At its High Lake polymetallic project in Nunavut,
The wholly owned High Lake massive-sulphide, copper-zinc deposit and the satellite Ulu gold deposit are 55 km apart in western Nunavut’s Coronation Gulf area, some 550 km northeast of Yellowknife, N.W.T.
Kennarctic Explorations discovered the first deposit at High Lake in the 1950s by using airborne surveying, but the project mostly lay dormant until 1991, when Kennecott (now a subsidiary of
The partners defined resources totalling 5 million tonnes from two known volcanogenic massive sulphide (VMS) deposits — an insufficient amount to start up a mine in such a remote area.
Wolfden acquired the High Lake massive-sulphide project from the two partners and last year discovered the high-grade West zone, 1.6 km west of the previously known A/B and D zones. The discovery hole returned 6% copper and almost 2% zinc, plus 149 grams silver and 3.5 grams gold per tonne.
The West zone ranks as one of the world’s highest-grade, undeveloped VMS deposits, in recognition of which Wolfden was presented with the “Bill Dennis Prospector of the Year” award at the 2004 convention of the Prospectors & Developers Association of Canada.
As result of this year’s drilling, Wolfden geologists are rethinking a previous interpretation of the West zone as a folded body; they now believe there are two separate lenses: the West zone and the West Extension. The latter, also known as the 007 lens, has a greater strike length than the 300-metre-long West zone.
As well, the West zone was previously believed to be cut off at depth in the northern portion, but recent drilling resulted in Wolfden’s biggest interval (45 metres) of sulphides at depth, at around 700 metres, where the deposit remains wide open.
Wolfden will not drill underneath that intercept until underground development gets under way.
In the short term, until the West zone area deposits are better understood, mining could begin relatively swiftly with open pits at the A/B zone, then proceed underground to the deeper D zone via a ramp.
Wolfden meanwhile expects to have a revised resource estimate for the High Lake deposits in November or December.
Wolfden began drilling the West zone following an airborne survey, and there are more untested anomalies south of the zone, says company President Ewan Downie. These will be drilled as part of next year’s program, the budget for which will equal, or possibly exceed, the $6 million spent in 2004.
“These massive sulphide deposits typically occur in clusters, which are what gave rise to such mining camps as Rouyn-Noranda and Flin Flon,” says Downie. “So far, we’ve found three near-surface deposits at High Lake, and we feel that many more can be found in the district.”
He adds: “The potential here is excellent, and we feel that the West zone is one of the largest and highest-grade VMS discoveries since Louvicourt [in Quebec], which was a company-maker for Aur Resources.”
Wolfden minority shareholder
Ulu gold
To the south at the Ulu gold project, Wolfden is sitting on a well-defined mesothermal resource of 1.4 million tonnes grading 12.91 grams gold down to 360 metres, or 565,000 contained ounces gold.
Wolfden acquired it late last year from
The original discoverer and operator,
To date, more than $40 million has been spent exploring and developing Ulu. A feasibility study was prepared in 1998, and underground development is mostly finished.
Kinross had originally planned for the mine to start producing in 2004, with ore transported to the company’s Lupin gold mine via a winter road which Echo Bay built in 1996.
However, grades petered out at depth at Lupin in 2003, forcing Kinross to shut the operation down.
The decision to sell Ulu followed. “If we didn’t have High Lake, we wouldn’t have wanted Ulu,” says Downie. “It’s not a stand-alone project, and for Kinross, Ulu only made sense if Lupin was making money.”
The Ulu purchase came with a full, 50-person mining camp and a runway with year-round access. Wolfden is now extending the runway so Hercules aircraft can land. Most of the heavy equipment necessary for surface and underground development is already at the project site.
Kinross completed a ramp to a depth of 155 metres and crosscut down into the ore on four levels, creating a surface stockpile of 2,200 tonnes grading 13.8 grams per tonne. At a depth of 155 metres, the ore zone has a true width of 5.2 metres and grades 19.1 grams per tonne. In 2005, Wolfden will be drifting on several of these zones in preparation for mining in 2006.
“The main area for growth in this deposit is at depth,” says Downie. “It has had three deep holes in the past, grading up to 19 grams per tonne.”
Wolfden’s latest follow-up drilling at depth at Ulu has intersected massive sulphides, just like at High Lake. The grades have been high: 7.5% copper, almost 7% zinc, 149 grams silver, and 1.05 grams gold across 2 metres.
Again, Wolfden will not be doing any follow-up work on that zone until the underground mining phase begins.
Meanwhile, a deal recently signed with
By the end of the year at Ulu, Wolfden will have tabled an updated resource, and the company will continue delineation drilling until a full feasibility study is completed before the end of 2005.
Wolfden hopes to being mining at Ulu in 2006 and achieve commercial production in late 2007. The mine is expected to last at least 10 years.
Central mill
Wolfden plans to build a central mill that will accept feed from both the High Lake and Ulu deposits. Base metal concentrate would be transported 45 km to the north by all-season road to a seasonal (4-month) seawater port, to be built on Coronation Gulf. From Ulu, Wolfden will be producing some gold bullion throughout the year and flying it out regularly.
“Producing gold year-round from Ulu and thus generating constant cash flow are key to the success of any base metal project in the Arctic,” says Downie.
The task of building a mill was made much easier in early 2003, when Wolfden acquired all the facilities they will need for production from zinc miner
“These acquisitions drastically enhance the economics of the project, because we paid nothing for them.” says Downie. “The cost for us has to do with dismantling the facility and taking it away.”
As a bonus, Breakwater refurbished the mill only eight months before shutting it down. It had been operating at the rate of 1 million tonnes per year.
One of Wolfden’s goals is to replace some of the mill’s crushing circuit, since the High Lake-Ulu ore will not require as much crushing as the Nanisivik ore did, and so the throughput rate can be increased.
Adds Downie: “Our targets are a twelve-year mine life and an annual mining rate of 1.2 million tonnes, so we need a 14.
4-million-tonne resource.”
Gold portfolio
Farther south, Wolfden has a portfolio of active gold exploration projects, including projects with
Wolfden has also been investing in other juniors, such as
“Wolfden is one of North America’s most-active exploration companies, and we are in the process of making the transition from being an exploration company to a development company,” says Downie, noting that the exploration budget on Wolfden’s seven active properties is more than $25 million in each of 2004 and 2005.
With about $43 million in cash in the bank and no debt, Wolfden is “fully financed to take our primary project [High Lake-Ulu] to full, bankable feasibility,” says Downie.
Wolfden has 50.2 million shares outstanding (54.8 million fully diluted) and last traded at $4.70 in a 52-week range of $3.93-7.70.
“The growth in our company will come as we move from being an explorer to a metals producer,” says Downie, who reckons that Wolfden is trading at about a 45% discount to its net asset value. With companies that are taking gold and base metals projects into production trading at about 1.4 times their net asset value, Downie sees room for Wolfden’s share price to rise.
(In a recent research report, BMO-Nesbitt Burns mining analyst David Mallalieu writes: “Given that High Lake could potentially be the most attractive base metal development project in Canada, there is a real possibility that the company could be a takeover target.”)
“Our strategy is also to grow through acquisitions, and we’re always looking for more opportunities,” says Downie. “Above all we’re proud Canadians, and so everything we do is here in Canada. There are land issues in other parts of the country, but I do think that Canada is the most favourable jurisdiction for mining in the world.”
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