Wednesday 28th September 2016

Resource Clips


The Panhandle Finally Pays Off

After Almost 40 Years of Drilling, Heatherdale’s Niblack is Close to Production

By Kevin Michael Grace

Call it serendipity. Geologist Patrick Smith began his career in “an exploration program with a boat and a helicopter in the 1970s in Ketchikan.” About this time over three decades of exploration began around the Niblack Mine on Prince of Wales Island, Alaska, just 44 kilometres across Clarence Strait from Ketchikan. In 2009, Heatherdale Resources signed an option to acquire 70% of the Niblack copper-gold-zinc-silver project. A year later, Smith became Heatherdale’s President and CEO.

Smith spent 32 years with Rio Tinto, 17 of them in Alaska. “I love the place,” he says, and couldn’t be happier to be involved again with Alaska mining. Especially with a resource so close to production and a company custom-designed for that purpose.

From 1974 to 2008, Niblack’s previous owners drilled 195,000 feet at a cost of $41 million. It was a long time coming, but by 2009, the resource had been proved. Coincidental with the establishment of Heatherdale in July of that year, a NI 43-101 estimate showed 2.6 million tonnes of indicated resources grading 1.18% copper, 2.33 grams per tonne gold, 2.19% zinc and 33.18 g/t silver, containing 67 million pounds copper, 193,600 ounces gold, 125 million pounds zinc and 2.8 million ounces silver. Inferred resources are 1.7 million tonnes grading 1.55% copper, 2.08 g/t gold, 3.17% zinc and 32.56 g/t silver, containing 58 million pounds copper, 114,300 ounces gold, 120 million pounds zinc and 1.8 million ounces silver (at a US$50 NSR cutoff).

Heatherdale gained control of Niblack from Niblack Mineral Development Inc. Heatherdale was required to invest $15 million (over three years) to gain 51%, another $10 million to raise that to 60%, and the funding of a feasibility study will raise it to 70%. Heatherdale‘s commitment to the project is manifested by an aggressive drilling program of over 100,000 feet and meeting the first $15,000,000 spending requirement over the first 18 months, thereby meeting the 51% threshold.

Smith characterizes 2010 as “a very successful year” at Niblack. “If you look through the assay releases, you’ll see some nice high-grade precious metal values with the copper-zinc ore.” The most recent results, in November, included 1.74% copper, 3.73 g/t gold, 2.47% zinc and 75 g/t silver over 14.3 metres and 1.84% copper, 2.54 g/t gold, 1.09% zinc and 51 g/t silver over 9.1 metres. October results included 2.36% copper, 2.71 g/t gold, 4.24% zinc and 70 g/t silver over 10.7 metres and 2.88% copper, 3.64 g/t gold, 2.81% zinc and 73 g/t silver over 8.7 metres.

These results have persuaded Smith that “the resource has increased,” but this will not be confirmed until Heatherdale releases its next estimate in February or March. Just as important, Smith adds, “We’ve cracked the code with regard to the geological interpretation, and this has led to some very exciting exploration targets. We’ll be exploring some of those from a surface drilling program and some from underground in 2011.”

When Smith says “we,” he refers not only to Heatherdale but also to HDI (formerly Hunter Dickinson Inc), a private Vancouver company that holds controlling interests in five mining companies (30% of Heatherdale) and is affiliated with six others. HDI provides Heatherdale with the advantages of integration (for example, HDI director Scott Cousens is Heatherdale’s Chairman) and economies of scale.

Smith explains, “We are independent and publicly owned, but we do have the advantage of HDI resources at our fingertips. Many of the staff are contracted to Heatherdale, but they are largely HDI staff: the geologists and engineers, legal, marketing. It goes beyond the ability to raise financings. It means the knowledge and experience, the human resources and professionalism of the group.” That said, Smith declares he is no mere placeholder: “I always have the ability to present other options to the board for consideration.”

In a three- to five-year timeframe—exploration to prefeasibility to feasibility — Patrick Smith

Heatherdale’s way at Niblack, according to Smith, is this: “In a three- to five-year timeframe—exploration to prefeasibility to feasibility. A positive feasibility study and ultimately a development decision is the goal.” This year will be devoted to expanding the resource, and Smith expects a prefeasibility study by 2012. Ultimately, “We would like to see at least a 10-year mine life at around 2,000 tonnes per day.”

As examples of operations similar to what Smith expects Niblack to become, he notes two from the Alaska Panhandle: Coeur d’ Alene’s Kensington Gold Mine and Hecla Mining’s Greens Creek silver-zinc-gold-lead mine. The latter was an operation he knew well in his previous role as Exploration Manager Alaska for Kennecott Exploration, a job that included working with the exploration team of the previous majority owner, Kennecott Minerals.

As to infrastructure, Niblack is a floating barge camp on deep water. According to Smith, “We’ve got optionality with regard to shipping concentrate or processing offsite.” Heatherdale has $8 million in its treasury and is well funded for its current drill program.

Heatherdale has a market cap of $70 million. Its share price reached a high of almost $2 in March 2009, but by September it had fallen precipitously to about $0.70. Since then it has climbed back to $1.25. Smith comments, “We have a multi-commodity massive sulphide deposit, which maybe people don’t understand completely. It’s not a pure gold play, so maybe that’s why people haven’t caught on. But it’s a wonderful deposit to have. It gives us staying power when we’re in production. When prices fluctuate, we’ll have several commodities to rely on.”


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