Northwest Territories

Diamonds have dominated exploration and mine development in Canada’s Northwest Territories since the first diamondiferous kimberlites were discovered in the Lac de Gras region in the early 1990s. Diamonds continue to attract the lion’s share of spending, followed by precious and base metals and uranium, primarily within known mineral districts. Yet non-traditional exploration targets in diverse, lesser known geological environments are being pursued with success in recent years, notably iron-oxide copper- gold (IOCG) deposits, nickel and platinum group metals (PGMs), and rare earth metals and minerals.

NICO project

Fortune Minerals of London, Ont., has spent more than a decade exploring its 90%-owned

NICO GOLD-COPPER-BISMUTH PROJECT situated

160 km northwest of Yellowknife, and now has a positive bankable feasibility study to show for its efforts. But the company’s next major challenge is to raise capital in a competitive market environment for a mine that would be the first of its kind in Canada.

Fortune explored the NICO project and nearby SUE DIANNE COPPERSILVER PROJECT using an IOCG Olympic Dam model, which was poorly understood in a Canadian context at the time. Olympic Dam hosts one of the world’s largest copper- gold-uranium deposits, yet was long perceived as a geological oddity unique to Australia. Fortune believed otherwise, and won industry and academic praise for its pioneering efforts after NICO and Sue Dianne were recognized as the first known significant Canadian examples of Proterozoic iron-oxide-hosted polymetallic deposits.

Greg Taylor, manager of investor relations and public affairs, says the project isn’t easily understood by investors because of its rare mineral assemblage. “Bismuth, for example, isn’t something that gets the average investor excited. Yet it’s an interesting commodity with many uses, ranging from household medicines to a [proposed] non-toxic substitute for lead in electronic soldering.”

Public understanding of the NICO project improved in early 2007, after Fortune released a bankable feasibility showing positive economics for a combined open-pit and underground mine and on-site plant that would produce gold dor, cobalt cathode and a high-grade bismuth concentrate.

The study led by Micon International and Met-Chem Canada is based on proven and probable reserves of 21.8 million tonnes (t) grading 1.08 g/t Au, 0.16% Bi and 0.13% Co, of which 20.6 million t are open-pit reserves. These reserves (within a much larger resource base) are sufficient to support a minimum 15-year mine life at the following proposed production rates:

• an average of 69,000 oz of gold in each of the first two years, and 24,000 oz/y thereafter;

•3.25 million lb/y of cobalt as 99.8% Co cathode;

• 3.23 million lb/y of bismuth contained in concentrate averaging 45% Bi.

The total in-situ metals contained in the reserves represent 3.32 million oz of gold equivalent at the base-case price assumptions of US$525/oz gold, US$16.50/lb cobalt, and US$4.50/lb bismuth, all well below current levels. Average cash costs are estimated at US$321/oz gold-equivalent.

At the base-case price assumptions, the project has a pre-tax internal rate of return (IRR) of 15.3% and an 8% discounted net present value (NPV) of $91.8 million. The IRR increased to 41.5% with an 8% discounted NPV of $484.5 million using prices current at the time the feasibility study was delivered (early 2007).

Since the report was tabled, Fortune has focused on underground bulk-sampling, with about 180 tonnes mined for large-scale metallurgical testing at a $4-million pilot plant at SGS Lakefield.

The company recently reported that flotation recoveries for cobalt, bismuth and gold “significantly exceed” (on average by 5% or more) recoveries achieved in the feasibility study, from both open-pit and underground material processed into gold-bearing cobalt and bismuth concentrates. Results are awaited for the hydrometallurgical components of the plant, which will recover cobalt metal, bismuth cement or metal, and gold from these concentrates.

Fortune has purchased milling and related assets from the dormant GOLDEN GIANT MINE at Hemlo, Ont., and will transport essential material to the NICO site to reduce capital costs, estimated at $215.2 million for a mine with a capacity of 4,000 t/d, or 1.46 million t annually.

Environmental assessment and mine-permitting applications are also underway with a view to starting production in 2010. Toward that end, Fortune is pursuing permits for an all-weather road to replace the existing ice-road, which will connect with roads already servicing the nearby Snare hydroelectric facilities.

“Working in the NWT is not without challenges, but we’d rather work here than in some other parts of the world,” Taylor says. “Land claims are settled, and support for mining from local communities is strong as long as people see that the environment is protected.”

Other projects

Another unusual project making its way through the mine development process is the THOR LAKE PROJECT near Yellowknife, one of the highest quality rare earth element (REE) and beryllium deposits in the world.

Operator Avalon Ventures received a positive preliminary economic study for its wholly- owned project in mid-2007, and is now conducting a $5-million work program, including 10,000 m of definition drilling and metallurgical studies, with a view to completing a pre-feasibility study by early 2009.

The CANTUNG MINE in the western N. W. T. is one of the world’s few primary producers of tungsten concentrates. The mine operated intermittently since it first opened in 1962, and was most recently revived by North American Tungsten in 2005. The company is also advancing the MACTUNG PROJECT, the world’s largest undeveloped high-grade tungsten-skarn deposit, in neighboring Yukon Territory.

The western portion of the Northwest Territories hosts some of the most prospective geology in the world for large-scale deposits, such as sedimentary exhalative and Mississippi Valley-type polymetallic deposits. Exploration and mine development in this region is meeting resistance from groups lobbying to expand parkland, notably beyond the boundaries of the proposed Nahanni Park expansion. Canadian Zinc is applying for permits to bring the PRAIRIE CREEK LEAD-ZINC PROJECT into production; the outcome of its efforts will be a test-case whether mines will be allowed to operate as good neighbours near existing parks.

Vivian Danielson is a freelance mining journalist based in North Vancouver, B. C.,

and can be reached at vivy@Telus.net.

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