NAP takes a swing at APP

North American Palladium (PDL-T, PAL-N) has agreed to spend the next two-and-a-half years examining the feasibility of reviving Gold Fields (GFI-N, GOF-L) Arctic Platinum project near the Arctic Circle in Finland.

Gold Fields mothballed the project in April owing to depressed palladium prices, increased capital costs, and a strengthening euro. Gold Fields also said at the time that there was insufficient smelter appetite for the proposed mine’s output.

Late last year, a review of the latest resource model of the Suhanko deposit saw estimated head grades slip below 1.9 grams per tonne combined platinum, palladium and gold, from original estimates exceeding 2 grams.

The study also boosted the project’s capital cost to more than US$500 million from previous estimates of US$300 million. The increase reflects a strengthening euro against the greenback, and dramatic increases in input and labour costs.

The company says US$120 million worth of the capital increase is owing to pricing increases and significant euro appreciation, with some US$70 million associated with design and scope changes.

Gold Fields consolidated ownership of the Arctic platinum project in 2003 by buying Outokumpu’s 49% stake for US$23 million in cash and US$8 million in shares, which Outokumpu quickly cashed in. Gold Fields has since spent US$90 million on the project up to the end of March 2005.

NAP can pick up a 60% interest in the project by completing a US$7.5 million re-scoping study and exploration program, followed by a US$5 million feasibility study by the end of June of 2008. Thereafter, NAP would have to fork over US$45 million worth of shares on a positive production decision. The price per share will be based on the weighted average trading price on the American Stock Exchange for 11 trading days, beginning on Oct. 11.

Also under the deal, Gold Fields will retain a back-in right to reacquire a 10% interest by returning 20% of the NAP shares issued to it. NAP will remain operator of the joint venture.

The new scoping study will primarily aim to define a mineable resource of 5 million oz. of combined platinum, palladium and gold at grades exceeding 3 grams per tonne. The study will also consider various mine design and processing options. Gold Fields had originally envisaged the project as a 10-million-tonne-per-year open-pit with an on-site concentrator, exploiting the Konttijarvi and Ahmavaara deposits.

Exploration work will focus on the SK and SJ Reefs with the goal of establishing a new geological model to support a combined mine plan. The company will also explore elsewhere along the along the Archaean-Proterozoic contact.

The scoping and feasibility studies are slated to begin in early 2006.

The companies said in a prepared statement that the project’s location and geology are “quite similar” to that of North American Palladium’s Lac des les mine, near Thunder Bay, Ont., thus allowing NAP to use its operating and development experience in the design and construction of a mine.

At the end of June 2004 (Gold Fields’ financial year-end), resources in all classes totalled 168.3 million tonnes containing 1.76 grams palladium, 0.45 gram platinum, 0.12 gram gold plus 0.19% copper and 0.09% nickel. The resource includes 118.9 million tonnes of open-pittable resources comprising the Suhanko project, where grades average 1.47 gram palladium, 0.35 gram platinum, 0.15 gram gold plus 0.23% copper and 0.09% nickel. Suhanko comprises the Konttijarvi and Ahmavaara and Ahmavaara East deposits, which are part of the Portimo layered mafic intrusive complex.

The project centres on 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. A series of layered, mafic-ultramafic intrusions are localized along this major geological feature. Platinum group metal mineralization occurs near the base of the layered mafic intrusions.