Sabina Shows Strength In Nunavut

VANCOUVER — For Sabina Gold and Silver (SBB-T) is ended 2009 on a high note, as the company’s Nunavut projects produced promising drill results and a solid preliminary economic analysis (PEA), while investors put another $8 million in the coffers in a flow-through financing. And with plans to increase exploration efforts in the coming years, it looks like Sabina is set to keep up the pace in 2010.

Sabina is exploring three contiguous properties in the western Kitikmeot region of Nunavut that together cover roughly 3,000 sq. km ofland. Theprojects, known as Hackett River, Back River, and Wishbone, all sit in the Hackett River greenstone belt.

Sabina has been exploring Hackett River since 2003 and it is the company’s most advanced project. It is also one of the largest undeveloped, primary silver-zinc vo lcanogenic massive sulphide (VMS) deposits in the world.

Indicated resources at Hackett River currently stand at 43 million tonnes grading 144 grams silver per tonne, 4.65% zinc, 0.42% copper, 0.64% lead and 0.3 gram gold per tonne. Inferred resources add 14.6 million tonnes averaging 136 grams silver, 4.46% zinc, 0.31% copper, 0.57% lead and 0.31 gram gold.

Resources are contained in five zones — Main West, Main East, East Cleaver, Boot and Jo — the mine plan calls for open pits at each zone, starting with the higher-grade Main West. The Boot and East Cleaver pits would also be mined early to ease later underground development. The Jo and Main East zones would be mined last. The strip ratio for the open pits is expected to average 7 to 1.

A mill churning through 12,000 tonnes of ore daily would feed a two-circuit flotation plant producing a zinc concentrate, a copper concentrate with by-product gold and silver, and a lead concentrate with by-product silver. In a year the operation would produce 13 million oz. silver, 350 million lbs. zinc, 24.6 million lbs. copper, 44.6 million lbs. lead, and 20,000 oz. gold.

Over a 16-year lifespan, the Hackett River mine would produce 180 million oz. silver, 4.7 billion lbs. zinc, 306 million lbs. copper, 600 million lbs. lead, and 300,000 oz. gold.

Using base case metal prices of US$13.20 per oz. silver, US88¢ per lb. zinc, US$2.08 per lb. copper, US61¢ per lb. lead, and US$880 per oz. gold as well as an 8% discount rate, Hackett River carries a pretax net present value (NPV) of $674 million and would produce a 25.9% internal rate of return (IRR).

Increasing metal price by 20%, which brings zinc to US$1.06 per lb. and gold to US$1,056 per oz., raised the NPV to $1.3 billion and the IRR to 38.5%.

To develop the operation, though, is expected to cost $688 million; sustaining it would cost another $343 million. The capital costs are high because of location. Sabina would have to build a 96- km, all-weather road from the mine to Bathurst Inlet, as well as a dedicated port facility. The port would consist of a container dock, a fuel unloading and storage system, a concentrate storage building connected to a loading pier by conveyors, and a small camp for workers. At the mine, aside from the mill and flotation facility, the operation would require housing, a maintenance shop, a fuel farm with storage capacity for one month’s fuel requirement, a 44- megawatt diesel powerhouse, an all-season aircraft capable of landing a Hercules transporter, and a tailings pond and water treatment facility.

In the summer of 2009, Sabina completed 12, 590 metres of drilling at Hackett River in a program with three goals: probing the northern extension of the Main Zone West deposit, testing the reach of several high-grade hits within mineralized areas, and investigating regional targets. And positive results from all three efforts indicate there is still significant potential for Hackett River’s economics to improve.

Drills testing the northern extension of the Main West deposit intercepted near-surface mineralization, such as 29.2 metres grading 6 grams silver, 0.05% zinc and 0.76% copper from 2 metres depth, followed by 8.5 metres of 7 grams silver, 0.02% zinc and 1.02% copper from 49 metres down hole 41. Earlier, hole 39 returned 20.1 metres averaging 288 grams silver, 8.28% zinc, 0.9% copper, 1.41% lead and 1.29 grams gold.

