Lac des les resource expected to grow

Ongoing drilling at the Lac des les palladium-platinum deposit, 85 km north of Thunder Bay, Ont., continues to expand the Roby zone.

Since mid-January, North American Palladium (PDL-T) has sank 40 holes totalling 20,000 metres as part of a US$3-million, 100,000-metre campaign planned for the zone in 2000. The recent holes were collared in the eastern section of a proposed pit expansion to confirm stepout drilling in the downdip extensions of the Roby and North Roby zones.

In the Roby zone, breccia and pyroxenite mineralization was outlined over a strike length of 183 metres. Palladium values varied from 1.37 to 5.74 grams per tonne over true widths of 29 to 136 metres. Also, several holes intersected the southern portion of that zone deeper than anticipated; for instance, hole 87 pierced 81 metres (true width) of 2.13 grams palladium, starting at a down-hole depth of 300 metres.

Furthermore, three deep holes extended by 200 metres the higher-grading pyroxenite unit to between 600 and 800 metres below surface. (The expanded pit is envisaged as bottoming at 500 metres.) Results are as follows:

– hole 204 cut 72 metres (true width) of 2.39 grams palladium per tonne, including 17 metres of 7.14 grams palladium;

– hole 206 intersected 29 metres (true width) of 1.9 grams palladium, including 9 metres of 3.52 grams palladium; and

– hole 209 hit 41 metres (true width) of 3.13 grams palladium, including 19 metres of 5.86 grams palladium.

All the deep holes were drilled along the central and northern portions of the Roby zone. Further drilling will test for continuity along strike.

Holes 00-46 to 00-57 targeted the North Roby zone, which is characterized by varitextured gabbro and gabbro breccia. Drilling intersected the zone over a strike length of 122 metres, returning between 1.17 and 2.48 grams palladium over true widths of 12 to 78 metres, between 258 and 456 metres down-hole.

The latest round of drilling also confirmed a new area of near-surface mineralization to the southeast of the Roby zone, just outside the planned pit. Dubbed Twilight, the zone so far runs between 1.42 and 4.14 grams palladium over 18 to 186.3 metres (core lengths).

The Twilight zone stretches over a strike length of 91 metres and thickens to as much as 167 metres (which averaged 1.35 grams palladium) in true width. Mineralization is hosted mainly by heterolithic gabbro and gabbronorite breccia, similar to the Roby breccia unit, and remains open along-trend to the southeast.

Based on current results and the zone’s projected trend, NAP expects Twilight to boost known project resources, which currently stand at 23.5 million tonnes grading 1.46 grams palladium, 0.18 gram platinum and 0.11 gram gold per tonne, plus 0.05% copper and 0.52% nickel. The resource lies outside the pit shell and is being revised to include recent drill results. (All holes included credits of platinum, gold, copper and nickel.)

Since production began in late 1993, Lac des les has held the distinction of being Canada’s only primary platinum group metals mine and North America’s largest open-pit producer of palladium. Though a string of losses has overshadowed the achievement, new management, appointed in 1998, is expected to reverse this.

The expansion project will see daily milling capacity increased to 15,000 tonnes from the current 2,400 tonnes. Feed will be supplied from the enlarged pit, which hosts proven and probable reserves of 74.2 million tonnes grading 1.64 grams palladium, 0.18 gram platinum, 0.14 gram gold, 0.07% copper and 0.06 gram nickel, all of which is based on a cutoff grade of 0.92 palladium-equivalent. The life-of-mine stripping ratio is calculated to be 2.26-to-1, and plans call for the new plant is to be commissioned in mid-2001. Annual production thereafter is expected to top 248,900 oz. palladium, 24,200 oz. platinum, 19,100 oz. gold, plus copper, nickel and cobalt credits. Cash production costs over the projected 11-year mine life are pegged at US$131 per oz., net of byproduct credits but excluding royalties.

NAP has already negotiated US$90 million of the US$126.5-million capital cost with a syndicate of Canadian banks and plans to finance the remainder through equity. The credit facility is secured by the company’s largest shareholder, Kaiser-Francis Oil, which has also agreed to cover any cost overruns during development. That company holds 17.4% of NAP’s 12.2 million outstanding shares and 10 million of its Series A preferred shares. Another 16.8% block of the common shares is held by Sheridan Platinum Group.

Payback is expected in 2.5 years, and the after-tax internal rate-of-return is pegged at 26.6%, based on a palladium price of US$350 per oz. in 2000-2002 and US$320 thereafter, a platinum price of US$410 per oz., and a gold price of US$330 per oz.