Minnova’s future lies in Northwest Territories

Awash with cash but short of ore reserves, Toronto-based Minnova (TSE) has agreed in principle to buy Falconbridge’s interests in three Northwest Territories copper-zinc properties for US$20 million.

The agreement includes 100% of the Izok Lake and Hood River properties as well as a 60% stake in the Gondor property which is held 40% by Falconbridge’s part owner Noranda (TSE). While Falconbridge is selling the projects to concentrate on its core nickel business, the nickel miner will retain a 3% net smelter royalty to be paid two years after commercial production begins.

Minnova has agreed to pay royalties of up to US$12.5 million over a 5-year period and to extend the time frame if production doesn’t generate the required amount.

The most advanced project in the package is the Izok Lake property, 260 km north of Yellowknife and 90 km west of Echo Bay Mines’ Lupin gold mine. Probable reserves stand at 12 million tonnes grading 3.1% copper, 14.5% zinc, 1.4% lead and 74.8 grams silver per tonne. The estimate is based on data from 148 holes drilled at 60-metre centres. When a $5-million exploration program begins in March, Minnova will focus on Izok Lake, says President Dave Watkins. “The reserves there are well established but we hope to extend the mine life by doing additional definition drilling,” he says. Minnova is also planning to explore the Hood River property about 80 km further north. It hosts about three million tonnes of 3% copper, 4% zinc, 20 grams silver and 0.7 grams gold in three separate massive sulphide pods. Near-surface drilling has intersected finely banded, massive sulphide mineralization grading as high as 5.7% copper and 5.1% zinc over 46.1 metres at vertical depths of 150-250 metres. “There are some spectacular intersections that have yet to be followed up,” says Watkins. The Gondor property, about 60 km east of Izok Lake, hosts a deposit containing 7.3 million tonnes of massive sulphides grading 0.2% copper, 4.8% zinc and 46 grams silver. But it will remain on the back burner for the time being, Watkins says.

Work in 1992 will include 20,000 metres of drilling combined with a study of the available transportation methods to and from the project site. “If we can lick the logistical problems of working in such a remote part of the country, we could be mining in this area for many years to come,” says Watkins. Depending on the outcome of exploration, he says Minnova may build a concentrator at Izok Lake and truck concentrates via frozen highway to the coast.

With nickel trading recently at US$3.20 per lb., Falconbridge cannot afford to develop the Northwest Territories projects, while spending $45 million at its Raglan nickel property in northern Quebec, says Lars Vannman, Falconbridge’s senior vice-president of business development. According to Falconbridge’s estimates, Minnova will have to produce around 400,000 tonnes annually to make such northerly properties a paying proposition, Vannman says. Upon closing, Minnova’s cash reserves will drop to about $100 million. But much of the decline should have been replaced by strong cash flow from the Kerr Addison Mines (TSE) affiliate’s four mines in October and November, Watkins says.