Starfield Resources sees shine in PGMs

Geology isn't always a fast-moving business, especially when you consider that minerals lie around for billions of years before they're discovered and eventually mined. So the fact that Toronto-based Starfield Resources has recently sprung into action after almost a decade of relative quiescence shouldn't mean too much in the grand scheme of things. What matters is that the company is now taking serious steps towards development of its sole project, the Ferguson Lake polymetallic deposit in Nunavut.

Starfield appointed a new president and CEO, André Douchane, in February, and in April the company began trading on the TSX. It also initiated a scoping study for Ferguson Lake that is due to be completed by the end of the year. In May Starfield filed a new 43-101 that showed an indicated mineral resource estimate for the property's Main West Zone of 15.2 million metric tons grading 0.71 percent nickel, 1.04 percent copper, 0.08 percent cobalt, 1.64 grams-per-ton palladium and 0.28 grams per-ton-platinum. The previous year's 43-101 showed an indicated resource of 8.7 million tons.

The Ferguson Lake property was discovered by Inco in the 1940s and held by that company until the mid-1990s, when Inco dropped it and it was picked up by a couple of prospectors, Douchane explained in a presentation at the RBC Capital Markets Mining and Metals Conference in Toronto June 13.

"Starfield was an entrepreneurial company at that point in time and got involved with the prospectors," Douchane said. "They raised about $71 million over a period of time and discovered the large sulfide deposit. From there, like any entrepreneurial company, they needed to change. The board changed and they went looking for professional management to take this company into the development stage, which they did. I joined the company in February, took a good look at it, just loved the asset and liked the challenge."

West Zone holds most of mineralization

Most of the mineralization at Ferguson Lake is located in the West Zone, which is about 4 kilometers long.

In 2006 Starfield put in 116 diamond drill holes and 20 geotechnical holes in the West Zone to try and upgrade it from an inferred resource to an indicated resource.

All of the geotechnical holes hit sulfide.

The deposit occurred in the Archean period, 3.8 billion to 2.5 billion years ago, when life first appeared on Earth, and when most of the world's major mineral deposits were formed.

"If you're in Archean greenstones, you're on the Serengeti looking for lions, it's the same as you're looking for gold in the greenstones," Douchane said.

"If you're in the Archean period you're in the right place and time."

The deposit is a multi-layer ultra-mafic intrusive, about 15 kilometers long and 6 kilometers wide at one end, 1.5 kilometers wide at the other end. Some of the ore comes to the surface, so the deposit could become both an open pit and an underground mine, according to Douchane. Based on mining a million tons of ore, potential revenue from Ferguson Lake could be between $365 million and $500 million, depending on operating costs and metals prices, Douchane estimates.

Demand for platinum, palladium and other platinum group metals that are present at Ferguson Lake will soar in the coming years, Douchane believes. This is mainly due to the vast numbers of cars that people in China and India are purchasing. "Every catalytic converter needs a little rhodium. That's what takes care of the nitrous oxides. Every catalytic converter needs a small amount of platinum to stabilize that rhodium," Douchane said. Gasoline engines are also likely to require some palladium, he added.

For this year's field program Starfield has a budget of about $11 million, which will be used to investigate a high-grade footwall platinum-group-metals zone at Ferguson Lake. "There's a narrow thickness that seems to go through it. It's about a foot in thickness, 0.35 meters, runs 1 ounce of platinum, 3 ounces of palladium and one-tenth of an ounce of rhodium," Douchane said. "It's extremely rich. ... That's what we're going to spend some time on this summer to see if that's real."

If the permitting process goes according to plan, construction of a mine could begin in three years. Metallurgical test work for Ferguson Lake is being conducted by SGS Lakefield. Starfield is also working in conjunction with Montreal's McGill University to develop an energy-efficient metals recovery method. The research is focused on the critical process step of iron precipitation and regeneration of the hydrochloric acid needed for the leaching step.