On the edge of the East Cleaver pit, hole 31 cut a 22-metre intercept grading 35 grams silver, 2.01% zinc, 0.02% copper, 0.57% lead, and 0.31 gram gold. And Sabina drilled 17 holes in an alteration zone immediately west of the East Cleaver deposit that has an associated geophysical anomaly.

Thirteen of the 17 holes drilled in the 500-metre by 500-metre area intersected massive or semi-massive sulphides, returned such results as 14 metres of 47 grams silver, 1.95% zinc, 0.52% copper, 0.32% lead and 0.3 gram gold, plus 4.7 metres averaging 154 grams silver, 4.47% zinc, 0.1% copper, 0.77% lead and 0.07 gram gold.

Sabina only acquired its other two Nunavut projects in June 2009, when the company paid $7 million and 17 million shares for the large Wishbone property and the series of properties that make up the Back River project.

Wishbone is a large land package that surrounds the Hackett River deposits and then extends south, along the Hackett River greenstone belt, for 150 km. The area has seen only minimal exploration. In 2009, Sabina drilled 14 holes totalling 2,000 metres and discovered the May zone.

Sabina targeted the May zone area based on its geological similarity to Hackett River, a narrow high-grade intersection in a single historical hole, and anomalous geophysics. Located roughly 15 km east-southeast of Hackett River, the May zone mineralization has thus far been traced along 600 metres strike and to 100 metres depth, and it appears to sit within a structure that dips shallowly to the south, where it remains open.

Hole 6 cut 10.6 metres grading 73 grams silver, 10.86% zinc, 0.28% copper, 1.15% lead and 0.19 gram gold. Hole 4 returned 8.1 metres of 45 grams silver, 15.08% zinc, 0.32% copper, 0.59% lead and 0.1 gram gold. And hole 5 hit 7.1 metres averaging 83 grams silver, 14.82% zinc, 0.36% copper, 1.53% lead and 0.13 gram gold.

The May zone occurs directly alongside one of the proposed routes for the road from Hackett River to Bathurst Inlet, which would make it a convenient, openpittable source of additional mill material.

The Back River series of properties sits to the east of Wishbone and Hackett River. The project includes the Goose Lake gold deposit, which contains 1.57 million indicated tonnes grading 11.9 grams gold plus 1.83 million inferred tonnes at 9.2 grams gold, for 900,000 combined oz.

The company had crews on site at Back River within a month of buying the land. The short summer campaign focused on drilling around Goose Lake, an effort that led to the discovery of the new Echo zone. Echo is 2 km west of the Goose deposit in a broad zone of thick, folded iron formation units that have been altered to the extent that the formation’s magnetic signature has been washed out. The large target, which measures 2 by 3 km, has seen no previous drilling.

Sabina punched six holes into Echo in 2009 and all six encountered mineralization and veining similar to that at Goose. Assay results include 8.17 grams gold over 15.2 metres, 5.54 grams gold over 3.6 metres, 1.23 grams gold over 4.6 metres, and 2.62 grams gold over 4 metres. All mineralized intercepts were within 150 metres of surface.

Sabina also started exploring the Del Lake property, which is acquired along with Back River and which sits 10 km southwest of the Goose deposit. Previous explorers identified gold mineralization in quartz veins cutting through the argillite country rock. Sabina collected 84 surface samples and found anomalous gold was largely contained to an area 3.5 km long and 750 metres wide. In that zone, 22 of 84 samples returned assays better than 1 gram gold and nine returned assays better than 10 grams gold.

In mid-December Sabina raised $8.1 million, selling 6.4 million
flow-through shares for $1.27 a piece. The financing left the company with $45 million in the bank. The company plans to increase exploration efforts at all three of its Nunavut project in 2010, drilling some 20,000 metres at Hackett and Wishbone together and another 20,000 metres at Back River. The Nunavut programs are expected to cost $23 million.

The company recently graduated from the Venture board to the main Toronto Stock Exchange and changed its name from Sabina Silver to Sabina Gold and Silver.

And the companys share price enjoyed a sustained climb through 2009: it started the year at 50¢ and ended it at $1.25. Sabina has 114 million shares outstanding.