Duluth Metals boosts resource in Duluth base metals complex

Duluth Metals (DM-T) has added some heft to its resource estimate for the Nokomis deposit in northeastern Minnesota’s Duluth base metals complex.

An updated National Instrument 43-101 resource estimate indicates that Nokomis has 30% more resources in the indicated category and 162% more in the inferred than previously thought.

At a 1% copper equivalent cut-off grade, the updated estimate demonstrates an indicated resource of 449 million tonnes grading 0.624% copper, 0.199% nickel, and 0.600 gram per tonne platinum, palladium, and gold (or TPM — at a copper equivalent grade of 1.46%).

This results in contained metal in the indicated category of 6.18 billion lbs. copper; 1.97 billion lbs. nickel; 103 million lbs cobalt; 2.3 million oz. platinum; 5.17 million oz. palladium; and 1.21 million ozs. gold.

Nokomis also holds an additional 284 million tonnes in the inferred category grading 0.627% copper, 0.194% nickel, and 0.718 gram per tonne platinum, palladium and gold (or TPM — at a copper equivalent grade of 1.50%).

This results in contained metal in the inferred resource category of 3.93 billion lbs. copper; 1.21 billion lbs. nickel; 62.8 million lbs. cobalt; 1.75 million ozs. platinum; 3.94 million ozs. palladium; and 0.88 million oz. gold.

The updated resource estimate, which includes all drilling up to April, includes two recently discovered high-grade areas.

The Nokomis deposit sits in the western portion of the Maturi extension properties and southeast of the town of Ely, Minnesota. So far Duluth has drilled only about half of the Maturi extension properties.

The Nokomis deposit lies about 400 metres below surface and extends to depths of about 1,200 metres.

According to a scoping study released earlier this year, and using base case prices of US$1.75 per lb. copper; US$7 per lb. nickel; US$10 per oz. platinum; US$350 per oz. palladium; and US$600 per oz. gold, the project would yield a pre-tax present value of US$792 million at a 10% discount rate.

The pre-tax internal rate of return would be about 21% from total underground mine production based on the previous and initial resource estimate completed in 2007.

The study also envisioned average annual production of 1.2 million lbs. copper, 23.8 million lbs. nickel; 430,000 lbs. cobalt; 75,000 oz. palladium; 33,000 oz. platinum; and 13,000 oz. gold.

In terms of geology, the deposit forms a tabular sheet of copper-nickel-PGM mineralization, hosted in troctolitic rocks resting on the lower contact between the South Kawishiwi intrusion and the Giants Range Batholith granitic rocks, the company says on its website.

The Duluth base metals complex is adjacent to the Mesabi Iron range, which has been producing iron ore for over 100 years.

As a result, the Maturi extension properties have access to extensive infrastructure including coal-fired power stations that were developed to support the historic and current taconite mines, six of which are operational and supply over 70% of iron ore demand in the United States. (Taconite is a lower grade, iron-bearing rock, which was considered a waste product by high-grade iron mines.)

The Duluth mining complex is also near ports that have access to the Atlantic Ocean through the Great Lakes and the St. Lawrence Seaway. The area is served by four major railroads serving five local ports.

Of course Duluth Metals is not the only mining company operating in the Duluth base metals complex. The region also hosts PolyMet (POM-T), Franconia (FRA-TV) and Teck Cominco (TCK.B-T).

But Duluth is “the largest current resource in the complex in terms of contained metals,” write the authors of an August 2007 report by Cormark Securities on the Dulux base metals complex.

The company also benefits from “experienced and aggressive management that is rapidly moving its project forward,” Cormack states.

The securities firm points out that the Duluth complex contains “one of the largest unexploited nickel-copper-PGE resources in the world” and is “the third largest nickel resource in the world after Sudbury and Nor’ilsk.”

Currently Duluth Metals is trading at about $2.70 per share and has a 52-week trading range of $1.49-$4.07. The company has 79.1 million shares outstanding.