Not so hollow

SITE VISIT

Yerington, Nev. — There is a lot to be gained from a little drilling and a lot of thinking.

That is probably one of the more obvious lessons from the new resource drilled off by Nevada Copper (NCU-T, NEVDF-O) at the Pumpkin Hollow project a few minutes east of Yerington. Another lesson is that a deposit with all its core carefully stored can be more valuable than one without — and, maybe more to the point, it can be easier to add value to.

Pumpkin Hollow — both a porphyry copper and a copper-iron skarn deposit — is one of those discoveries that never quite went away. U.S. Steel discovered the iron deposit in 1960, following up on an aeromagnetic survey. The steelmaker, interested almost strictly in the economics of an iron mine, held the property until 1975 but — even after 120,000 metres of drilling in 282 holes — hadn’t delineated enough mineralization to justify pushing the project further. Seeking feed for a mill in Utah, U.S. Steel developed a project in Wyoming whose capital cost beat Pumpkin Hollow.

Still, U.S. Steel’s drill program had established that the magnetite skarn that sent the needles off the charts was only a part of a larger mineralized system, where granodiorite and diorite bodies intrude a sequence of limestones and calcareous shales, with a few interbedded volcanogenic sediments. There was copper, mainly in the hangingwall of the magnetite skarns, at grades comparable to other U.S. open pits.

Anaconda Copper was next, drilling another 96 holes between 1975 and 1977 under an option deal with U.S. Steel. The company had developed the Yerington copper mine in the hills to the west of Pumpkin Hollow in the early 1950s, and the pit was nearing the end of its life (it would close in the middle of 1978). Anaconda, too, would find Pumpkin Hollow a little too weak to make it during a period of low copper prices.

The property — still in U.S. Steel’s hands — was optioned to the oil company Conoco, then to Plexus Resources, which had plans for an 8,500-metre drill program in 1985 but wound up drilling only two holes. Cyprus Resources mounted a serious program in the early 1990s, then a Vancouver junior, International Taurus, drilled a few more holes in the last downbeat years of the century.

Conoco and Cyprus brought some lateral thinking to the project — they concentrated on the East and E-2 zones, two higher-grade, deeper bodies east of the magnetite skarns U.S. Steel had concentrated its efforts on. While they didn’t develop those deposits, their insight would prove prescient.

U.S. Steel divested large parts of its mining portfolio in 2003, selling them to private interests in Houston, Tex. From there, Pumpkin Copper, a Nevada company, took up a 10-year lease in the project, renewable for up to 40 years, and in a qualifying transaction with a Venture Exchange capital pool company, created Nevada Copper in late 2006.

That caught the beginning of a wave in copper prices, and the company financed further drilling on the deposit. It also brought in Greg French and Hank Ohlin, two geologists that had worked on the project before, to supervise the work and reinterpret the geology. And it has been reinterpretation, along with re-logging and re-assaying old core, that has made the biggest difference to Pumpkin Hollow’s picture.

Misleading picture

Most previous operators had come with a certain vision in their heads — an iron mine, or a low-grade porphyry copper — and their methodology flowed from that vision. Sometimes core wasn’t assayed for other elements, sometimes drilling stopped as soon as it went through the exploration target. Resource modelling was based on a northwest-southeast grid system that now appears to have displayed a misleading picture of the structures.

“I think we’re starting to get it nailed down structurally now,” says French, the project manager.

Changing to a north-south grid exposed a much more coherent structural picture in much of the deposit. There are seven principal mineralized zones: four on the western side of the property, the Northwest, North, South, and Southeast zones, which were discovered early in the project’s history; and three deeper zones on the eastern side, East, JK-34 and E-2. All are mainly hosted in Triassic to Jurassic-aged sediments below the Quaternary alluvium of the Mason Valley.

The North zone mainly has a flat-to-gentle westward dip, and sits in hornfels and calc-silicate skarn intruded by granodiorite. The South and Southeast deposits have similar geology, but occur in mainly carbonate rocks lower in the section — unlike the North deposit’s hornfels and skarn, derived from calcareous sediments of the Jurassic Gardnerville formation, the South deposit’s hosts are in Triassic limestones of the Mason Valley formation. Those lower limestones are host to the eastern trio of deposits as well.

