Newfoundlan’s exploration potential draws interest

Geologists remain convinced that “the rock” is still one of this country’s prime exploration bets with plenty of targets still to be tested. Visible gold showings have been encountered on numerous properties to date, and companies active in Newfoundland are confident that it’s just a matter of time before more significant discoveries are made.

Despite the general optimism, however, some industry sources fear that part of last year’s exploration momentum could be lost if metal prices, especially gold, sink to unattractive lows.

As elsewhere, gold has been the main driving force behind Newfoundland’s vibrant exploration sector and its price remains a key variable in determining the levels of exploration activity for the yellow metal.

Last year saw several new gold discoveries result from annual expenditures estimated at about $40 million in Newfoundland.

Similar levels of expenditures are anticipated this year, although the junior sector is likely to contribute less, with senior companies taking up the slack.

Backed by a proud mining history, Newfoundland has in recent years witnessed a new assault on its geological formations — regarded by many as some of the most naturally productive, yet still relatively untested, in Canada.

“One of the main problems here has been lack of publicity,” says Corona’s Peter Dimmell, who manages that company’s Newfoundland exploration arm. “It’s hard to get people to take the mineral potential of Newfoundland seriously,” he says.

Most of the province’s nearly one billion in annual mineral production value last year came from iron ore, but the contribution from gold will likely increase as more of the currently promising prospects become mines.

Despite getting off to a rocky start, Hope Brook Gold Inc’s (TSE) $162 million underground gold mine on the south coast is again feeding ore into its conventional mill, following a brief shutdown earlier this year.

The mill is designed to produce between 120,000-140,000 oz of the yellow metal annually from ore averaging around 0.13 oz gold per ton. Production costs are reported at around $225-$250 per oz.

Last year, the Hope Brook mine produced 73,993 oz of gold, which was below the company’s earlier forecast level. First quarter production this year totalled only 5,406 oz, and this was largely due to a 2-month shutdown for modifications to the effluent treatment system.

The Hope Brook mine has the distinction of being one of the first gold mines in the world to use all- electric underground haulage. At start-up, the project enjoyed the generous financial support of both levels of government for construction of a power line into the site.

To the west of Hope Brook, Dolphin Explorations (TSE) will be spending about $4.7 million this summer on its property where a fault zone hosted gold deposit is being prepared for a production decision.

Dolphin, controlled by Corona Corp. (TSE), says a 200 ton-per-day mill is contemplated with a production decision possible by year end.

Dolphin recently reported revised “potential mining (diluted) reserves” of 485,000 tons grading 0.302 oz gold per ton on the property.

A flotation circuit for the recovery of copper, lead and zinc is also being considered for the project, says vice-president of exploration John Thompson.

The province`s biggest exploration player by far has been Noranda Exploration which has one of the largest ground positions on the island, and together with its numerous junior partners, accounts for the lion’s share of exploration expenditures.

“Maintaining adequate levels of exploration expenditures is a key factor in sustaining momentum here,” says Noranda’s Dan MacInnis, who manages that company’s Newfoundland exploration arm.

He says if exploration expenditures are not kept at high levels for at least another few years, many of Newfoundland’s mineral properties will not mature to more advanced stages where production decisions can be made.

Noront Resources (VSE) and Noranda will conduct a $2.5 million exploration program on the Grubline joint venture this year. The Grubline is Newfoundland’s biggest grassroots gold play in terms of land area involved.

The Grub (Gander River Ultrabasic Belt) line project is located in the Gander River area of north- central Newfoundland.

Investors will likely be watching the results carefully from a number of key projects under way in Newfoundland this year, including Bitech Corp.’s (ASE) Nugget Pond prospect, where a small but high- grade gold deposit has been outlined following its discovery last year.

The company says it has already drilled off a tonnage of 555,000 tons grading 0.35 oz gold per ton at Nugget Pond.

Working with a member of the Placer Dome group, Equity Silver Mines (TSE) as its partner, Bitech appears well financed to continue exploration on its claims.

A spokesman for Bitech says an access road into the Nugget Pond site is being contemplated.

Exploration work at Nugget Pond is managed by the Toronto-based firm of James Wade Engineering, with staff totalling about 10 based in Newfoundland. The company has consulting contracts with at least four companies exploring gold on the Baie Verte Peninsula.

A joint venture agreement signed earlier this year gave Equity the right to earn a 50% interest in the property by making staged option payments totalling $12.3 million over four years, and exploration expenditures of $12.2 million.

A number of other joint venture projects on the Baie Verte Peninsula will also see active drill programs this summer. Noranda will be busy on the Stoger Tight gold prospect with partner International Impala Resources (VSE), while Corona Corp. (TSE) plans major drilling at Varna Gold’s (ASE) Lightning zone.

West of Springdale, the Rendell Jackman gold prospect will see more drilling by Noranda Exploration and partner Major General Resources, a private Vancouver company.

Significant gold mineralization on the Rendell Jackman property is contained in structurally controlled quartz-carbonate zones associated with felsic dyking in sheared sediments and mafic volcanics. Results to date have been quite encouraging and at least one drill hole intersected more than 1.0 oz gold per ton across 18 ft.

Activity could be somewhat slower this summer on the Rambler joint venture property as partners Petromet Resources (TSE), Newfoundland Exploration (TSE) and Teck Corp. (TSE) go over the results from last year’s $3.8 million work program and decide on future plans. A gold tailings project is a possibility on that property.

In central Newfoundland, exploration for gold and base metals is being led mainly by senior companies such as Noranda, BP Minerals and Rio Algom (TSE). The main prospect in that area is BP-Noranda’s Duck Pond copper-lead- zinc deposit. The massive sulphide deposit was found by drilling within a fault block of highly altered felsic volcanic rocks, and has been called a “blind discovery” by Noranda geologists. Chlorite alteration detected in early drilling indicated the presence of a potential hydrothermal system and follow-up work led to the discovery of significant mineralization.

Drill indicated reserves for the Duck Pond deposit have been estimated at 4.5 million tons grading 3.5% copper, 1.0% lead, and 6.8% zinc.

In a business where the geoscience database is crucial to exploration success, Newfoundland’s Department of Mines has also played its role in stimulating exploration activity.

Through a number of initiatives, such as geochemical surveys, mapping programs and the establishment of drill core libraries, the mines department has made a valuable commitment to mineral exploration in Newfoundland.

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