Base metal boom helps revive Canadian Cordillera

Vancouver — With base metal prices at or near record highs, everything old is new again in the western Cordillera, where dormant mines or advanced projects discovered decades ago continue to dominate the mine-development pipeline.

Of the dozen or so base metal projects showcased at the recent Mineral Exploration Roundup in Vancouver, many are past-producers or previously developed projects that were often stopped or stalled by the wildly cyclical metal prices of past decades. The new owners, mostly juniors, are having better luck, with strong demand from China and other emerging economies providing the necessary stability for them to break into the once-risky base metal business.

Two pioneering companies that made the leap early are Imperial Metals (III-T, IPMLF-O) and Taseko Mines (TKO-V, TGB-X). In 1997, Imperial opened the Mount Polley copper-gold mine near Williams Lake, B.C. and the 50%-owned Huckleberry copper-molybdenum mine near Houston. By 2000, operations were suspended or under job-protection programs. By 2005, rising prices had revived both mines, which are now producing profits, as well as base metals, for Imperial’s account.

Taseko reopened the Gibraltar copper-gold mine in 2004, and has since outlined sufficient resources to allow for mining to continue for at least 12 years, and possibly twice that. The mine began operations under a previous operator in 1972.

One dormant mine still struggling for an encore performance is Tulsequah Chief, a silver-lead-zinc-copper mine previously operated by a predecessor of Teck Cominco (TEK.SV.B-T, TCKBF-O) in the 1950s. Redfern Resources, now a subsidiary of Redcorp Ventures (RDV-T, RDFVF-O), led efforts to revive the massive sulphide project in the late 1980s, initially in partnership with Cominco, and then on its own.

Redfern spent $36 million to advance the project to the development approval stage, but efforts stalled when environmental groups lobbied against mine development. The mine is located in a scenic, historic mining region of northwestern British Columbia.

The company persevered and recently secured environmental certification from both federal and provincial agencies to proceed with development. A special use permit is also in place governing construction, use, and decommissioning of an access road.

Tulsequah Chief hosts measured and indicated resources totalling 5.38 million tonnes grading 1.41% copper, 1.32% lead, 6.73% zinc, 2.73 grams gold and 100.8 grams silver per tonne. A further 1.54 million tonnes grading 1.13% copper, 1.07% lead, 5.44% zinc, 2.23 grams gold and 85.1 grams silver are classified as inferred.

The project endured some ups and downs on the technical front, too. An initial review of a feasibility study was curtailed after a preliminary economic assessment concluded that the project was “not sufficiently attractive to proceed without further resource expansion.” The analysis was based on copper at US$1 per lb., zinc at US55 per lb., lead at US35 per lb., gold at US$400 per oz. and silver at US$6.50 per oz.

Since then, with metal prices at robust levels, the potential economics are considered much improved. The company has commissioned another review, this time to identify areas of “potential cost reductions and optimization of the development plan.”

The company is discussing production options with potential joint-venture partners, while it draws up plans for an exploration program aimed at expanding resources. The proposed program would also examine potential for resource expansion at the nearby Big Bull deposit, a former producer located 9 km from Tulsequah Chief (on the same property). Previous production at Big Bull totalled 360,073 tonnes grading 1.2% copper, 1.9% lead, 7.3% zinc, 5.14 grams gold per tonne and 154.3 grams silver.

Discussions are also in progress for potential cost-sharing initiatives with another junior company looking to revive a past-producing gold mine in the same region.

British Columbia’s two largest exploration projects, Galore Creek and New Afton, also have historical roots going back decades. New Afton was found on the remains of the past-producing Afton mine, operated by companies related to Teck Cominco in the 1970s and 1980s. The project is a few hours’ drive from Vancouver, and adjacent to the Trans-Canada Highway.

New owner New Gold (NGD-T, NGD-X) recently raised $75 million to advance the project to feasibility. An infill drill program is nearing completion, and results will be incorporated into an updated resource estimate slated for release in mid-2006. The feasibility study is also under way, examining a proposed underground mine below and adjacent to the Afton open pit.

A previous scoping study estimated measured and indicated resources at 68.7 million tonnes grading 1.08% copper, 0.85 gram gold per tonne, 2.62 grams silver and 0.12 gram palladium (also calculated as 1.68% copper equivalent, or 2.61 grams gold equivalent). Of this total, 9.5 million tonnes were classified as measured, while the indicated resource was 59.2 million tonnes.

Copper Galore

Farther north, near Stewart, B.C., NovaGold Resources (NG-T, NG-X) is pushing hard to advance its Galore Creek copper-gold deposit to feasibility this year. The company is earning a 100% interest in the project from subsidiaries of Rio Tinto (RTP-N) and Anglo American (AAUK-Q).

Galore Creek is a large deposit that would likely be a mine already, were it not for its remote location and lack of infrastructure. These challenges are being tackled head-on with some innovative solutions that will form part of the feasibility study. Already in hand is a co-operation agreement with local native groups.

At last report, the project hosted measured and indicated resources totalling 516.7 million tonnes grading 0.59% copper, 0.36 gram gold, and 4.54 grams silver per tonne, or 0.8% copper equivalent, based on a 0.35% copper-equivalent cutoff grade. Inferred resources at the adjoining Copper Canyon project add another 578.3 million tonnes of 0.41% copper, 0.42 gram gold, 4.35 grams silver, or a copper-equivalent grade of 0.68%, at the same cutoff grade.

