Andrew just gets better and better

ANDREW PROJECT, Yukon Territory - If Australia-based Overland Resources gets its way, this remote valley in eastern Yukon may become home to the next lead-zinc mine in the Far North. And if development plans currently being discussed by the aggressive junior come to fruition, the Port of Skagway could provide facilities for loading the mine's metal concentrates onto oceangoing barges bound for Asia.

Overland has set its sights on defining and developing a growing base metal resource that began with discovery of the Andrew Zinc Deposit here in the mineral-rich Selwyn Basin.

Andrew was discovered in 1996 by prospector Ron Berdahl, who followed up a stream geochemistry anomaly delineated during a 1989 government-funded regional stream sampling program and noticed a distinctive, hillside "kill zone," or naturally occurring sulphide drainage area, in this thickly forested valley.

First explored by Noranda between 2001 and 2003, the property encompasses 567 mineral claims that cover about 108 square kilometers and a 2,500-meter soil geochemistry anomaly that promised additional opportunities for expansion when it first came to Overland's attention several years ago.

The under-explored Selwyn Basin presented an enticing contrast to Overland's stomping grounds in Australia, where hardrock mining has become an increasingly competitive environment, said Hugh Bresser, Overland's managing director.

Yukon's stable and supportive government also helped to make the region especially attractive to the junior, he said.

Base metal potential expands

Noranda's exploration of the Andrew property had been "hit and miss," but the 26 holes that the company drilled before releasing the property encountered intersections with high grades of zinc mineralization.

Overland optioned 90 percent interest in the property in January 2007 and used encouraging results from Noranda's exploration to develop a mineral resource estimate. At a 3 percent zinc cutoff, the company calculated 5 million metric tons at 10.79 percent zinc equivalent at Andrew, of which 83 percent was in the measured and indicated categories.

Overland drilled 10 more holes at Andrew in 2007 and reported additional promising intercepts, including 18.4 meters at 14.89 percent; 27.5 meters at 12.84 percent; 10.25 meters at 10.34 percent; 6.80 meters at 10.78 percent; and 6 meters at 13.63 percent.

Overland also recognized the potential to significantly increase the resource, which was open at depth and along strike.

The junior saw an opportunity to rapidly advance what it calls the "Yukon Base Metal Project" to production because the resource is close-grained and appears to lie near the surface.

"We came to Yukon Territory expecting an exploration project, but it is more an early-stage development project," Bresser told reporters here on a brisk June morning.

The tests also showed that conventional flotation technology could produce high-grade metal concentrates from the deposit and leave behind a limited amount of sulphides in tailings because of a naturally occurring neutralizing material on the property.

In a scoping study last winter, Overland found that a 2,000-metric-ton-per-day initial open pit operation could be developed for relatively low capital costs of just under $60 million, including construction of an access road to the project.

Laboratory tests showed that not only could substantial quantities of zinc and lead be recovered in relatively pure concentrations from the Andrew deposit, but also silver and germanium would generate significant credits.

Road upgrade would benefit project

The junior also calculated relatively low operating costs: $79/t of feed, including delivery cost of concentrates to port.

The 678,000-tpa year-round operation would employ 65 people and produce 62,000 metric tons of zinc concentrates and 32,000 metric tons of lead concentrates annually.

The junior attracted Lyncor to the project as an investor and, in the process, secured a buyer for all of Andrew's prospective output.

Overland also calculated a rapid 9- to 18-month payback period.

Bresser said one question he gets asked often in Australia is whether Overland can operate an open-pit mine in Yukon Territory. In answer, he said he cites the Minto copper-gold mine, owned and operated by Sherwood Copper Corp.

"It's a similar-sized operation and it faced similar challenges getting started," he said.

Like Sherwood, Overland also envisions trucking ore to the Port of Skagway, some 750 kilometers, or 465 miles, away. However, Yukon government officials are studying an alternate route that could reduce the distance to the port by 250 kilometers, or 155 miles.

