WMC advances Meliadine West gold target — Pending drill results, project could go underground

WMC International, a division of Australian-based major Western Mining Corp. (WMC-N), is nearing completion of a drilling program aimed at expanding the Meliadine West gold project in the Northwest Territories.

The 36,000-metre effort follows the release of an independent scoping study by H.A. Simons that indicated the project requires an additional 1.5 million oz. to meet the proposed 400,000-oz.-per-year production target. The existing resource stands at 3.3 million oz.

Meliadine West lies 20 km north of the community of Rankin Inlet in the Kivalliq region of what is soon to be known as Nunavut. Rankin Inlet, with a population of about 2,000 people, is on the northwestern coast of Hudson Bay. Daily jet service is provided from Winnipeg, Man., and Yellowknife, N.W.T. A seasonal barge operates from Churchill, Man., which is linked to the North American railway system.

The project is accessible by helicopter, or by winter road from Rankin Inlet. WMC is the operator and holds a 56% interest in the project, with Cumberland Resources (CBD-T) and Comaplex Minerals (CMF-T) each holding a 22% carried interest through to production.

To maintain its interest, WMC is required to make a series of escalating cash payments to Cumberland and Comaplex, and provide all financing to production. The Australian company can buy a further 4% at the time of production, for a cash payment of between $1 million and $4 million.

The adjoining Meliadine East property is a 50-50 joint venture between Cumberland and Comaplex.

Combined, the two properties cover a 70-km-long trend of gold zones and showings extending from the shores of Hudson Bay. That trend “would fit the entire Timmins camp,” remarked Cumberland’s senior vice-president Kerry Curtis during a recent tour of the area by The Northern Miner.

Gold mineralization along the Meliadine trend is associated with the a large, northeasterly trending structural break called the Pyke fault, and a parallel iron formation package. Two distinct styles of gold mineralization are present: a shear-hosted style typically found in splay faults off the main corridor that draws analogies to the Timmins area; and a banded iron formation to the north of the Pyke fault, similar in style to Echo Bay’s Lupin mine, also in the Northwest Territories, and Placer Dome’s Musselwhite mine, in northwestern Ontario.

The properties are underlain by a package of Archean-age, structurally deformed greywackes, turbidites, silica and oxide facies iron formation, as well as mafic volcanic tuffs.

Since entering into an option agreement with Cumberland and Comaplex in 1995, WMC has spent more than $17.5 million at Meliadine West. Prior to the 1998 field season, WMC drilled more than 48,800 metres, mostly on the Tiriruniak, F, Wolf and Pump zones, which comprise the so-called Wes Meg portion of the project. Much of the drilling has been carried out on 100-metre centres.

WMC estimates the main Tiriruniak zone contains an indicated resource of almost 8 million tonnes grading 11.12 grams gold per tonne, equal to 2.85 million oz., whereas the F zone hosts 450,000 oz. in an indicated resource of 1.8 million tonnes grading 7.83 grams. The combined resource totals 9.8 million tonnes of 10.52 grams, equivalent to 3.3 million contained ounces.

The resource estimate was calculated using a cutoff grade of 5 grams and a three-dimensional block model in which the mineralized zones were diluted to a minimum mining width of 2.5 metres.

Curtis said Meliadine West ranks as Canada’s biggest gold discovery this decade.

Ten-year mine life

H.A. Simons’ scoping study examined the economics of a 400,000-oz.-per-year underground and open-pit operation with a 10-year mine life. The study assumed a combined daily milling rate of 3,750 tonnes at an average grade of 10.4 grams, with gold recoveries forecast at 94%.

Metallurgical tests by Lakefield Research indicate that gold recoveries in the range of 91-96% are possible using a combination of gravity concentration and cyanide-leach techniques. Gravity separation methods alone recovered 25-45% of the gold.

The average annual operating costs of such a mine are projected to be US$35.74 per tonne of ore mined and milled, or US$114 per oz. gold. The study assumed an additional 1.5 million oz. resource on top of the existing 3.3-million-oz. resource.

No capital expenditures were released, but Greg Barnes, a mining analyst with Yorkton Securities, believes the number to be in the range of US$275-300 million, including feasibility costs. Canaccord Capital’s Graeme Currie offers a slightly higher projection, US$275-350 million, but says further details are required before a final estimate is possible.

Based on the results of the scoping study, Cumberland contracted H.A. Simons to produce a financial model for the project. This study indicated a payback duration of 3.2 years, an after-tax rate of return of 17.1%, a net present value of US$130.9 million at a 5% discount, and a gold price of US$300 per oz.

