Expatriate sees Wolverine as stand-alone operation

Whitehorse, Yukon — The recent resurgence in metal prices has breathed new life into the Finlayson Lake district where Expatriate Resources (EXR-V) now appears set to develop its Wolverine massive-sulphide deposit as a stand-alone, underground operation.

The Wolverine deposit was being considered as part of a co-development operation with two other deposits because of the high selenium content in the ore. However, owing to a recent 10-fold price increase in selenium to nearly US$30 per lb., the element that once dogged plans to mine the deposit is now being seen as a bonus.

The Wolverine property, situated 130 km southeast of Ross River, was initially held by Atna Resources (ATN-V). Atna optioned the property to Westmin Resources in 1995, after which Westmin discovered the Wolverine deposit. By the end of that year, Westmin had earned a 60% interest in Wolverine and became operator of the joint venture. An airstrip, which provides the only access to the project, aside from a winter trail, was built in 1996.

Subsequent drilling at Wolverine defined a resource of 6.2 million tonnes grading 12.6% zinc, 1.55% lead, 1.33% copper, 371 grams silver and 1.76 grams gold per tonne.

Expatriate purchased Westmin’s 60% interest in the project in March 1999, from Boliden (BLS-T), which had taken over the junior.

Wolverine is a high-grade volcanogenic-massive-sulphide (VMS) deposit that dips steeply. The tabular shaped deposit has an average thickness of 5.1 metres, a 700-metre strike length, and dips at about 35. The deposit has a known 400-metre down-dip extension and remains open at depth onto claims held by Teck Cominco (TEK-T).

The mineralization is hosted within a thick sequence of felsic volcanic rocks interbedded with sediments. The sulphide minerals include pyrite, sphalerite, chalcopyrite and galena. In addition to Wolverine there are at least three other massive-sulphide bodies on the property including the Lynx, Fisher and the Sable zones.

An independent prefeasibility study in 2000 by engineering firm Hatch estimated a “diluted mining reserve” of 3.4 million tonnes grading 12.4% zinc, 1.44% lead, 1.37% copper with 337 grams silver and 1.59 grams gold. There were also unusually high amounts of selenium which was seen as an impediment to the deposit because smelters would levy a penalty against selenium-laced ore, thereby significantly adding to the cost of producing base metal concentrates. At US$3.50 per lb. for selenium, it would not be economic to recover the metal.

Expatriate looked for another deposit to blend with its Wolverine ore and, in March 2000, the company announced an agreement to acquire what seemed like the ideal candidate: Teck Cominco’s Kudz Ze Kayah property, some 30 km away.

Kudz Ze Kayah is a moderately dipping thick sequence of Devonian-Mississippian age felsic volcanic rocks that occurs relatively near surface. The tabular body contains several lenses of mineralization that add up to 22 metres.

Kudz Ze Kayah has an open-pit minable indicated resource of 11.3 million tonnes grading 5.9% zinc, 1.5% lead, 0.9% copper and 133 grams silver and 1.3 grams gold per tonne.

The Wolverine-Kudz Ze Kayah plan considered developing the two deposits in combination with one another under a plan known as the Finlayson Lake project. The prefeasibility study completed by Hatch in early November 2000 was based on metal prices of US55 per lb. zinc, US90 per lb. copper, US20 per lb. lead and US$5 per oz. silver and US$275 per oz. gold. The plan called for an open-pit mine on the upper portion of the Kudz Ze Kayah deposit at a rate of 3,000 tonnes per day alongside a 1,250-tonne-per-day underground operation at Wolverine.

The ore from both deposits would be blended and treated by simple flotation to produce zinc, lead and copper concentrate at a mill slated for construction at the Kudz Ze Kayah site. The blended ore would have solved the selenium issue via dilution.

In any case, the concentrate would still have needed to be shipped a considerable distance to the seaport of Skagway in Alaska prior to being smelted.

For its part, Expatriate could not meet the terms of the agreement with Teck Cominco, and by November 2001, the deal was off.

Logan project

Expatriate then looked at co-development with another zinc-silver massive-sulphide deposit at Logan, situated 170 km north of Wolverine. The company acquired a 60% interest in the Logan project, the remainder of which is owned by Almaden Minerals (AMM-T).

The Logan deposit consists of a 1,110-metre-long and 140-metre deep, fault-bounded mineralized zone that cuts graphitic granite and pegmatitic phases of a Cretaceous intrusive. Sulphide minerals, including sphalerite, pyrite, chalcopyrite, are concentrated in multiple-phase quartz and ankerite veins.

