada and Norway, and the company is now largely run from its head office in London.
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