Another difference for the project was a re-assaying program that has helped convert material previously assumed to be waste into mineralization. About 5,300 metres of core had never been assayed for gold or silver, having been drilled during campaigns where the operator was interested purely in iron or copper.

Luckily for Nevada Copper, those previous operators preserved both their records and their drill core carefully, in a large core shack that now serves as Nevada Copper’s main exploration building.

“I think we’ve come to a critical mass of information now,” says Ohlin, who worked on the deposit with Cyprus.

Getting to the critical mass took 19,000 metres of Nevada Copper’s own drilling, but by comparison with the 181,000 metres of drilling other operators had already done, that wasn’t a lot. But the project had put the horse of compilation ahead of the cart of more drilling, with telling effect on the way that 19,000 metres was used.

Among the first holes to come out of the property in 2007 was one in the Northwest Zone that cut 213 metres of mineralization grading 1.04% copper, with gold and silver credits. Other early successes extended the East Zone to the northeast and cut 68.5 metres grading 2.87% copper, 0.29 gram gold, 9 grams silver and 14.7% iron in an infill hole in the East Zone.

Drilling in the E-2 zone showed a 500-metre downdip extent, with true thickness between 8 and 18 metres. A 19.1-metre intersection, representing 8.1 metres true thickness, graded 2.92% copper and 20.3% iron, with 0.68 gram gold and 13.2 grams silver per tonne.

Other holes expanded the North zone southward, and the South zone farther southwest.

In the JK-34 zone, between the East and E-2, there had only been limited drilling. One hole designed to test about 60 metres northeast of the discovery hole intersected multiple zones of copper-iron mineralization, with the widest a 7.1-metre zone running 1.62% copper and 9.2% iron, with silver and gold credits.

Out of that effort has come a measured and indicated resource of 343 million tonnes averaging 0.58% copper, 0.06 gram gold and 2.4 grams silver per tonne. An additional inferred resource of 438 million tonnes grades 0.45% copper, 0.05 gram gold and 2.2 grams silver per tonne.

Big gains

The biggest gain came in the deeper resources of the East and E-2 zones, where there is now a measured and indicated resource of 41.6 million tonnes at a grade of 1.46% copper. The two eastern zones — higher-grade underground deposits — represent an important opportunity for Nevada Copper.

“It makes sense to go underground early,” says the company’s chief operating officer, Joe Kircher, a mining engineer currently herding the consultants for a preliminary economic assessment of the project.

Higher-revenue ores from underground would provide a much faster payback on the project.

The calculation also puts Pumpkin Hollow in the same league as other nearby deposits, including the 25-year mine at Yerington, which produced 147 million tonnes grading 0.55% copper, and two other undeveloped deposits — Ann Mason and Bear-MacArthur, each with ab
out 450 million tonnes at 0.4% copper.

The iron resource amounts to 191 million tonnes at grades of 27.8% iron and 0.28% copper, measured and indicated, plus 465 million tonnes at 19.6% iron and 0.23% copper in the inferred category. The magnetite resources are entirely in the North and South Zones — with the higher-grade material in the South Zone — and overlap with the copper resource.

The planned scoping study on production will look at a 2,000- to 4,100-tonne-per-day rate from the underground zones on the east, plus 23,000 to 32,000 tonnes out of open pits on the west.

There will also be a design for an exploration shaft for the underground zones.

The calculation of the iron resource will allow some assessment of its economics as well.

“If the iron is commercial, it will be a byproduct,” Kircher says.

Still, adding a beneficiation plant for the magnetite would be a fairly small addition to a large copper mill.

Metallurgical testing on the deposit in the 1960s and 1970s showed recoveries of up to 85% of the copper. Newer metallurgical tests show recoveries in the low 90s, producing a concentrate with 30% copper.

About 98% of the resource is on patented land, the U.S. Steel ground, and the remainder on U.S. Bureau of Land Management land. That has implications for both permitting — normally easier on patented and BLM land — and for mineral royalties, because patented land is unaffected by current proposals to increase mining taxes on federal land.

More drilling is due to start in December, and the company has been able to assure itself of drills in a busy time. Targets for the new program include western and northeastern extensions to the East Zone and a southwestern extension of the E-2.

Kircher is optimistic about the forthcoming drilling: “For a skarn deposit, this is very predictable.”