First Point partner quadruples drill program at ‘1st-of-its-kind’ Decar project

First Point Minerals (FPX-V) seemingly has it all.

The company has made a rare sulphides-free greenfield discovery of potentially huge proportions in its flagship Decar project, located in the safe, if not exactly perfect, mining jurisdiction of British Columbia. It also has a world-class joint venture partner in the form of Cliffs Natural Resources (CLF-N) earning a 75% interest in the project, in return for bearing all exploration and engineering studies costs until a feasibility study is complete.

The Decar project’s bulk-tonnage, open-pittable potential resource has been shown to have excellent recovery in advanced metallurgical testwork, using only basic grinding, gravity and magnetic separation processing methods. Tailings from the mine would also be acid-free, which should result in less environmental resistance. And the resulting concentrate produced would be free of sulphur and so bypass costly smelters on its way to market, with the project lying just 5 km away from a rail line and 110 km from a power grid.

So what’s the problem?

The mineral First Point wants to mine is called awaruite.

Most geologists and laypeople cannot even pronounce it, let alone know what it should be used for. As Ron Britten, the company’s vice-president of exploration, explained on a recent site visit to Decar: “We talked to a lot of nickel players two and a half years ago when we were trying to get a partner for Decar, and even the best geologists working in nickel didn’t know about awaruite… Finally, a Kiwi, actually my old boss at Homestake Mining, came to the PDAC when I was showing off the stuff. And he said, ‘No Ron, you don’t pronounce it that way, it’s like this (ah-where-oo-ite). You’ve got to pronounce the ‘u’ in the middle.'”

A nickel-iron alloy First Point likes to call “naturally occurring stainless steel,” awaruite is heavy and magnetic, comprising 75% nickel, 25% iron and 0% sulphur. It is widely disseminated at the 132-sq.-km Decar project, where the average grade of awaruite in the serpentinized ultramafic host rocks ranges from 0.1% to 0.15%. Occurring as tiny white grains ranging from 5 microns to 400 microns in width (400 microns is about 0.4 of a millimetre), metallurgical tests have shown approximately 80% of the awaruite grains are recoverable to produce a desirable ferronickel concentrate grading 2.6% nickel, 52% iron as magnetite and 2.2% chromite.

But with nickel prices currently hovering between US$9 and US$10 per lb., compared with a high of US$24 in early 2007, investors are hard-pressed to think much about nickel, a major component in stainless steel. As for asking investors to rethink the concept of nickel altogether – well, that would only seem to make things more difficult.

Nevertheless, First Point seems to have found a very willing partner for Decar in Cliffs Natural Resources. The Cleveland-based major iron ore and coal producer has dramatically increased its exploration expenditures on the project this year: it plans to spend over $7 million advancing the project in 2011, up from the US$1.8 million program it proposed at the start of the year and the US$1.4 million spent in 2010. Cliffs has now more than fulfilled its US$4.5-million spending requirement over four years under the JV partners’ original option agreement. Clifford Smith, Cliff’s senior vice-president of global business development, even said in an analyst and investor day presentation in June: “The Decar project is something we are very excited about. It’s going to be our first major discovery as we move forward.”

As Britten explains it, “They [Cliffs] didn’t get the total metallurgical results back from our preliminary tests in the winter until late June, and that’s when they went – oh, hmmmm. Obviously in-house they must have said, ‘We’ve got to fast-track this sucker.'”

Cliffs has expanded this year’s drill program at Decar from 4,000 metres using one rig to around 15,000 metres using four rigs. They plan to put 47 drill holes at a downhole depth of about 300 metres each into the main Baptiste zone, where seven widely spaced holes were drilled in 2011. Fourteen of the holes have been completed so far, with assay results pending. One of those holes was completed to a depth of 600 metres so as to test the extent of mineralization at depth as well.

Three other targets at Decar may see some drilling this year, weather permitting: four holes are planned on a ridgetop about 3 km north of Baptiste called the Sidney zone, where two holes in 2010 intersected nickel-in-alloy mineralization to a downhole depth of 398 metres; two holes are planned for the never-before-drilled Van target, located 6.2 km north of Baptiste and measuring 1,150 metres long by 200 metres wide; and one hole has been completed at Target B, a prospective new zone about 4.6 km north-northwest of Baptiste. The company expects to continue drilling at Decar until mid- to late October, weather permitting.

