Positive study tabled for Finlayson

The Finlayson zinc project in southeastern Yukon is technically and economically viable, according to a prefeasibility study which assumes that the sulphide concentrates are marketable without any secondary treatment.

Expatriate Resources (EXR-V) says it has solved the selenium problem that plagues the Wolverine deposit simply by co-milling the potential ore material with that of the nearby Kudz Ze Kayah deposit. The selenium content can be reduced to “acceptable” salable levels, reports the company. The junior has sent sample products from locked-cycle flotation metallurgical testing of drill core composites to smelters in Japan, Korea and Canada. Expatriate says the response has been positive, with letters of interest outlining “reasonable” treatment, refining and penalty terms.

Based on these responses, the company has decided against the more costly alternative, which would be to treat the zinc concentrate on-site using a roasting facility. Initial tests showed that this secondary treatment could produce a product virtually free of selenium.

The Finlayson project is 135 km southeast of Ross River and 237 km northwest of Watson Lake. Expatriate holds 100% of the Kudz Ze Kayah deposit and 60% of Wolverine. Atna Resources (ATN-T) owns the remaining 40% of Wolverine.

The prefeasibility study, prepared by Hatch Associates, examined the concurrent development of the Kudz Ze Kayah and Wolverine polymetallic massive sulphide deposits based on a production schedule of 4,250 tonnes per day. Hatch received data and assistance from Beattie Consulting, Bruce Geotechnical Consultants Engineering, Nilsson Mine Services and Pincock, Allen & Holt.

The study outlined probable reserves of 14.6 million tonnes grading 7.23% zinc, 1.53% lead and 0.97% copper, plus 1.39 grams gold and 184.4 grams silver per tonne, which would allow for a mine life of 11 years. The two deposits contain an overall resource of 19.2 million tonnes grading 8% zinc, 1.6% lead and 1.05% copper, plus 1.49 grams gold and 207 grams silver.

Average annual production is pegged at 86,996 tonnes of contained zinc, 13,044 tonnes lead and 10,583 tonnes copper, as well as 39,778 oz. gold and 5.9 million oz. silver over the life of the mine. Total operating costs are estimated at $59.43 per tonne, whereas the life-of-mine production costs average US20 per lb. zinc, including copper, lead, silver and gold credits.

Production in the first five years is expected to average 109,000 tonnes zinc, 15,000 tonnes lead, and 12,000 tonnes copper, plus 54,000 oz. gold and 8 million oz. silver

The project carries a projected capital cost of $187 million, including a 15% contingency. The projected initial working capital requirement is $17.5 million, and sustaining capital over the life of the mine is estimated to be $29.7 million.

The project shows an after-tax internal rate-of-return (IRR) of 31.9% and a payback period of two years. The net present value (NPV), at a 10% discount, is $163 million. The study is based on prices of US55 per lb. zinc, US20 per lb. lead, US90 per lb. copper, US$5 per oz. silver and US$275 per oz. gold.

At a lower zinc price of US50 per lb., the after-tax IRR decreases to 26.4%, the discounted NPV lowers to $118 million, and payback increases to 2.4 years.

The study calls for the upper part of the Kudz Ze Kayah deposit to be mined by open-pit methods at the rate of 3,000 tonnes per day. The pit model contains a probable reserve of 11.1 million tonnes grading 5.61% zinc, 1.56% lead and 0.85% copper, plus 1.33 grams gold and 136.9 grams silver, at a stripping ratio of 6.73-to-1.

Kudz Ze Kayah contains a total resource of 13.7 million tonnes grading 6% zinc, 1.61% lead and 0.9% copper, plus 1.38 grams gold and 139.2 grams silver.

The Wolverine deposit will be developed as a 1,250-tonne-per-day underground mine, with the ore trucked 35 km to a processing facility at Kudz Ze Kayah. Hatch estimates a probable underground reserve of 3.5 million tonnes grading 12.43% zinc, 1.44% lead and 1.37% copper, plus 1.59 grams gold and 336.6 grams silver, based on a minimum thickness of 4 metres. Under the current plan, Wolverine has a mine life of eight years.

