Polar Star takes on Chile

SITE VISIT

CALAMA, CHILE — It’s hard to wrap your head around the monstrosity of the Chuquicamata open-pit copper mine — affectionately known as “Chuqui” to the locals. Is the pit floor really almost a kilometre from the tourist lookout point on the edge of the pit? That makes it not quite two CN Towers deep.

In direct contrast to Chuqui are Polar Star Mining’s (POS-V, POSRF-O) early-stage Montezuma and Tulipan properties, about 35 km south. The properties lie along the central sub-zone of the main Chilean porphyry belt and cover about 20 km of strike of the same west fissure fault system and the related subparallel and cutting ancillary faults.

But the location of this combined 300-sq.-km land package could mean much more than finding another copper deposit in the Atacama Desert — it could be a chance to find the missing half of Chuqui.

That’s right: after a century of digging along the fault, many wonder whether there’s more to the enormous deposit. Even the mine’s operator, state-run Codelco, mentions it while discussing Chuqui expansion plans during an exclusive presentation for Polar Star and its guests during a recent visit.

Terence Walker, Polar Star’s vice-president exploration and general manager in Chile, doesn’t discount the theory.

“It’s something that’s been thrown around for a long time,” Walker says. “There may be another half but nobody’s found anything.”

Walker says there are many explanations for what could have happened to the hypothetical missing half.

“If the fault has displaced, (the rest of the deposit) should be to the south,” Walker says. “(But) it moves vertically too, not just horizontally, or, it could have eroded off.”

Nevertheless, being such a short distance from a mine with reserves (as of 2006) totalling 2 billion tonnes grading 0.83% copper is still a good thing. The Atacama Desert holds nearly 40% of the world’s copper reserves.

The main Chuqui pit is about 3 km wide and more than 4.3 km long. Codelco is considering joining Chuqui with a smaller pit to the south to create one big super pit. The super pit would trace mineralization as far as 16 km and be dug as deep as 1,200 metres. But minable copper grades have been proven to a depth of 1,700 metres so far, and plans for going underground a decade from now are in the making.

Already, waste dump expansions and environmental regulations have forced the 2,000 townspeople of Chuqui, who happily lived their lives steps from the mine, to relocate 15 km south to a new development on the perimeter of Calama, a city of 200,000. Now, abandoned homes in the town thatonceboasted 24,000 residents are quickly disappearing under waste rock. It’s conceivable Calama could one day see a similar fate should the strong mineralization extend far enough.

So far, Polar Star has identified several large areas with leached, hematite-stained and sulphate-rich caps containing minor amounts of copper wad located along and lateral to the west fault where it strikes through the northern claims of Montezuma. As well, some small, internal claims held by Codelco within the property have been reported to contain copper-gold veins, which are commonly found peripheral to porphyry systems.

Although there are no public records of exploration on Montezuma or Tulipan, the areas are not untouched. At Montezuma, Polar Star has found about 20 trenches scattered in three groupings and there’s an old flux pit at Tulipan. The pit is about 25 metres deep with a diameter of 50 metres, exposing a very coarse quartz-feldspar pegmatitic granite body, found in the higher-level siliceous plugs of the Chuqui system. Tulipan is also due north and straddling some of the same structures as Codelco’s Gaby open-pit copper mine, which has a reserve of 584 million tonnes of oxide copper grading 0.41%.

Arriving at the Montezuma property, Walker pulls over his pickup truck to check out the rocky hillside coloured by pinkish-brown hematite staining.

Holding out a satellite map of the region, he points to a spot.

“We are sitting right here, where there are two splays from the main fault,”he says. “We don’t really know if there are any splays here or not –we have to do more work.”

The company has already done 200 soil samples at Tulipan and is now getting started on geophysics for Tulipan, Montezuma, and two other properties, Chulacao and Los Azules.

And in the last year and a half, the company has picked up 17 properties including the Chepica copper-gold mine — on the verge of production– 225 km south of Santiago and a range of exploration properties.

Polar Star president and CEO Douglas Willock points out that the company is doing something new.

“We aren’t looking at old projects to recycle,” he says. “If there is one thing I’m proud of, it’s that this company is doing really grassroots exploration and day-lighting some of the hidden gems that are still to be found in Chile.”

But Chile has not escaped the challenges of this commodity boom. Willock suspects that many mining companies are reluctant to release contracted drills because of the length of time it takes to get one again.