The Tiriruniak and F zones are primarily underground mining targets, with some open-pit potential. The Tiriruniak deposit occurs in a splay fault off the main break and consists of a series of parallel zones dipping 60-65 to the north. There is an upper contact zone of oxide iron formation and a lower zone of shear-style quartz mineralization.

The F zone is an iron-formation-hosted deposit 5 km southeast of Tiriruniak.

Comaplex recently released initial drill results from WMC’s 36,000-metre summer program, which is nearing completion. WMC budgeted $5.9 million to conduct advanced drilling and engineering studies on the Wes Meg portion of the West Meliadine project in 1998.

Infill drilling on the main Tiriruniak zone was designed to help confirm the resource projection of 2.8 million oz. The drilling was tightened up to 50-metre centres for a large portion of the zone. With assay results reported for 23 holes, highlights include:

* 17.13 grams per tonne over 5 metres, starting at a vertical depth of 20 metres in hole 194;

* 10.91 grams over 6.6 metres at a vertical depth of 75 metres in hole 298; * 24.75 grams over 3.4 metres at a 277-metre depth in hole 251; * 17.17 grams over 3.4 metres at a depth of 293 metres in hole 312; and * 22.35 grams over 5.9 metres, beginning at a depth of 334 metres in hole 311.

The Tiriruniak zone remains open to depth.

New zone

WMC had better luck expanding the resource potential of the F and Wolf zones, and in the discovery of a new zone immediately north of the Wolf. Comaplex anticipates a “substantial increase” in the resource estimate for the F zone, based on stepout drilling to the east and at depth. Select results include:

* 5.43 grams over 4.3 metres from a down-hole depth of 80-84.3 metres in hole 248;

* 21.18 grams over 4.7 metres, starting at a down-hole depth of 242 metres in hole 250;

* 9.6 grams over 2.3 metres at a down-hole depth of 217.7 metres in hole 272; and

* 5.98 grams over 11.3 metres, beginning at a 246-metre depth in hole 273.

Drilling on the “high priority” Wolf zone is said to have extended the zone horizontally and at depth, with a new zone being discovered immediately to the north. Select results from nine reported holes in this area include:

* 71.54 grams over 3.4 metres, starting at a down-hole depth of 79.8 metres, plus 16.49 grams over 6.1 metres at a depth of 90.3 metres, in hole 234;

* 9.72 grams over 4.9 metres, beginning at a down-hole depth of 431.8 metres in hole 236;

* 13.87 grams over 3.7 metres at a 417.4-metre depth in hole 239; * 1 metre of 33.25 grams at 34.06 metres of depth and 15.21 grams over 3.9 metres at a 289.1-metre depth in hole 241; and

* 5.12 grams over 6.4 metres, starting at a down-hole depth of 144 metres in hole 284.

Assay results remain pending for many of the most recent drill holes. Once all the results are in, a decision will be made on driving a decline for an underground drilling and sampling program in preparation for a full feasibility study.

Westward extension

A further $1.5 million was budgeted for exploration on targets outsid
e the Wes Meg block on the westward extension of the project. Curtis said five outstanding targets were at the drill-ready stage prior to the start of the 1998 field season, including:

* the Arseno Lake area, where a boulder field yielded an average grade of 8.5 grams in 44 boulders;

* the VG Lake area, where 20 boulders averaged 13.8 grams;

* the Maggot Lake area, where 14 boulders averaged 5.46 grams; and * the Far West showing, where prospecting returned up to 24.6 grams in outcrop.

The prospective areas were tested with two phases of drilling this summer. No results were available at presstime.

Prospecting has been an effective exploration tool for WMC. Curtis explained that cobble-size boulders averaging more than 34.3 grams led to the discovery of the Tiriruniak zone. The boulders have been found not to have traveled too far from source.

On the adjoining Meliadine East property, a resource of 1.8 million tonnes grading 6.72 grams, equivalent to 400,000 contained ounces, has been defined by 76 drill holes in what is dubbed the Discovery zone — a “classic iron formation deposit.” Curtis said that, prior to WMC’s involvement in Meliadine West, perhaps too much emphasis was placed on chasing iron formation targets. “Given the expanse of the project, it was time to move on and find other targets,” he said. In recent years, Cumberland has been focusing on shear-related prospects. “We’re learning what we can from WMC and applying it to the eastern half.”

Last year, a combination of outcrop and boulder-sampling identified several gold prospects on the eastern end of the property, with grab samples yielding up to 40 grams. The sampling was carried out in conjunction with mapping and till work geochemistry. A limited number of widely spaced holes tested some of the more interesting prospects but, according to Curtis, “didn’t find any strength.”

This summer, Cumberland continued with detailed mapping and sampling, uncovering several new prospects in the process. No drilling is planned this year on Meliadine East, but, said Curtis, “we’re building a good database now, and in the next few years we will really get at it.”