FNX, Dynatec table McCreedy West resource (March 03, 2003)

With production scheduled to begin in weeks, partners FNX Mining (FNX-T) and Dynatec (DY-T) have tabled resource estimates for five of seven deposits at the McCreedy West mine in Sudbury, Ont.

Measured and indicated resources in the Contact deposits (Inter Main, Upper Main and East Main) are pegged at 1.1 million tons grading 2.07% nickel and 0.29% copper per ton. The deposits also host 376,000 tons of inferred resources grading 1.75% nickel and 0.4% copper. Both estimates are based on a cutoff grade of 1% nickel and a minimum true-width of 8 ft.

In the 700 and 950 veins, combined measured and indicated resources stand at 659,000 tons grading 2.42% copper, 0.38% nickel and 0.16 oz. platinum- palladium-gold per ton. The deposits are in the footwall rocks of the Sudbury igneous complex and are therefore collectively referred to as the footwall deposits.

FNX used a cutoff grade of 0.75% nickel-equivalent for the 950 Vein and 1.5% nickel-equivalent for the 700 Vein. The equivalent grade is based on a nickel price of US$3.75 per lb., a copper price of US75 per lb., a platinum price of US$684 per oz., a palladium price of US$252 per oz., a gold price of US$350 per oz., and an exchange rate of US$1 to $1.55.

The minimum widths employed are 8 ft. for the 950 deposit and 5 ft. for the 700 deposit. The widths were chosen to include internal dilution in the case of the 950 vein and external dilution in the case of the 700 vein.

Mining consulting firm Roscoe Postle & Associates has confirmed the in-house estimates and will shortly table a report.

According to the partners, the overall resource can support five years of production at a mining rate of 1,000 tons per day. Mining will begin in the 700 vein at 200 tons daily, and then extend later in the year to the other deposits, boosting daily production rates to the targeted 1,000 tons.

Excluded from the resource are the Boundary and PM zones. The Boundary is between the 1,450- and 2,500-ft. levels, and measures about 1,500 ft. wide by 1,500 ft. long. The zone has returned upwards of 10.75% copper, 2.81% nickel and 122 grams platinum-palladium-gold over as much as 126 ft. Wide-spaced drilling at the PM zone, which was previously mined to the 1,450-ft. level, suggests it extends another 1,500 ft. down-plunge and downdip toward the property’s boundary. Results from 25 drill holes include 4.68% nickel and 1.08% copper over 8.8 ft., and 0.32% copper and 2.02% nickel over 27.9 ft.

McCreedy West is the most advanced of five properties FNX acquired from Inco (N-T) in early 2002. The others are Levack, Victoria, Kirkwood and Norman, all of which are past producers near Sudbury.

According to the deal, FNX must spend $30 million by 2006.

Inco holds a back-in right for 51% in any new discovery that contains more than 599 million lbs. contained nickel. Should it exercise this right, it is required to spend 200% of the costs incurred by FNX and Dynatec.

The major also has the right to process all of the concentrate produced by FNX, or, in the event of third-party processing, to collect a 2% net smelter return royalty for nickel, copper and cobalt plus a 2.5-5% NSR for precious metals. Inco retains a right of first refusal on the sale of any property.

FNX has since dealt Dynatec 25% interests in the properties in exchange for covering $11 million of its required expenditures. Dynatec also will manage the surface and underground mining operations.

Currently, FNX and Dynatec have 11 drill rigs turning — five at McCreedy West, three at Norman, two at Levack and one at Victoria. Three of the rigs at McCreedy West are proving up mineralization from underground stations.