“Our biggest challenge and we’re on the verge of solving that, is gaining access to good drills and keeping them,” Willock says. “I think our first victory is securing Major Drilling; they are now onsite at Los Azules drilling.”

Los Azules is a 65-sq.-km copper-molybdenum property located 60 km east of Copiapo, a city of 130,000 people about 800 km north of Santiago. Miles of heap-leach pads owned by Enami, another state mining company, line the highway leading to Los Azules. That’s because the region is known for mining. Green and blue staining on rocks make it easy for artisanal miners, known as piquineros here, to find ore.

“It’s a very crowded district,” Willock says. “People have been actively mining there for so long.”

No formal exploration has been done on the property but it was mined on a small scale in the 1930s. Parts of it are currently being exploited by piquineros who say they’ve been hauling away about 250 to 350 tonnes of ore per month from the copper oxide portion grading 3-5% copper.

“It’s easy for guys to go mining,” Willock says of the piquineros. “There’s the green and you just chisel into the side.”

But Polar Star is interested in the copper potential of the breccia zones beneath the oxides, which run only 100 metres deep at the most. The Brecia zones are estimated to have grades of 0.7-1% copper.

“This isn’t a property that you are going to be able to drill one hole and say that’s what it is,” Willock says. “It’s a breccia. . . this isn’t a sedimentary deposit where you are going to have uniform grade.”

Post-magmatic hydrothermal collapse breccia pipes, ranging from 5 to 350 metres in diameter, cut through a subhorizontal sequence of sub-areal epiclastic sediments and inter-bedded basaltic and andesitic flows.

The hydrothermal mineralization of the pipes consists of an early fragment replacement stage followed by open-space filling; the filling stage includes tourmaline with specularite, followed by quartz, chalcopyrite, pyrite with and without gold, molybdenum and galena. The pipes also contain traces of uranium, though no uranium minerals have been identified so far.

A surface oxidation zone up to 100 metres deep contains leachable copper minerals such as atacamite, chrysocola, brocanthite, copper wad and copper pitch.

Between January and March, Polar Star began a 2,500-metre drill program on the Araya main pit but the company could only get an underground drill, which wasn’t robust enough.

“We didn’t want to sit there for six months,” Willock explains. “Has it been efficient? No. Has it been expensive? Yes, but you’ve got to start somewhere.”

Some of the drill holes stopped midway, giving the company only half of the picture.

Higher grades were found in the oxide zone, as ex
pected. For example, Hole 2 returned 44 metres grading 0.13% copper, 0.04% molybdenum and 13 parts per million U3O8 in the leached zone. The same hole in the oxide zone cut 26 metres grading 0.66% copper, 0.07% moly and 18 ppm U3O8 as well as 19 metres grading 0.99% copper, 0.02% moly and 28 ppm U3O8.

Now Polar Star has a much larger drill contracted from Major Drilling Group International (MDI-T), allowing it to explore deeper into the primary mineralization. Willock says the difficult drilling was worth it in the end.

“We are getting a better handle on the system of where the oxides are and where the sulphides start, every bit is helpful,” he says.

Willock says he’d like to drill some targets at Polar Star’s 3-sq.-km Yoanca property, located about 75 km north of Calama, as well. All that’s needed is a drill.

Yoanca covers a classic leach capped zone along the same west fault system as Chuqui. The west fault is exposed in three small open cuts — the work of piquineros.

Willock calls Yoanca “the most obvious visible target” and it’s easy to see why: the piquineros have left behind a big pile of rocks stained bright blue and green.

But Willock concedes that the greater size of Montezuma and Tulipan make them more prospective over the long term.

Walker is also cautious: “It’s a question mark until we drill whether there’s mineralization beyond surface.”

Polar Star also has plans to drill in southern Chile, far away from the dry desert, in the country’s lush agricultural region.

The Nancagua epithermal gold-silver property, 180 km south of Santiago, showed promising results a decade ago when Walker worked on the property for a different company.

Walking around the hilly property, used partly for pasture, Walker rhymes off drill grades from the past.

In fact, it’s Walker’s 12 years of experience in Chile that allowed Polar Star to acquire such a range of properties. The Liverpool-born expat has worked all over the world during the last 40 years.

