Minnova to get $15 million — Metall to buy into Izok Lake

Toronto-based companies Minnova (TSE) and Metall Mining (TSE) have agreed to combine their mining and financial strength in a bid to develop the Izok Lake copper-zinc property in the Northwest Territories.

Needing to boost fast depleting ore reserves, Minnova paid Falconbridge US$20 million earlier this year for Izok Lake and two other Northwest Territories copper-zinc projects.

Seen by Minnova as one of the largest undeveloped base metal deposits in North America, Izok Lake hosts an estimated 13.4 million tonnes of grade 14.4% zinc and 3.2% copper. But its remote location, 90 km west of Echo Bay Mines’ Lupin gold mine, means that establishing transportation routes to and from the site will be the biggest logistical problem facing both companies. Minnova President David Watkins says he is pleased that Metall has emerged as a likely joint venture partner because of the latter’s connections to Teck (TSE) and Cominco (TSE) which already have arctic mining experience. Minnova will also look to Metall’s German parent, Metallgesellschaft AG, for help in marketing joint venture production, according to Watkins. He expects capital costs to be in the $300-million range.

Assuming the deal closes, March 31, Metall can earn a 40% stake in Izok Lake for $15 million, to be paid in separate instalments consisting of $10 million on signing, $2 million if a feasibility study is completed, and $3 million if a decision is taken to put the project into commercial production. The agreement also gives Metall the option to earn 40% of Metall’s interest in the Hood River and Gondor properties by putting up $2 million for exploration over the next two years. Having acquired Falconbridge’s interest in both properties, Minnova now owns 100% of Hood River and 60% of Gondor with the remaining 40% held by Noranda (TSE).

Situated 80 km north of Izok Lake, Hood River hosts about three million tonnes of 3% copper, 4% zinc, 20 grams silver and 0.7 grams gold per tonne in three separate massive sulphide pods. The Gondor property, 60 km east of Izok Lake, hosts 7.3 million tonnes of massive sulphides grading 0.2% copper, 4.8% zinc and 46 grams silver.

With three rigs on site, exploration will focus initially on Izok Lake and Hood River where operator Minnova expects to spend $6 million this year to define and extend existing ore reserves. Future work will also include metallurgical testing on samples taken from the property. With plans to have a feasibility study in place next year, Minnova is looking into the logistics of transporting equipment and material from the project site north to Coronation Gulf.

With that in mind, the company is talking with Echo Bay and Inuit organizations about building a port large enough to allow a 30,000-tonne shipping vessel to pick up concentrates from the village of Canmine. While Metall’s chief producing asset is the Copper Range copper complex in Michigan, it gained experience in arctic mining by way of its involvement in Conwest Exploration’s (TSE) Nanisivik zinc-lead mine on Baffin Island. When Falconbridge sold the properties last year, it retained a 3% net smelter royalty to be paid (to a maximum of US$12.5 million) two years after production begins.