Base metals make comeback in the Great Lakes states

The three states that surround the upper Great Lakes — Michigan, Minnesota and Wisconsin — have a great mining history, but one that has, over the last four decades, receded further and further into history. Minnesota was America’s iron mine from the 1880s onward, but in recent decades the mines were drawn down along with the country’s sinking steel industry. Michigan has a long history of copper mining (and one of the country’s great mining schools in Michigan Tech), but is no longer a major copper producer.

The geology is like that on the other side of the Pigeon River and Lake Superior, making the three states the great “why not?” of American mining. Through the middle decades of the 20th century, some explorers asked that question with drill holes and got some very inviting answers, including the discovery of nickel and copper deposits in the mafic rocks of the Superior Rift and of volcanogenic massive sulphides in the Penokean volcanic belt of northern Wisconsin.

There was another answer, though, and it began “here’s why not.” The large, low-grade nickel and copper deposits of the Duluth magmatic complex proved to be difficult to process; a metallurgical challenge is one thing, but the will to overcome it is easier to find when you have a high-grade Bathurst rather than a low-grade deposit that, even with its extractive problems solved, may or may not be economic.

And the residents of northern Wisconsin had another here’s-why-not answer to development of the copper and zinc deposits of the Penokean belt in the 1980s — “because it’s in my back yard.” Opposition to the development of sulphide mines was unbending and immovable, and large discoveries — Crandon, a full-fledged company-maker, was the largest — sat idle while one developer after another sought to jump through ever-narrower hoops.

Prospectors are persistent, though. With advances in metallurgical technology, Duluth-type base metal-platinum group deposits are not impossible dreams any more, and the mineral endowment of northern Wisconsin extends past that refractory state’s northeastern border.

In the Duluth complex, PolyMet Mining (POM-T, PLM-X) has taken its project furthest. The NorthMet deposit, about 10 km south of Babbitt, Minn., was discovered in 1969 by U.S. Steel, and had the typical Duluth history — a large resource was drilled off, then metallurgical and economic considerations made sure it stayed just a resource. U.S. Steel, the Australian precious metal miner Nerco, and PolyMet’s predecessor Fleck Resources all took swings at the deposit, but NorthMet never got further than resource evaluation. (A 3% net smelter return royalty originally held by U.S. Steel has passed to a private company based in Texas.)

PolyMet, having received a feasibility study on the project, is now pursuing permits. Most recently it submitted its project description to Minnesota and federal environmental regulators.

Feasibility

The feasibility study, which was finished in September, looked at a large open-pit mine feeding the 100,000-ton-per-day Erie beneficiation plant that PolyMet acquired from iron miner Cleveland-Cliffs (CLF-N) for US$3.4 million in cash and 6.2 million shares. (PolyMet has since inked a deal to take over surface facilities and a short-line railway from Cliffs, for a further US$15 million in cash and 2 million shares.)

The study estimated a capital cost of US$312 million, including a US$27-million contingency against overruns. The pit would take an average of 81,000 tons of material per day, to feed the plant at 32,000 tons per day. The pit designs have not been finished, but those figures imply a stripping ratio around 2.5.

NorthMet has a reserve of 182 million tons, at grades of 0.31% copper, 0.09% nickel, with 0.008% cobalt, 0.008 oz. palladium, 0.002 oz. platinum and 0.001 oz. gold per ton. That figure is out of a measured and indicated resource of 422 million tons grading 0.28% copper, 0.08% nickel, 0.007% cobalt, 0.007 oz. palladium, 0.002 oz. platinum and 0.001 oz. gold per ton.

While the precious metal grades are low, the project’s scale would make it a respectable producer of platinum group elements, turning out about 75,000 oz. palladium and 21,000 oz. platinum annually, and contributing about 12% of the project’s revenue.

The feasibility study used metal prices based on averages over the last three years and forward prices for the next two. That worked out to US$2.25 per lb. for copper, US$7.80 per lb. for nickel, US$274 per oz. for palladium, US$1,040 per oz. for platinum and US$540 per oz. for gold. Treating all those metals as co-products, the operating cost has been estimated at US81 per lb. for copper, US$2.84 per lb. for nickel, US$113 per oz. for palladium, US$477 per oz. for platinum and US$239 per oz. for gold.