A previous scoping study concluded that Galore Creek has potential to recover at least 5.9 billion lbs. copper, 3.7 million oz. gold and 40 million oz. silver over a 20-year mine life, with total production costs in the lower quartile of producers.

Production in the first six years would average about 300,000 oz. gold, 2.31 million oz. silver and 370 million lbs. copper each year, at an average total cash cost of US36 per lb. copper, after precious metals credits. The ultimate scale of the project, and capital cost and production cost estimates, will be determined once the final feasibility study is in hand.

Near Dease Lake, Western Keltic Mines (WKM-V, WLKTF) is advancing the Kutcho Creek copper-zinc project, discovered by previous operators in the late 1970s. The project is composed of three massive sulphide deposits that collectively host 20 million tonnes containing 850 million lbs. copper and 1.2 billion lbs. zinc.

In early January, the company released new resource estimates for the advanced project. Kutcho, the largest deposit, hosts measured and indicated resources of 14.2 million tonnes grading 1.86% copper, 2.44% zinc, 32.7 grams silver, and 0.39 gram gold.

Measured and indicated resources at Esso West now stand at 2 million tonnes of 2.93% copper, 5.5% zinc, 69 grams silver and 0.63 gram gold. Sumac hosts an inferred resource of 5.5 million tonnes at 1.23% copper, 1.91% zinc, 18.1 grams silver and 0.17 gram gold.

Engineering and metallurgical studies are being carried out for the final feasibility study. The company has advanced Kutcho Creek to the province’s environmental assessment process in order to obtain permits for a mining operation.

A significant number of previously explored “stan
d-alone” molybdenum projects in the Cordillera are getting a second look in light of much improved prices for the metal. Most have established resources defined by previous operators in the 1970s and early 1980s.

Yukon projects

Neighbouring Yukon Territory currently has no operating mines, but does have several former producers and previously discovered projects on the fast-track to production.

Sherwood Copper (SWC-V, SWOPF-O) is forging ahead with plans to revive the Minto copper-gold project, initially discovered in 1973. A previous operator spent US$10 million on mine construction in the late 1990s before pulling the plug because of low metal prices.

Based on a newly released resource estimate, Minto hosts measured and indicated resources of 9.19 million tons grading 1.83% copper, 0.016 oz. gold, and 0.23 oz. silver per ton. A feasibility study is scheduled for completion in the first quarter.

Another Yukon project making its way through the mine-development process is the Wolverine deposit, discovered during the 1980s in the Finlayson Lake district. The project and surrounding land package are now owned by Yukon Zinc (YZC-V, YZCCF-O).

A newly released report puts measured and indicated resources at 4.52 million tonnes grading 12.04% zinc, 1.15% copper, 1.57% lead, 351.5 grams silver and 1.68 grams gold per tonne. The underground deposit also hosts an additional inferred resource of 1.69 million tonnes grading 12.16% zinc, 1.23% copper, 1.74% lead, 385.1 grams silver and 1.71 grams gold. The estimate includes results from a recently completed $17-million test-mining and definition-drilling program.

A feasibility study is scheduled for release shortly, with a view to advancing the project to a production decision in mid-2006, and production in 2007.

A related company, Pacifica Resources (PAX-V), hopes to revive a zinc-lead-silver project initially discovered in the 1970s, and now considered the largest undeveloped zinc deposit in the world.

Howard’s Pass is a sedimentary exhalative deposit within the Selwyn basin, near the border with the Northwest Territories, in a region lacking mining infrastructure.

Previous operators spent $20 million on exploration and underground sampling, roughly twice the acquisition price negotiated by Pacifica. The vendors retain a 1% net-smelter royalty on production, and a 20% net-profits royalty capped at $10 million on initial production.

The global resource, estimated at 1 billion tonnes, is not compliant with National Instrument (NI) 43-101 standards, except for certain portions tested by the company’s recent drilling programs. The newly released updated estimate (compliant with NI 43-101 standards) includes 33.5 million tonnes grading 5.52% zinc and 2.1% lead in the indicated category, and 112.9 million tonnes containing 5.4% zinc and 2.14% lead in the inferred category.

The project requires infrastructure improvements before mine planning can begin in earnest. Recent work has focused on metallurgy, with a key element being testing to determine the effectiveness of using dense media separation (DMS) as a preconcentration step before milling. Initial results were positive, and confirmed previous tests done in the 1970s and in 2004.

Pacifica’s latest gravity separation test work rejected 39.4% to 45.87% of run-of-mine material, upgrading feed material to 140-150% for zinc, and 150-160% for lead.

In neighbouring Northwest Territories, the past-producing Cantung tungsten mine was reopened by North American Tungsten (NTC-V, NATUF-O) in September 2005. The mine is now considered to be the Western World’s pre-eminent tungsten producer.

Among the up-and-coming producers is the Prairie Creek mine, which almost made it to production in the early 1980s. The new owner, Canadian Zinc (CZN-T, CZICF-O), was recently awarded a water permit for underground development and the operation of a metallurgical pilot-plant at the mine site.

This year’s work program will include driving at least 400-500 metres of new decline within the underground workings, followed by about 10,000 metres of underground infill drilling to better define known resources and test for additional resources. The historic resource stands at 11.8 million tonnes averaging 12.5% zinc, 10.1% lead, 0.4% copper and 161 grams silver per tonne.

Prairie Creek has shouldered its share of opposition from groups opposed to mine development, but, as was the case at Tulsequah Chief, the company persevered and was eventually awarded the necessary permits to advance the project.