Cliffs is hoping to delineate a maiden inferred resource estimate at Baptiste, targeting a 2,500-by-700-metre area using 200-metre centres. “You know, this is new stuff,” Britten says. “It’s really hard to know whether or not 200-metre-spaced drill holes are even going to give you a resource – that’s mainly going to be driven by geostats and 43-101 definitions.  But with Decar being like a porphyry copper system, I figure they should be able to do it with that kind of spacing, if they can show the mineralization is continuous.” As an illustration, a 500-by-500-by-500-metre zone at Baptiste would result in a roughly 300-million-tonne resource.

In mid-September, Cliffs announced it has begun the process of hiring an engineering consultant group to conduct a National Instrument 43-101-compliant preliminary economic assessment, or scoping study. Cliffs has agreed to complete the study in 18 months, though First Point is hopeful it will be finished in about a year.

In the meantime, First Point’s geologists are on the hunt for another Decar – or several. “We’re doing a global search right now,” a tight-lipped Britten explains. “But until we have mineral title, we won’t disclose anything.”

First Point has let a few clues slip out, however. The company is actively exploring for awaruite in 7 countries, including the United States and Canada, and has already found several properties prospective for the mineral in Central and Northern B.C. It has staked seven large properties to the north of Decar, all 100% owned, four of which comprise a sort of semi-continuous 130-km-long trend north of Decar. The other three are located west of Dease Lake in Northern B.C. There is also the Joe Property in Oregon, which is still early stage.

The most advanced prospect of the bunch is Klow, a 950-by-270-metre drill-ready target about 70 km north of Decar. First Point hopes to drill there either later this year or next spring, once it has all the necessary permits in place. Of note, some samples have contained sulphides at Klow, unlike Decar. How much, however, remains unclear.

“Our global search is ongoing, alive and busy,” Britten promises. “I’m more busy on that than anything else, certainly not Decar, it can take care of itself I hope. I think you’ll hear some news in the next two or three months, once we’ve picked up the ground that we want.” The company is spending about $2 million this year on world-wide exploration, with about $350,000 of that on properties in B.C.

“If we can find two or three Decars – and there’s no guarantee we’ll find them – but even if we find a small one that’s like Decar, or several of them, it will impact nickel. I shouldn’t say the price [of nickel], but it will change the makeup of the industy. It is a game-changer… because this style of mineralization will be much easier to produce than laterites. You don’t have to worry about energy costs, and energy costs are going to get higher and higher. Right now we figure we can find more, we’re pretty confident of that. And we’re the only game i
n town – for now.”

But this all depends on whether Decar moves from concept to reality, and that will require a significant amount of more work.

Proving out recoverability is a major next step. Metallurgical testing so far has shown First Point can recover awaruite grains down to about 50 microns in size, but anything less than that they are not sure about. Below 20 microns could be a problem, because the grains are hosted in serpentine minerals which are non-magnetic, added to the fact they are lighter and might not be able to be picked up in the gravity separation.

For the most part, First Point has established the distribution of awaruite at the main Baptiste zone is totally universal; there is no control in terms of local structural features. There is also a loose relationship between grain size and higher nickel values within the range between 0.1% to 0.15% nickel. One concern is that if grain size drops in certain areas, and the really small grains of awaruite cannot be recovered, it might lead to significant dilution in the mine plan. Cliffs is now completing advanced metallurgical testwork in an effort to demonstrate this will not be the case.

Since awaruite has also never been mined before, Cliffs might want to build a full-scale pilot plant before building a first-of-its-kind mining operation (though the mechanical processing method is standard enough, the mineral being mined is new). Decar’s economics have also yet to be proven out, even in a preliminary scoping study.

Finally, there are some First Nation issues at Decar that Cliffs will have to deal with eventually. The local group, Tl’azt’en Nation, issued a non-binding stop work order to Cliffs in August after claiming the company had lied to them and insulted them by “hiring private security guards to keep us out of our lands.” Cliffs is continuing its work on the property and has said it remains focused on resolving their differences. Tl’azt’en want a signed exploration agreement before any more work takes place; First Point says the parties are working toward a deal but have yet to work out the details. It appears the B.C. group has caught on to the tactics of their Ontario counterparts, who have tried somewhat successfully to disrupt Cliff’s exploration in the Ring of Fire area in order to force the company to make concessions.

As of June 30, First Point had approximately $9 million cash in its treasury. It has 90.4 million shares outstanding, 102 million if fully diluted, with management and insiders controlling about 5%. Cliffs is the company’s largest shareholder, controlling about 13.6 million shares or 15% of the company. First Point’s shares closed at 67¢ on Sept. 22, within a 52-week range of 57¢-$1.06.