According to Hatch, the total resource at Wolverine is about 5.4 million tonnes grading 13.06% zinc, 1.59% lead and 1.43% copper, plus 1.76 grams gold and 378.1 grams silver. An earlier resource estimate, calculated by Westmin Resources, put the deposit at 6.2 million tonnes grading 12.66% zinc, 1.55% lead and 1.33% copper, plus 1.76 grams gold and 371 grams silver. The difference is attributed to the elimination of the upper lenses in the Lynx zone, which were included in the Westmin estimate.

The processing plant would treat, on a daily basis, 4,250 tonnes of blended ore, with zinc, lead and copper concentrates produced by means of grinding and flotation. Composite drill samples of the blended material have yielded recoveries to a final concentrate of 91% for zinc, 66% for lead and 81% for copper. The overall recovery for gold is 75%; for silver, 85%. The zinc concentrate averaged a grade of 55%; the copper, 25%; and the lead, 55%.

The concentrate will be trucked 700 km to Skagway, Alaska, for shipment to smelters in Asia and eastern Canada. A 24-km tote road connecting the Kudz Ze Kayah deposit to the Robert Campbell Highway will be upgraded to support mining operations. The operating plan provides for a workforce of 252 on a fly-in/fly-out basis, with a camp on site.

Expatriate acquired Kudz Ze Kayah and the smaller GP4F deposit (1.5 million tonnes grading 6.4% zinc, 3.1% lead, 0.1% copper, 2 grams gold and 90 grams silver) from Cominco (CLT-T) last March as part of a land package comprising 580 sq. km in the Finlayson Lake region. The price tag was $11 million in the form of $1 million cash (paid) and a $10-million convertible debenture. The debenture is to be repaid over four years, with $1 million payable on each of the first, second and third anniversaries, and the balance on the fourth.

Cominco will also receive a $2-million payment at production and retain a sliding-scale net smelter return royalty ranging from 1% during the first four years of production to between 2% and 3.5% in the following years, depending on the price of zinc.

Kudz Ze Kayah came with a water licence issued in 1998, as well as access road surface rights and a socioeconomic agreement with the Ross River Kaska Dena (First Nations). The existing permits and licences are being amended to include the development of an underground mine at Wolverine and an expansion of the proposed mill at Kudz Ze Kayah.

Expatriate says the prefeasibility study identified several opportunities for enhancing the project economics through additional engineering and exploration work. Carol Ellis, vice-president of investor relations, says both Kudz Ze Kayah and Wolverine are open to extension. “We would look to add resources and then upgrade them to reserves,” she says.

The company completed three exploration holes in late fall, drilling on the WOL and Goal Net properties. A third hole tested the downdip extension of the Wolverine deposit on to the WOL claims, which were acquired from Cominco. In June, Expatriate intercepted a 7.4-metre interval grading 13.56% zinc, 1.16% lead and 0.14% copper, plus 0.59 gram gold and 152 grams silver, with its first stepout hole 100 metres downdip of the nearest hole on Wolverine. The second hole intersected weak mineralization 300 metres downdip of the hole 1.

The third hole was drilled to the northeast of hole 1, with assay results pending. A second rig on the wholly owned Goal Net property tested a shallow, weak ground electromagnetic geophysical conductor. The Goal Net property is 15 km southwest of Wolverine and 6 km south of the GP4F deposit.

Expatriate’s plan to advance the Finlayson project through final feasibility next year, including underground test mining of the Wolverine deposit, will depend largely on its ability to raise roughly $12-15 million. With its stock languishing at 40-45, the company has been
forced to negotiate a series of small private placements in order to finance this year’s work and provide working capital.

Expatriate currently has about $800,000 on hand, with 22.5 million shares outstanding, or 31 million fully diluted. Boliden (BOL-T) is a major shareholder, and currently owns 8.3 million shares, or a 37% stake.

The company has engaged Newcrest Capital as financial advisor to seek a partner interested in acquiring Boliden’s interest in Expatriate, and in participating in the financing and development of the Finlayson project. Boliden has not advised Expatriate that it wishes to sell its interest.