Skelleftea, Sweden — Storliden, the first new mine in Sweden in more than a decade, has begun commercial production of copper and zinc on time and under budget.
Situated 140 km northwest of the city of Skelleftea, the mine is wholly owned by
North Atantic Natural Resources is managed by South Atlantic Ventures even though Boliden owns 38% of the company.
The underground mine was developed as a joint venture with Boliden at a budgeted capital cost of US$15 million.
“We expect the capital expenditure to come in under budget at around twelve to thirteen million dollars [U.S.],” said Edward Posey, managing director of North Atlantic Natural Resources and president of South Atlantic Ventures.
Boliden acts as the principal contractor and provided the startup capital in the form of a credit facility. North Atlantic will pay back the loan from 75% of the initial revenue generated from the project, after mining, milling and marketing costs, as well as a $5-million sunk cost. Payback is anticipated in less than 18 months. Pretax profits after costs are split between NAN, with 66.6%, and Boliden, with 33.3%.
Storliden is a volcanogenic massive sulphide deposit which hosts copper, zinc, gold and silver with grades as high as 33% zinc and 8% copper. The property was discovered by North Atlantic in 1997 during an airborne electromagnetic survey. Drilling defined a resource of 1.8 million tonnes averaging 10.3% zinc and 3.4% copper, plus 0.25 gram gold and 24 grams silver per tonne, with 20% dilution.
“Mining operations over the past few months have shown that the mill grades are higher than what we’ve expected,” Posey told The Northern Miner.
Geologically, Storliden is hosted by a series of Proterozoic-aged metamorphosed sedimentary and tuffaceous volcanic rocks. These rocks have been intruded by quartz-feldspar porphyries as well as mafic sills and dykes. Two principal styles of mineralization exist: high-grade massive sulphides and lower-grade disseminated-to-semi-massive sulphides. The massive sulphides form an irregularly shaped core referred to as the Central zone, which measures 100 by 65 by 30 metres. This mineralization extends into the West zone for 200 metres and into the East zone for about 100 metres in a series of rich massive sulphide lenses. The peripheral mineralization is fracture-controlled disseminated-to-semi-massive sulphides.
Mineralization consists primarily of sphalerite, chalcopyrite and pyrrhotite with minor galena and arsenopyrite. The mineral grain size is generally coarse in the massive sulphide lenses and finer in the peripheral stringer zones. The contacts between the sulphide mineralization and the wall rocks are sharp, and South Atlantic believes the mineralization was placed as part of a post-depositional metasomatic event.
The resource was calculated by the UK office of Micon International using a cutoff value of US$25 per tonne. It is classified according to the Australian Joint Ore Reserve Committee code. Micon reports that 85% of the resources fall within the indicated mineral resource category and 15% is classified as inferred.
Ore is trucked 90 km southeast to Boliden’s mill in the town of the same name. Boliden spent US$2.3 million to modify its concentrator in order to handle Storliden’s high-grade ore. Specifically, the company increased the mill’s flotation capacity and added pressure filters, as well as thickener mechanisms. The mill can process 1.5 million tonnes of material per year.
Metallurgical tests on Storliden ore were performed by Lakefield Research of Toronto and confirmed by Boliden’s own laboratories.
South Atlantic recently reported that the second mill run was completed in August; it consisted of 35,000 tonnes of ore averaging 15.24% zinc and 4.36% copper. The concentrator turned this ore into 9,098 tonnes of salable zinc concentrate averaging 54.5% zinc. Also produced were 4,656 tonnes of copper concentrate grading 30% copper.
Zinc recovery at the mill averaged 92.9%; copper recovery was 91.4%. NAN expects revenue from sales of these concentrates in October.
The third mill run, consisting of another 35,000 tonnes, is to begin in October. The company expects to mine 130,000 tonnes this year from Storliden.
The resulting copper concentrate is sold to Boliden’s Ronnskar Smelter in Skelleftea, and the zinc concentrates are being sold to European smelters through Boliden’s marketing department.
Startup
Startup at Storliden occurred last April with the mining of 30,158 tonnes of ore from both the West and Central zones. The material was originally sourced from lower-grade section along the margins of the deposit. As mining progressed, the grade increased to as high as 5% copper and 17% zinc. The average grade of the first ore campaign was 13.2% zinc and 3.3% copper. After processing, a total of 92.2% of the zinc was recovered into 6,848 tonnes of concentrate grading 55.1% zinc. In addition, 91.3% copper was recovered into 3,161 tonnes of concentrate averaging 28.3% copper.
The net smelter return royalty (NSR) prior to mining and milling costs for this campaign was valued at US$2.5 million, based on metal prices of US36 per lb. zinc and US72 per lb. copper.
Storliden is expected to crank out 300,000 tonnes of ore per year, from which will be produced 25,200 tonnes zinc and 11,150 tonnes copper in concentrate over a mine life of six years. The orebody, which has been subdivided into three zones, Central, East and West, is accessible via a 960-metre inclined ramp.
The Central zone hosts continuous massive ore, which is amenable to bulk mining. This zone is exploited using a modified cut-and-fill technique. The East and West zones will be mined using a modified, mechanized drift-and-fill method since the ore in these zones is characterized by several narrowly dipping tabular bodies. The West and Central zones are now being mined concurrently. Full production is scheduled in 2003.
Mining and milling costs are pegged at US$17 and US$15 per tonne, respectively. The net pretax profit is estimated at US$49 per tonne of ore with a estimated net cash flow, over the mine life, of US$58.8 million, based on life-of-mine metal prices of US48 per lb. zinc and US85 per lb. copper. The corporate tax rate in Sweden is 28%. The NSR is pegged at US$87 per tonne.