Previous drilling at Logan in 1989 defined a historical resource of 12.3 million tonnes grading 6.17% zinc and 25 grams silver per tonne, and the deposit remains open at depth. Ninety five per cent of the zinc and 85% of the silver is recoverable.

Expatriate planned to develop Logan as an open-pit operation at a rate of 3,000 tonnes per day, while mining underground ore at Wolverine at a rate of 1,250 tonnes per day.

A mill would have been built at Logan and ore trucked from Wolverine and mixed, thereby reducing the selenium content. An 8-year mine life would have seen a combined annual production of 114,000 tonnes zinc, 4,000 tonnes lead, 5,270 tonnes copper with 4.9 million oz. silver and 19,600 oz. gold. This scenario was tied to a US45-50 zinc price.

But Expatriate’s co-development plan with Logan has been put on the back burner to focus on prefeasibility work at Wolverine.

Wolverine stand-alone

In a surprise move earlier this summer, Expatriate purchased Atna’s 40% interest in Wolverine for $2 million, plus 10 million shares and 5 million warrants. Atna retains a sliding 4-10% NSR royalty on silver and gold production and no royalty on any base metals produced.

In the meantime, Expatriate recently announced plans to spin off its properties outside the Finlayson Lake district into a new company, Pacifica Resources. The move is designed to make Expatriate better leveraged to silver and zinc prices. As part of this restructuring, Expatriate will be renamed Yukon Zinc Corp. to better reflect its focus on Finlayson Lake. The move is similar to that of its StrataGold Resources (SGV-V) spinoff to focus on base metals.

A prefeasibility study by Hatch has been commissioned to build on previous development plans for Wolverine which were completed in October 2000 as part of the Finlayson Lake project. The study showed that the relative metal value of the deposit was 54% zinc, 26% silver, 12% copper, 5% gold and 3% lead. Cash costs of zinc production, reduced by the silver, copper and gold credits, would be below US30 per lb. Capital costs for Wolverine are roughly estimated at $100 million.

The company has proposed an $8- to $10-million financing later this year to fund test mining and an underground exploration program slated begin later this fall and take eight months to complete.

A ramp would be built from surface to the upper levels of the deposit, at which point drifts into the ore would be constructed for bulk sampling. A drift into the hangingwall of the deposit would provide a drill platform for further definition drilling. The underground work would serve to show that the proposed mining method is effective under existing ground conditions.

“The underground development will start with a portal at the seventeen-hundred-and-fifty-metre level and include about six-hundred-and-fifty metres of development to extract some thirty-six-thousand tonnes of ore as a test mine,” explains Jason Dunning, Expatriate’s project geologist at Wolverine. “The ground conditions will be an important determining factor in the mining method which will in turn affect the costs.”

The reserve will be brought up to National Instrument
43-101 standards and prefeasibility work will take about 6-8 months to complete. If prefeasibility proves positive, a bankable feasibility study will follow shortly thereafter.

“They want to push ahead with a mine — the upper drift is ‘flow throughable’ and there is the 25% Yukon tax credit,” notes Dunning.

Permitting for the underground program is under way and talks are ongoing with representatives from the Kaska First Nation, which owns the rights to the Wolverine deposit. A 16-km road would be required along what is now considered a winter trail, in order to gain access to the nearby Robert Campbell Highway.

But what about the selenium in the ore? Dunning says Expatriate has been in talks with various smelters for its Wolverine ore. “In 2000, the smelters said there was too much selenium,” he says. “But now, smelters are willing to take the ore ‘as is’.” Selenium is used largely in the glass and fertilizer industries and limited supply has driven up prices.

Meanwhile, there are at least two advanced-stage sulphide deposits in the district that have been shelved owing to the prolonged downturn in metal prices. Perhaps once Expatriate gets rolling, other companies will be spurred into action.

“It remains to be seen what Teck Cominco will do over the next few months,” explains Dunning. “Teck Cominco’s Wall claims that cover the down-dip projection of the Wolverine orebody would require 1.2-km drill holes from surface.”

The Yukon government is likely to provide good support for the Wolverine project in keeping with its recent drive to get mining operations back in the territory. Even though Wolverine may prove economic on its own, to an outsider, it still makes sense to develop the Logan and Wolverine deposits in combination with one another.