He first came across Polar Star at the Prospectors and Developers Association of Canada convention a few years ago. Walker later met up with Willock who was originally interested in forming a joint venture with International PBX Ventures (PBX-V), the company Walker was working for. No deal was made but it turned out that Walker had a few ideas of his own.

That was good news for Willock, a former investment banker who got into mining in the early 2000s. He started Polar Star in August 2003 with the intention of acquiring precious metals projects in Finland but it didn’t work out.

“So we sat and waited,” Willock says. He eventually found Chile, on the opposite side of the world.

“This country, its success in the past and today and in the future, is mining,” Willock says. “It’s much easier to deal with someone who shares your interest — your interests and goals are aligned.”

Walker evaluated dozens of properties in Chile before narrowing down the list. Some, like Nancagua, were easy choices.

Mineralization at Nancagua has been detected over an area 700 metres wide and 3 km long. On surface are zones of quartz veins and silicification within an envelope of sericite-clay alteration containing limonite, hematite and goethite.

In the mid-1990s, Agate Bay Resources completed extensive geological mapping, geochemical sampling and geophysics, outlining seven zones of gold and silver-enriched veining.

The company also drilled a total of 1,600 metres in about 20 shallow holes, with significant values found in eight. Assays ranged from 31 metres grading 1.5 grams gold per tonne and 6.6 grams silver to 11 metres grading 9.2 grams gold and 65 grams silver.

Although the Nancagua property has been drilled before, it’s not immediately obvious that this quiet countryside, with its clusters of farmhouses, could be the future setting for a heap-leach gold mine.

Walker says the economy in the region is largely dependent on agriculture and that when he worked here before, the local people were excited about the opportunity for more work; some people even cycled lengthy distances to work on the exploration team, he says.

Willock calls it a classic issue of whether two industries can coexist.

Agriculture is obviously sensitive to water, he says, while mining has been an important industry in Chile for the last century.

But Willock isn’t too concerned. Chileans are accepting of mining, he says, and the company will advance the project by adopting the best practices clearly set out by government.

“We understand what the concerns are and we’ll address them,” Willock says.

And proof that mining is accepted almost anywhere in Chile, is Polar Star’s Chepica copper-gold mine, where cattle graze in pasture at the mine property entrance. In April, the company agreed to pay $5.1 million for an 85% interest in the project.

The company plans to start mining this fall, processing ore at a rate of 300 tonnes per day in a yet-to-be built mill from China. Production will be ramped up to 500 tonnes by mid-2009.

Largely explored in the early to mid-1990s, Chepica was the subject of a bulk sample by the previous owners between 2001 and 2003 with the help of Enami.

They took 12 run-of-mine bulk samples from the Chepica No. 1 vein and about eight samples from the No. 2 vein, each weighing about 300 tonnes. The samples were shipped to local plants for processing. About 500 metres of drifting, crosscutting and raising was also completed.

Head grades from Chepica No. 1 averaged 1.6% copper, 3 grams gold per tonne and 16 grams silver, while samples from the Chepica No. 2 vein averaged 2.5% copper and 3 grams gold per tonne.

The mine sits on a 166-sq.-km land package covering a northeast-southwest- trending roof pendent of Cretaceous volcanics, subvolcanic porphyry bodies and sediments within Cretaceous granodiorite. Extensive gold and copper mineralization in the form of epithermal to high-level mesothermal veins, pipes and disseminations occur throughout and are associated with the subvolcanic porphyries and healed fault zones.

Gold and copper occur both with banded chalcedonic quartz veins, sheets and stockworks containing disseminated pyrite and some chalcopyrite.

There’s no resource for the mine but it’s at the top of Polar Star’s list. Drills have been set up so the company can complete a due diligence report.

As for Polar Star’s other properties, Willock says the time has come to start optioning out some of them. That’s what the company has already done with its Todd Creek gold-silver property in northern British Columbia.

In May, the company had about $3.2 million in the bank. By June, Polar Star announced a $5-million best efforts brokered private placement led by GMP Capital Trust (GMP. UN-T). Units are being priced at 65 each, containing one share and half a warrant. Whole warrants can be traded in for one share for $1 over a period of 18 months. Most of the proceeds will go towards exploration at Chepica.

Willock and Walker feel they have assembled a well-rounded portfolio that they hope will show the company can do it all.

“When we go to develop our other properties, we’ll have a track record that people can look at in terms of whether or not we are competent to run a mine,” Willock says. “It should add to our credibility and it adds to our capability.”