Exploration potential
Current operations have provided access for underground mapping of the deposit. The information gleaned, combined with the data collected in ongoing geophysical surveys, will be used to fine-tune exploration along strike.
“We’ve had an exciting development that’s just recently happened,” said Posey. “We think we have found a possible extension of the mineralized payload — that is, a weak conductor which looks like the extension of the mineralized halo that surrounds the ore.”
Since deposits such as Storliden typically occur in clusters, surface drilling was carried out in order to test a geophysical target north of the orebody.
The first hole was collared 200 metres north of the orebody in a hole that was originally drilled in 1998 as STOB-98-036. NAN deepened the hole by 47 metres to 197 metres. The extension cut a 6-metre interval of sulphide mineralization that was uneconomic. However, the interval included a 0.3-metre section of massive sphalerite similar to the high-grade ore at Storliden. Assays are pending.
Two additional holes have since been completed in an attempt to define the area. Hole STOB-02-215 and 216, were each drilled to a depth of 250 metres. The holes cut traces of copper and zinc mineralization, and assays are still pending. Samples obtained from the drilling program are being prepared in NAN’s preparation lab in Uppsala, Sweden, and then sent to Chemex Labs in Vancouver for analysis.
Last March, North Atlantic Natural Resources and Boliden inked a deal ensuring co-operative exploration in the surrounding Skellefte mining district. The purpose is to share technical data and conduct more efficient exploration, as well as earn interest on claims held by either party. According to the agreement, exploration that justifies a prefeasibility study grants the exploring party a 70% participating interest in that particular property. Targets on adjacent claims held by both parties can be pursued on a 50-50 basis. The agreement excludes the ground around the Storliden mine.
The Skellefte district is 120 km long and 30 km wide, and is known to host 85 sulphide ore deposits. Of these, 21 have been mined since 1924 and five are currently being mined by Boliden.
One target, known as Stormyran, is 15 km southwest of the town of Mala and represents the first project to be tested under the terms of the NAN-Boliden joint exploration agreement.
The area has been explored intermittently since the 1920s, during which time several minor base metal sulphide prospects have been identified. Skelleftea Group volcanic rocks form two anticlines that are covered with a blanket of sedimentary rocks. Most of the known sulphide occurrences were discovered near the top of the volcanic package in the vicinity of the contact with the sediments.
Several discrete electromagnetic and magnetic anomalies were identified in an airborne survey flown in 1997. In the spring of this year, grid-based electromagnetic and induced-polarization ground surveys were performed. Subsequent targets were drill-tested with 12 holes totalling 1,500 metres. In most cases, the anomalies were determined to be disseminated and semi-massive iron sulphides with only minor base and precious metals. Drilling is ongoing.
Norrliden
North Atlantic Natural Resources also owns the Norrliden copper-zinc-silver deposit, 40 km northwest of the Boliden concentrator.
“It’s a smaller-tonnage deposit,” Posey explained, “but if metals prices go up, it may become economic.”
The project is at the feasibility stage. Based on 111 diamond drill holes, crews have outlined an inferred resource of 775,000 tonnes averaging 0.8% copper, 7.8% zinc, 0.7% lead, 1.1 grams gold and 100 grams silver per tonne.
The deposit is characterized by two distinct zones of pyrite-rich stratiform sulphide mineralization. The ore occurs as lenses hosted in a strongly deformed quartz-sericite horizon within a sequence of felsic metavolcanic rocks. Geological sections indicate reasonable continuity of mineralization over strike lengths of 20-60 metres and downdip 15-25 metres. The mineralization does occasionally and suddenly pinch out, and this is thought to be a result of faulting. A final production decision on the deposit is expected later this year.
Norrbotten
Farther north, in Norrbotten Cty., South Atlantic Ventures owns 17 exploration permits which cover 800 sq. km of prospective ground. The junior has set its sights on finding an Olympic Dam-style copper-gold deposit associated with iron-oxide minerals. (The Olympic Dam deposit in South Australia hosts 2 billion tonnes grading 1.6% copper and 0.6 gram gold per tonne and is hosted in hematitic breccia.)
The Norrbotten project is situated along the Kiruna Break, an east-west-trending fault system associated with numerous copper-gold and iron ore deposits. The district lies 1,000 km north of Stockholm and hosts the 2-billion-tonne Kiruna iron oxide deposit. This deposit is one of the largest underground mines in the world, with an annual production of 13.7 million tonnes of iron ore products averaging 66% iron.
Another notable deposit in the area is Aitik, which hosts measured and indicated resources of 870 million tonnes grading 0.3% copper and 0.2 gram gold.
Several major mining companies are searching for iron-oxide copper-gold deposits in the area, including
South Atlantic hopes to kick off its first exploration program this winter. The company is currently compiling geophysical and geochemical data for the region and has already identified eight targets.
South Atlantic Ventures posted a net loss of $254,000 during the second quarter and $318,000 over the first six months of 2002, compared with a net loss of $414,000 and $410,000 during the comparable periods last year. The improvement reflects the company’s equity pickup in North Atlantic Natural Resources, though this was offset by an increase in general administrative expenses and foreign-exchange losses.
As a result of Storliden’s having reached commercial production in the second quarter, South Atlantic’s equity share in the net income of NAN was $164,000. This compares with an equity loss of $533,000 during the corresponding period last year.
More recently, South Atlantic has agreed to sell up to 1.6 million units priced at $2 per unit for gross proceeds of $3.2 million. Each unit consists of one common share and half a share purchase warrant. Each whole warrant can be exercised into one share over two years at a price of $2.25 per share.
South Atlantic has 9.3 million shares fully diluted (including the latest offering) and $3.2 million in working capital.
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