Saturday 22nd October 2016

Resource Clips

Northern Persistence

Challenges Notwithstanding, Nunavut Explorers Persevere

By Greg Klein

See Part I of this story.

Nunavut’s mining future might have seemed grim indeed when Agnico-Eagle TSX:AEM applied a $644.9-million write-down to Meadowbank, the territory’s sole operating mine. Newmont’s TSX:NMC $1.61-billion write-down of its Hope Bay Gold Project would seem to validate pessimism. Yet Nunavut mining has flourished in the past, and rising commodity prices have brought renewed interest in past-producing operations. Meanwhile, a new strategic alliance offers hope for largely unexplored lands.

Undeterred by its Meadowbank disappointment, Agnico is pushing its Meliadine Gold Project towards 2017 production. But if Elgin Mining TSXV:ELG keeps to its timeline, it will re-open the Lupin Gold Mine by Spring 2014. Located 400 kilometres north of Yellowknife, the mine was shut down by Kinross TSX:K in 2005 after producing 3.34 million ounces. Production, however, was sporadic. The mine was opened October 1982, shut down January 1998, re-opened April 2000, shut down again August 2003, re-opened March 2004 and shut down yet again in February 2005.

Challenges Notwithstanding, Nunavut Explorers Persevere

Despite its high grade, Lupin’s resource estimate isn’t huge. The June 2011 43-101 shows 720,000 tonnes grading 11.7 grams per tonne for 271,000 gold ounces indicated and 410,000 tonnes grading 10.73 g/t for 141,000 ounces inferred.

The company maintains, however, that existing infrastructure means the mine “does not require a multimillion-ounce deposit to justify a production decision,” putting the project in a “unique position” compared to other Northern projects.

Results from Lupin’s WZSOS Zone released March 6 include

  • 5.89 g/t gold over 8.9 metres
  • 9.56 g/t over 5.3 metres
  • 9.5 g/t over 4.4 metres

Along with Lupin, Elgin picked up the Ulu Gold Project 155 kilometres further north. Another high-grade project, Ulu’s June 2011 resource estimate shows 751,000 tonnes grading 11.37 g/t for 275,200 gold ounces indicated and 418,000 tonnes grading 10.61 g/t for 142,900 ounces inferred, using a 2.5 g/t cutoff. The deposit remains open below the 360-metre level, and drilling is scheduled to resume this month.

Next month Elgin shareholders vote on a proposed merger with Gold-Ore Resources TSX:GOZ, which owns the Bjorkdal Gold Mine in northeast Sweden. Among the merger’s proposed advantages, Elgin states the Bjorkdal team “has Arctic underground and open-pit mining operating experience that will benefit the combined company.”

New to the neighbourhood is HTX Minerals, a privately held project generator that last week announced a strategic alliance with Nunavut Resources Corp, described as Canada’s first Inuit-owned mining development company. HTX already holds a three-year, $3.9-million strategic alliance with Implats, the giant platinum producer, to explore northern Ontario. Under the five-year NRC agreement, the Inuit company is expected to raise at least $18 million to fund exploration.

The alliance hopes to create joint ventures to develop projects which then might be optioned to a third party or sold to a new corporation. The agreement covers the Kitikmeot region of western Nunavut. Kitikmeot consists of 450,000 square kilometres populated by about 5,400 people, 88% of whom are Inuit. The region includes Hope Bay, subject of last month’s write-down.

The NRC was founded by the Kitikmeot Inuit Association which, according to some sources, played a role in the demise of Hope Bay. The February 16 edition of the Nunatsiaq News reports that Kitikmeot Corp, the KIA business arm, received at least $60 million a year from the Hope Bay Project for the last four years.

According to the report, “KIA President Charlie Evalik says money was not a sticking point, but, according to a person who was not authorized to speak publicly and who spoke on condition of anonymity, the KIA may have asked for too much before the mine had even reached production.” Evalik is also Chairman of the NRC.

The newspaper added, “‘KIA played a role in a complex decision,’ is all [Chris Hanks, VP of Newmont's Hope Bay Mining subsidiary] had to say about that issue.”

Evalik was travelling, and another NRC spokesman didn’t respond to a interview request by press time.

The HTX-NRC alliance will explore three separately defined land packages: federally owned Crown lands, Inuit Owned Lands and Article 41 lands. The last are actually in the Northwest Territories but were granted to the KIA as part of the boundary negotiations leading to Nunavut’s creation in 1999.

We’re going to see more and more infrastructure, and a lot of these resources will become more and more accessible —Scott McLean

Speaking from Sudbury, HTX President/CEO Scott McLean says, “The alliance helps accelerate the path to discovery. It gives us a social licence because we’re working directly with the people of the region. We’ll be mentoring and training the Inuit so they can become self-sufficient with respect to mineral exploration. We’ll have access to funds without diluting our shareholders’ equity.”

He points out, “It’s a multi-commodity alliance, although if you try to focus on everything everywhere you probably won’t be too successful. But there are some obvious targets that jump off the page—gold targets, nickel-copper targets, VMS targets and diamond targets. However our main drive, at least in the first year, will be in the gold space and the nickel-copper space.”

A number of former mines dot the region, including the Ekati and Diavik diamond mines just south of the Article 41 lands and Lupin to the north. “There’s no reason why we wouldn’t consider taking on a past-producer, particularly if it offered some upside beyond what was done before,” McLean adds.

But even with climate, isolation and lack of infrastructure already ganging up on Northern enterprise, the Fraser Institute’s most recent Survey of Mining Companies found another problem—corruption. The institute pins Nunavut with the third-highest level of graft among high-income jurisdictions. The NWT comes in fourth. Eight percent of respondents said they would not invest in Nunavut for that reason. The survey is based on industry polls and doesn’t provide details or examples.

McLean says he hadn’t heard of concerns about corruption. Newmont’s Hope Bay write-down, on the other hand, “was a concern for everybody working up there. That came out towards the end of our negotiations [with the NRC]. However, this is an area that’s going to be opening up over the next few decades. We’re going to see more and more infrastructure, and a lot of these resources will become more and more accessible. It’s not something that discourages us; it just heightens our awareness of the challenges of working in that area.”

Chief among them, he says, is “the high cost associated with any exploration or development. We’ll wait and see how environmental change progresses and see how all these challenges present themselves as we go forward.”

Other companies working in Nunavut include Advanced Explorations Inc TSXV:AXI, ArcelorMittal, Diamonds North Resources Ltd TSXV:DDN, Minmetals Resources Ltd, Peregrine Diamonds Ltd TSX:PGD, Sabina Gold & Silver Corp TSX:SBB, Shear Diamonds Ltd TSXV:SRM and Xstrata.

One Response to “Northern Persistence”

  1. Since i hold shares in Advanced Explorations and SABINA I can only hope that things work out better for them. I want to add them as winners in my portfolio of over 200 free trading shares I hold in junior explorers and miners. Check out my website; which will be going commercial once I have all 15 of my categorized portfolios uploaded.

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