Canico confirms promise of Puma

Vancouver — The initial results from an on going 11,000 metre drill program has enhanced the economic potential of the Onca-Puma nickel laterite project in northern Brazil.

Canico Resource (CNI-V) tabled the values for the first 39 holes, which were collared at the western end of the Puma deposit. The holes covered a 1.5 km strike length section of the Puma ridge and were drilled along 200 meter line spacings some 100 metres apart. All of the mineralization occurs at or very near the surface. Highlights include:

• Hole 1005 7.9 metres grading 2.89% nickel from surface,
• Hole 1008 7.8 metres grading 2.65% nickel from surface,
• Hole 1011 11.8 metres grading 1.72% nickel from surface,
• Hole 1014 13.9 metres grading 3.22% nickel from surface,
• Hole 1018 31.8 metres grading 2.34% nickel from 1 metre downhole,
• Hole 1020 31.1 metre grading 2.46% nickel from surface,
• Hole 1032 17.7 metres grading 1.94% nickel from 4 metres downhole,
• Hole 1034 31.2 metres grading 4.02% nickel from 1 metre downhole,
• Hole 1038 36.7 metres grading 2.09% nickel from 3.4 metres downhole.

The initial results indicate a wider mineralized zone than previous thought and as a result, Canico believes that there is good potential for increasing the tonnage at Puma West.

Situated in Para state, the Puma deposit lies on the 400-sq.-km Ona-Puma property, which hosts a near-surface inferred resource of 50 million tonnes grading 2.3% nickel and 0.09% cobalt using a 1.5% nickel cutoff grade.

“The mineralization marks a long, linear and thin blanket of laterite sitting on a ridge of weathered ultramafic rocks,” says Canico’s President, Micheal Kenyon. “There is only 1.7 metres of overburden and about 4.5 metres of mineralized saprolite underneath.”

The resource consists of three separate targets. The Ona target covers an 18-by-1-km area, with the mineralized laterite having an average thickness of 4.1 metres. Moving 10 km northeast, the Puma West target extends for 10 km along strike and is also about 1 km wide. The mineralization is slightly lower grade but has an average thickness of 5.1 metres. Between the two deposits lies an iron formation. Another 3 km to the northeast is the smallest zone, called the Puma East area, which measures 7 km long by 500 metres wide.

Half of the Puma West and all of the Puma East deposits lie within an indigenous reserve and not available for development. Even when the 10-11 million tonnes of ore-grade material that occur on the native lands are excluded, the project economics appear robust and Canico sees potential upside by increasing the tonnage of the deposits.

The junior aims to drill 265 holes into the Puma deposit before moving on to the Onca deposit. More than 400 drill holes are planned for the Onca drill program. In all, Canico plan on completing 11,000 metres of drilling at Onca-Puma by year-end.

Canico was formed in late 2001 through the merger of Oliver Gold and privately held Hastings Resources. Both companies were run by strong management groups that found success exploring for gold in Africa. Hastings is led by the former team of Sutton Resources, which delineated the gigantic Bulyanhulu gold deposit in Tanzania and was subsequently acquired by Barrick Gold (ABX-T) for $490 million in March 1999, whereas Oliver pocketed $5.5 million from the sale of its Segala project in Mali in January 2000. Under the merger, Oliver acquired all the outstanding securities of Hastings and consolidated its shares on a 9.3-for-1 basis. The junior then issued one new share for each Hastings share. Hastings’ principals received 5 million consolidated shares, 90% of which are held in escrow pending completion of the acquisition of Ona-Puma. Canico began trading in early February with 9 million outstanding shares.

Canico can acquire the Onca-Puma property from Inco (N-T) in return for raising at least US$22.5 million by Jan.31, 2003. At the end of the day, Inco will receive no cash payments but hold an 18% stake in the junior.

Canico and Inco have also agreed to an offtake deal that allows Inco to buy all nickel matte produced from the property, and a technical service agreement allows Canico to use the major’s reduction smelting process.

A 1997 scoping study by Watts, Griffis & McOuat indicates that the deposit could be exploited using conventional smelting technology. A single-line pyrometallurgical process similar to that used by Inco in Indonesia, would generate throughput of 1.1 million tonnes of laterite annually, yielding 50 million lbs. nickel matte yearly over a mine life of 20 years. The stripping ratio is a respectable 0.4-to-1 and the recovery rate is set at 91.6%. Capital costs are pegged at US$450 million; operating costs, at US$49 per tonne.

“This project is starting to live up to its considerable promise,” says Kenyon. “If the potential production scenario recognized by Watts, Griffis and McOuat is realized, Canico will rank within the top ten nickel producing companies in the western world.”