Plugging those numbers into a discounted cash flow model puts the project’s internal rate of return at 34%, with a pretax US$1.2-billion net present value at a 5% discount rate, or US$911 million at a 7.5% discount. Using lower price assumptions the project still makes a 17% rate of return, with a US$451-million net present value at 5%.

The secret of this success has been the development of a hydrometallurgical process for the ore, and finding a very, very cheap grinding plant, which reduced the expected capital costs by US$200 million.

The plant would produce cathode copper directly, plus a nickel hydroxide precipitate and a precious metal precipitate. The cobalt might be extracted separately as a hydroxide, or be shipped with the nickel; studies on that issue are ongoing.

The process starts with a conventional flotation system to concentrate the sulphides. That concentrate would run about 15% combined base metals, plus 0.25 to 0.35 oz. precious metals per ton. That concentrate is pressure-leached at about 225C (440F) to bring metals into solution. Chloride is added to the solution to form chloride complexes with the precious metals.

Precious metals come out first, in a process that reduces the ferrous iron in solution, then precipitates the palladium, platinum and gold with copper sulphide and sulphuric acid. The solution, which is acidic at that point, is neutralized with limestone (producing gypsum as a byproduct), and the copper extracted with an organic solvent. The organic is stripped with strong acid and the copper recovered by electrowinning.

The leach solution, with the copper removed, goes to a circuit to precipitate nickel and cobalt as hydroxides.

Metallurgical testing on the process has shown average recoveries around 92% for copper, 70% for nickel, 40% for cobalt, 75% for palladium, 72% for platinum and 67% for gold.

The permitting process has proved to have some bumps, as public opposition — mainly speculative, but politically difficult nonetheless — is appearing. PolyMet found it necessary to reiterate that its construction schedule can remain on track for a late 2008 startup, whatever permitting hurdles there might be.

Birch Lake

Northeast of Babbitt, about 20 km from NorthMet, Franconia Minerals (FRA-V, FRALF-O) has been drilling at its Birch Lake project, where two deposits have been defined in the past — Birch Lake, with 100 tonnes grading 0.59% copper, 0.19% nickel, 0.08% cobalt, 0.65 gram palladium, 0.32 gram platinum and 0.14 gram gold per tonne, and Maturi, with 83 million tonnes at 0.7% copper, 0.26% nickel, 0.2% cobalt, 0.26 gram palladium, 0.1 gram platinum and 0.05 gram gold per tonne. (Both are inferred resources.)

An early stage evaluation in mid-2006 considered bulk underground mining on the project — room-and-pillar at the gently dipping Birch Lake deposit and open stoping at the moderately dipping Maturi. Processing would follow a similar model to PolyMet.

Capital costs have been estimated at US$616 million, including a plant, and operating costs at around US$26 per tonne.

Franconia’s recent infill drilling at Birch Lake has been turning up wider thicknesses and higher grades than earlier resource drilling had, though t
he market may have been deceived by an error in a Franconia press release that substituted metres for feet. Mineralized widths in the past winter’s drill holes range from 24 to 41 metres, with copper grades mainly around 0.6% and palladium grades of 0.8 to 1 gram per tonne.

Downdip from Maturi, Toronto-based junior Duluth Metals (DM-T, DULMF-O) has started a 30,000-metre drill program to assess a resource. Duluth was spun off from Wallbridge Mining (wm-t, wlbmf-o), which drilled six holes on the property in 2006.

Wallbridge’s holes encountered grades similar to the Maturi resource, but mainly over narrower intersections, though one hole, MEX-6, intersected 67.1 metres grading 0.73% copper, 0.25% nickel, 0.48 gram palladium, 0.22 gram platinum and 0.11 gram gold per tonne, with 0.01% cobalt.

Duluth’s first two holes returned substantial widths: MEX-7 cut 77.7 metres grading 0.43% copper, 0.13% nickel, 0.37 gram palladium, 0.18 gram platinum, and 0.08 gram gold per tonne, with cobalt and silver credits, while MEX-8 ran 0.69% copper and 0.22% nickel over 62 metres, with 0.31 gram palladium, 0.12 gram platinum, 0.11 gram gold, and again some cobalt and silver.