That possibility would involve upgrading a road originally built during World War II that would connect the Andrew Project directly to the Alaska Highway.

If the government was able to dedicate a grader to keep the road in good shape and ensure that a bridge along the route was in good shape, "a lot of issues go away," Bresser said.

Giving back to the community

This promising outlook guided Overland going into the 2008 exploration season for which the junior budgeted $15 million for drilling.

Rather than importing a contingent of geologists and engineers from Down Under, Overland opted to hire Equity Explorations Ltd., a Vancouver, B.C.-based consulting and contractual services firm.

Equity's president, Darcy E.L. Baker and Robin Black served as project geologists for the exploration program at the Andrew Project.

Overland also hired Kluane Drilling, a Yukon company with international experience and the wisdom to hire and train drillers locally on projects around the globe, Bresser said. With four rigs turning, Overland employed 21 drillers, drillers' helpers, pump guys and drill foreman, plus cat operators.

In addition, the company forged cooperative agreements with the Selkirk, Nacho Nyak Dun and Kaska First Nations to assist with economic and cultural programs. The Andrew property is situated at the convergence of lands owned by the three groups.

Overland matched contributions made by other mine projects to a program that provides for training miners under the Canadian Royalties Act.

"Mining companies tend to come and go, but it is important to leave something behind," Bresser said.

In addition to training geologists and engineers in First Nations communities, Overland also wants to support efforts on the supply side, that is, helping to set up contracting services through joint ventures for catering, fuel supply and helicopter companies, he said.

2008 brought more discoveries

By September, the company had completed a second phase diamond drilling program, completing the last 70 of 134 holes, drilling a total of 23,425 meters. Results have been reported for 92 holes and analytical results are pending for a further 42 drill holes.

Overland said results of the drilling confirmed the quality of the project, but also revealed a new high-grade deposit in the Darcy Zone. The Darcy Zone is located about 600 meters southeast of the Andrew Zinc Deposit. One hole drilled in the mineralization, AN02-021 intersected 5.5 meters at 7.5 percent zinc.

In October, the company reported results of another six drill holes in the Darcy Zone. These included 43.9 meters grading 11.9 percent zinc from 139 meters; 28.3 meters grading 13.6 percent zinc from 85.7 meters; 14.6 meters grading 2.8 percent zinc from 24.8 meters; and 6 meters grading 6.3 percent zinc from 44.5 meters.

Overland said the high-grade thick and shallow nature of the mineralization at the Darcy Zone had given it confidence that a satellite mine might be established at the site to feed any processing facilities to be developed at the Andrew deposit. Also, mineralization at the Darcy Zone remains open at strike in both directions.

Drilling results this year also intersected two new prospects, Adrian and Darin, with the same soil anomaly that holds the Darcy Zone and the Andrew Zinc Deposit. These findings illustrate the project's considerable potential for additional expansion, Overland said.

Falling zinc prices, meanwhile, have failed to curb Overland's enthusiasm for the project, according to Yukon government geologist Mike Burke.

"Their outlook remains that there will be a significant shortfall of zinc starting around 2011-12 due to the closure of several existing mines (and other developments); so they remain bullish on the long-term outlook," Burke said. "Overland's principals believe they can keep moving the project forward and that the schedule they are on now will catch the next bull run in zinc. Their exploration was very successful both in increasing the size of the Andrew deposit and in the discovery of the Darcy zone, which gave a great intersection of something like 40 meters of 11 percent zinc."

Burke said the 2008 exploration program gave the junior enough data to move forward on producing a new NI 43-101-compliant resource.

Indeed, Overland said the 2008 drilling program overall significantly increased its understanding of and confidence in the Andrew Project and that it is well-positioned to advance the project feasibility and mine permitting.

"To this end, work has commenced to recalculate the resource base at the project together with generating a revised mining plan based on the upgraded resource estimate," the company added.