Initial resource tally for Big Daddy chromite

The Big Daddy chromite deposit in the McFaulds Lake area of northern Ontario is living up to its name as one of the largest and highest grade deposits of its type in the world.

An initial resource estimate for the deposit calculated by Micon International put indicated resources at 23.2 million tonnes grading 40.66% chromite and inferred resources at 16.3 million tonnes averaging 39.09% chromite.

KWG Resources (KWG-V) and Spider Resource (SPQ-V)each hold a 26.5% interest in the project while Freewest Resources, a subsidiary of Cliffs Natural Resources (CLF-N), holds the remainder. KWG, the current operator, rotates with Spider on an annual basis.

Chromite is processed into ferrochrome, which is used to make stainless steel.

KWG president Frank Smeenk says what makes Big Daddy attractive is its ratio of chrome to iron to waste. Many stainless steel makers use chrome pellets or brickettes that are about two parts chrome one part iron with as little waste as possible.

“What we have occurring naturally in Big Daddy is two parts chrome one part iron and two parts waste,” Smeenk says.

This is good news, Smeenk says, because there could be steel makers that would be willing to buy the ore as is without much processing. In this form it’s known as “lump.”

“It’s possible that it could be sold as lump,” Smeenk says. “We could mine and ship it directly to some steel makers in some parts of the world who would be untroubled by the two parts waste.”

From here, the company will need to gain a better understanding of the chemistry before it will know if it can sell the lump or a more refined material.

In any case, the resource estimate was more than just good news, Smeenk says. It actually caught the company off guard.

“This is big news and it’s a result we didn’t completely expect,” Smeenk says. “Even though mining exploration companies are (always called) optimists, this is bigger news than we anticipated.”

He says it will be some weeks before the company determines how it will proceed to develop the project — whether more shallow or deeper drilling will come first.

Micon actually reported a second resource estimate that includes a broader zone of chromite mineralization.

Indicated resources here were 26.4 million tonnes grading 39.37% chromite and inferred resources of 20.5 million tonnes grading 37.47% chromite.

The deposit has been tested by 48 drill holes on a grid with 100-metre spacing. Drilling covers a strike length of 1 km to a depth of 365 metres. The bulk of the chromite mineralization was found to be confined to the massive chromite domain but also occasionally occurs in the host peridotite as disseminated, semi-massive or intermittent beds of chromite.

Although the company has just completed its first resource estimate on the Big Daddy deposit, last year, KWG started on a study to build a 340-km railway passage to transport its ore to the CN mainline near Nakina, Ont.

Once the company has all the necessary data, it will begin more formal consultation with First Nations in the area so it can start a feasibility study on where the corridor will be located and what the cultural and environmental issues are.

The local First Nation has already voiced their opposition. The proposed railway would run through the Marten Falls First Nation’s traditional territory and they have complained that they weren’t consulted and that it undermined 10 years of planning for an access road to the James Bay lowlands.

“It was our view that a responsible way to proceed was to collect the information first so we could have a fully informed consultation about the alternatives,” Smeenk says.

The company hopes to have all the data by the end of the summer.

KWG became the operator on April 1, 2010. Both KWG and Spider have the right to earn an additional 7% interest by spending $10 million ($5 million each) by March 31, 2012, or by completing a positive feasibility study and related resource definition study on Big Daddy.

KWG has proposed that the two companies go ahead with a scoping study and a resource definition study, but the details have not been finalized.

Smeenk admits that the rotating operator-ship with Spider is “not that common” but says it’s working for the time being.

“Lots of people are discussing that it might be a good idea now (to merge),” he says. “And keep our other assets out of the new company.”