Another large resource in the same area is controlled by Teck Cominco (TCK.B-T, TCK-N); the Mesaba deposit, near NorthMet, has a historic resource of 700 million tonnes at 0.46% copper and 0.13% nickel.

Magmatic nickel-copper deposits aren’t restricted to Minnesota. In the Upper Peninsula of Michigan, Kennecott Minerals received a preliminary approval for a mine permit on its Eagle nickel project early in January.

Kennecott, a unit of Rio Tinto (RTP-N, RIO-L), has outlined a 3.6-million-tonne resource at Eagle, with grades of 3.8% nickel, 3% copper, 0.8 gram platinum, 0.5 gram palladium and 0.3 gram gold per tonne. Permitting took a year longer than Kennecott had expected, partly because Michigan’s newly revised state mining law was being applied to a permitting process for the first time.

Ore from Eagle is to be shipped out, because Kennecott did not want to go through the process to permit a mill.

If Eagle is a success, there are additional resources that could be turned into reserves. Another half-million tonnes of massive sulphide are inferred, averaging 2.2% nickel, 2.2% copper, 0.4 gram platinum and 0.3 gram palladium per tonne, and there is an inferred low-grade resource of 8.1 million tonnes grading 0.5% nickel and 0.4% copper, with minor precious metals.

The Upper Peninsula’s other attraction is volcanogenic massive sulphides, in the Penokean volcanics near the border with Wisconsin. Aquila Resources (AQA-V, AQARF-O) has resumed work on its Back Forty project in Menominee Cty., where it plans between 15,000 and 20,000 metres of drilling.

Aquila has also engaged Datamine Consultants to calculate a new resource based on drilling in 2006. A 2005 estimate put the size of the four drilled zones on Back Forty at 3.1 million tonnes grading 6.78% zinc, 0.25% copper, 2 grams gold and 32.2 grams silver per tonne.

The last results from 2006 show several more wide intersections of base metal mineralization. Those holes tested extensions of known mineralization at the Main Zone Hinge and the Pinwheel Zone, two massive sulphide lenses on the hinge and northwest limb of a southwest-trending fault. The Main Hinge in particular had provided several very thick sulphide intersections in earlier drilling.

Two new holes on the Hinge intersected 65.7 metres and 58.5 metres of massive sulphides, with the longer of the two overlying stringer mineralization at depth. Hole LK-150 cut 65.7 metres grading 6.95% zinc, 0.31% copper and 0.04% lead, with 1.6 grams gold and 20.7 grams silver per tonne. Beneath that, another 31 metres of stringer sulphides graded 0.27% zinc, 0.22% copper, 0.53% lead, 10 grams gold and 65 grams silver per tonne.

Hole LK-148 graded 0.59% copper, 0.05% zinc and 0.01% lead, plus 5.1 grams gold and 11.6 grams silver per tonne over 58.5 metres. A third hole cut 26 metres grading 3.67% zinc, 0.11% copper, 0.04% lead, 1.7 grams gold and 13.8 grams silver per tonne.

On the Pinwheel zone, drilling is defining a massive sulphide body with a gossan zone, enriched in gold but depleted in base metals, on top of it. Two of the better massive sulphide intersections were a 16.4-metre length that graded 0.84% copper, 0.1% zinc, 0.03% lead, 0.9 gram gold and 16.1 grams silver per tonne, and an 11-metre intersection of mixed sulphides and gossan that graded 1.07% copper, 1.7 grams gold and 265 grams silver, with negligible lead and zinc.

The gossan intersections included a 1.42-metre interval where gold averaged 3.2 grams per tonne and silver 31.5 grams per tonne, with 0.08% copper and 0.2% lead. A 7.5-metre interval of footwall sediments underneath that intersection graded 4.2 grams gold and 24.3 grams silver per tonne.

A single deep hole drilled well to the southwest of known mineralization, targeting the downplunge extension of the fold axis, cut 18 metres of stringer mineralization that contained 1.27% zinc, with small amounts of gold, silver, copper and lead.