Summer exploration expands picture in South Raglan

It has become predictable: another field season, another nickel-copper deposit in the Nunavik district of far northern Quebec. The company largely responsible for this state of affairs, Canadian Royalties (CZZ-T, CRYAF-O), did the same again this year.

This year’s discovery was the Ivakkak zone, well to the west of Royalties’ previous discoveries on the South Raglan trend. The zone is about 23 km southwest of the Mequillon deposit, which is in turn 17 km west of the Expo deposit.

Ivakkak was discovered in following up on airborne electromagnetic surveys. The anomaly “goes several kilometres and there were no holes ever drilled in it,” says Royalties’ president, Bruce Durham.

The new mineralization is a northeast-dipping body of massive and net-textured nickel and copper sulphides in ultramafic sills. It more closely resembles the style of mineralization at the Mesamax discovery, the easternmost of Royalties’ deposits on the trend.

The discovery hole, IV05-01, cut a 12-metre core length that ran 2.34% nickel, 3.25% copper, 0.1% cobalt, 6.2 grams palladium, 1.6 grams platinum and 0.5 gram gold per tonne.

Subsequent drilling has expanded the length of the zone to 175 metres, consistent with ground electromagnetic surveys that showed a 200-metre long conductor. The zone has not been closed off by drilling either to the east or the west.

Most of the mineralized intersections drilled so far are at vertical depths of 25 to 50 metres and cut core lengths of 7 to 20 metres, though holes IV05-16, IV05-17 and IV05-18 tested at vertical depths closer to 100 metres and intersected narrower zones, 2 to 2.5 metres long.

Nickel grades in the Ivakkak drill holes mostly cluster around 0.7% to 2% and copper grades around 2% to 3%, but palladium and platinum grades are unusually high: in 20 holes reported so far, most intersections have averaged 2 to 6 grams palladium and 0.5 to 1.5 grams platinum per tonne.

Much of this season’s exploration has concentrated on the joint-venture ground Royalties holds with fractious partner Ungava Minerals (UGVAF-O). After three years of legal wrangles, with Ungava claiming damages against Royalties and non-performance of requirements under the joint-venture agreement, arbitrators dismissed Ungava’s actions. Ungava said in March 2005 that it was giving up on arbitration in the dispute. “We think that is behind us now,” Durham said in a presentation to investors earlier this month.

Royalties has earned a 70% interest under their agreement and moves to an 80% interest once it has presented a final feasibility study. If Ungava does not fund its 20% interest, it is diluted in stages to 10%, after which the interest reverts to a 1% net smelter return.

The last field season saw exploration on the Lac Mequillon deposit, the nearby Tootoo prospect, and extensions of the previously known deposit at Expo.

Resource drilling at the Lac Mequillon deposit has now established a minimum 1,100-metre strike length on the mineralized zone.

A 19-hole program to investigate the northeastern extension of the zone encountered mineralization with grades comparable to the current resource grades along grid sections 300E and 250E. (The grid easting at Mequillon is northeast.) Previous drilling had established the strike of the deposit out to 350E.

The best intersection on line 250E graded 0.46% nickel, 0.66% copper, 1.7 grams palladium and 0.4 gram platinum per tonne, with gold and cobalt credits. Other holes on the same section ran slightly lower grades over 30- to 35-metre intersections.

Another 50 metres to the northeast, one hole on section 300E ran 1.02% nickel, 1.32% copper, 3.6 grams palladium and 0.8 gram platinum per tonne over a 57.7-metre core length. A second hole averaged 0.72% nickel, 1.61% copper, 2.5 grams palladium and 0.6 gram platinum over 54.1 metres, with a separate 22-metre interval averaging 0.76% nickel, 1.15% copper, 2.5 grams palladium and 0.5 gram platinum per tonne. All the intersections also carried cobalt and gold.

Assay results from eight more holes, all drilled to the northeast of section 300E, are pending. Once those are available, Royalties plans to calculate a new resource estimate for Mequillon. The current estimate is 4.2 million tonnes grading 0.6% nickel, 0.9% copper, 0.03% cobalt, 2.4 grams palladium, 0.7 gram platinum and 0.2 gram gold per tonne.

A few kilometres to the southeast, step-out holes on the Tootoo prospect have extended the known mineralized zone there.

Royalties drilled 12 holes in the recent field season on centres 25 metres to the northeast and southwest of the prospect’s discovery holes. Eleven intersected some mineralization, some over significant thicknesses.

The mineralization is hosted in gabbro sills and the picture that has emerged from the recent drilling is of an embayment in the sills where the mineralized zone thickens substantially. Northeast of the discovery holes, the best new drill intersection averaged 1.13% nickel and 1.22% copper over 38.6 metres, with average grades of 0.06% cobalt, 2.19 grams palladium, 0.41 gram platinum and 0.12 gram gold per tonne. At the base of that intersection, the last 9.8 metres averaged 3.2% nickel, 2.91% copper, 0.18% cobalt, 3.7 grams palladium, 0.62 gram platinum and 0.21 gram gold per tonne.

To the southwest, the widest intersection was a 50.8-metre interval grading 0.75% nickel, 0.63% copper, 0.04% cobalt, 1.49 grams palladium, 0.32 gram platinum and 0.07 gram gold per tonne, again including a higher-grade zone at the base of the interval.

Most of the mineralization is less than 100 metres below surface.

Work at Expo investigated two outlying zones of mineralization, one about 400 metres northeast and the other about 300 metres south of the known Expo resource. A July calculation on Expo’s main zone put the indicated resource at 4.4 million tonnes grading 0.8% nickel, 0.8% copper, 0.04% cobalt, 0.1 gram gold, 0.3 gram platinum and 1.5 grams palladium per tonne. Only about 200,000 tonnes of that resource is massive sulphide; the rest is mainly net-textured sulphide material in peridotite sills. None of the northeastern or southern mineralization has been brought into that resource.

Two holes on the eastern limit of the Expo resource intersected relatively narrow sulphide mineralization. One cut 1.7 metres grading 1.46% nickel and 1.54% copper but with 4.1 grams platinum and 3.4 grams palladium per tonne, plus cobalt and gold credits; the other cut 1.6 metres grading 0.59% nickel and 1.54% copper with 2 grams palladium per tonne.

Mineralization on the northeast zone, originally discovered in 2003, has been found to extend to the west and east along strike. Among the better intersections on that zone, hole EX05-108 cut 0.52% nickel, 0.56% copper, 1.1 grams palladium and 0.2 gram platinum per tonne over 115.7 metres, and hole EX05-122 cut a 40-metre interval grading 0.9% nickel, 0.78% copper, 2 grams palladium and 0.4 gram platinum. All the northeast intersections carried cobalt and gold values as well.

Two holes in Expo’s southern zone intersected sulphides, one cutting 5.9 metres averaging 0.57% nickel, 1.45% copper and 0.7 gram palladium, and the other 7.1 metres averaging 0.33% nickel, 0.46% copper and 0.7 gram palladium per tonne.

Royalties also has arranged a flow-through financing of 4 million shares at $1.45 per share, being offered on a best-efforts basis by investment houses Raymond James and Blackmont Capital. The agents get an 8% cash commission plus options for 10% of the number of shares issued, exercisable for two years at $1.45.