Junior clears obstacles to Nico Project

Fortune Minerals Ltd. is taking the lemons it has encountered in developing the Nico Project in Northwest Territories and making lemonade.

The London, Ont.-based junior recently reported substantial progress in overcoming major obstacles to building a vertically integrated mining operation at Nico, which is located 160 kilometers, or 99 miles, northwest of Yellowknife.

Fortune Minerals discovered Nico, the largest known IOCG (Olympic Dam-type) deposit in Canada, in 1996. The deposit contains proven and probable mineral reserves of 21.8 million metric tons, containing 760,000 ounces of gold, 61 million pounds of cobalt, and 77 million pounds of bismuth or, an equivalent 3.2 million ounces of gold at the base-case metal price assumptions used in a 2007 Micon feasibility study. The deposit also contains significant amounts of copper and nickel that will be produced processing the cobalt.

Once developed, Nico will be the largest independent producer of bismuth in the world and a leading global producer of cobalt. Both are high-value metals in demand for numerous modern applications, including hybrid-electric cars and medicines.

Fortune wants to produce about 4 million pounds, each of cobalt and bismuth, annually from the deposit as well as 81,000 ounces of gold in each of the first two years of mine life, followed by 27,000 ounces of annual gold production in subsequent years. The project also will produce minor amounts of copper and nickel byproducts.

The company wants to open the mine by 2012, assuming it obtains necessary regulatory approvals. Nico's reserves will support a minimum 15-year mine life at the planned ore production rate of 4,000 metric tons per day (1.5 million metric tons per year).

Ore processing in southern Canada

To simplify the project for permitting and to overcome numerous social, environmental and economic obstacles, Fortune said in late July that it will build the hydrometallurgical part of the processing plant to treat concentrates produced from Nico on a site in southern Canada.

"This change in the NICO project will have a material positive impact on both capital and operating costs for the development. It also will help mitigate future exposure to increasing energy costs, accelerate the construction schedule, reduce environmental impacts, and help speed the permitting process already in progress," Fortune said.

The junior said it will construct the mine, mill and flotation concentrator in the Northwest Territories as originally planned. However, the downstream hydrometallurgical part of the process plant, which is comprised of pressure and acid leaching followed by electro-winning to high-value metal products, and the gold leach circuit, will now be constructed at one of four sites in Alberta, Saskatchewan and Manitoba. The company said it has investigated possible sites in southern Canada for six months and will acquire one shortly.

Fortune cited eight benefits of making the move, including:

• Reducing capital costs of the project;

• Cutting power costs during operations (electricity rates in the NWT are projected to be more than 20 cents per kWh as compared to rates as low as 3.7 cents per kWh in some southern provinces);

• Reducing reagent transportation costs, which will offset about half the costs of shipping metal concentrates from the mine to the hydrometallurgical facility?

• Simplifying permitting for the NICO project by eliminating the need for most of the process chemicals at the NICO site and removing some waste products from processing;

• Accommodating aboriginal concerns for perceived potential water quality impacts;

• Mitigating risk of worker turnover, especially among engineers and chemical plant operators who will now be able to commute daily from their homes in southern Canada;

• Accelerating mine construction because the two parts of the project now can be built concurrently and without weather or seasonal constraint for the southern hydrometallurgical facility; and

• Aligning the company's power requirements with existing and planned hydroelectric generation in the Northwest Territories. Existing and planned hydropower in the Northwest Territory cannot satisfy the increased power loads at NICO as a result of recent operational improvements, but could supply the 9 megawatts of electrical demand from the mine and concentrator.

Reactions to new plan

Reactions among Northwest Territories government and mining officials were generally favorable to Fortune's decision to relocate the hydrometallurgical part of the Nico project to southern Canada.

Martin Haefele, manager of environmental impact assessment for the Mackenzie Valley Environmental Impact Review Board, said the regulatory panel will assess whatever Fortune Minerals proposes but has no opinion on the company's decision to relocate the hydrometallurgical facility to southern Canada.

"But we're glad they made a decision because now the assessment can move forward. Not having that question answered slowed down the process," Haefele told Mining News. "Hopefully, the issue will be clarified for the board sometime soon.

MVEIRB has been working on an environmental assessment of the Nico Project since early this year and should publish a draft of the project's terms of reference and work plan soon, Haefele said.

"It's difficult to estimate how long the timeframe will be for completion of the assessment until we have the draft out and have gotten some feedback," he said. "The process had taken eight months to two and one-half years in the past, which is about the same as other jurisdictions in Canada. It's the period after the assessment that can be longer sometimes. Some projects get turned around faster than others."

Mike Vaydik, general manager of the NWT & Nunavut Chamber of Mines, said Fortune's press release announcing its decision to move the hydrometallurgical facility to southern Canada is a classic study of the impediments to mining development in the Northwest Territories.

"It's interesting that this company has been very active in consultations with the aboriginal community and the power company, and it couldn't get people to understand that the mine not only would have an impact on the environment but also the economy," Vaydik told Mining News Aug. 19. "Their original plan was to ship metals from the mine, and now they plan to ship ore and make the metals somewhere down south. That means the jobs will go down south, too."

Though his office works to maximize benefits from every development project in the Northwest Territories, Industry, Tourism and Investment Minister Bob McLeod told Mining News Aug. 20 that Fortune's decision will not be a complete loss.

"Obviously, our preference is to see all the processing done in the Northwest Territories," he said. "From our count, 40 jobs would be lost because of the decision."

By comparison, the mine will generate 600 jobs during its construction and 150 jobs during production, the minister said.

Diesel power for now

While the Nico property is only 22 kilometers, or 14 miles, west of the N.W.T. Power Corp.'s Snare River hydroelectric plant, Fortune is currently planning to build a diesel plant at Nico for both power and heat, since the hydro facility would not supply all of the nine megawatts of power the mine will need. No plan to expand the hydro plant has gelled during the past five years as the company worked to convince locals to do so.

"Selling hydropower to the NICO development presents an attractive long-term, environmentally sustainable business opportunity for the local Tlicho people and NWT government," Fortune said.

McLeod said the problem Fortune has encountered obtaining hydroelectric power is a unique circumstance because the authority for making such a decision actually falls under the authority of the government of the Tlicho First Nation, which indicated that it preferred a regional approach to hydroelectric development when Fortune applied for power two years ago.

The Tlicho are currently holding an election for grand chief. Four people are running in the election, which is scheduled for Sept. 14.

Fortune, meanwhile, has indicated that after five years, it can no longer rely on the prospect of more local hydropower being available when the mine is ready to start up.

Mine dismantling complete

Also, Fortune Aug. 12 reported that its plan to dismantle and demolish the defunct Golden Giant Mine at Hemlo, Ont., is substantially complete and valuable equipment is being stored at the site under an amended agreement with Newmont Canada Ltd. until Nico's permits are approved. Fortune intends to reassemble the equipment at the Nico site to produce gold doré, bismuth and cobalt cathodes, along with the copper and nickel concentrates.

Fortune acquired some of the Golden Giant Mine buildings, equipment and an inventory of spare parts from Newmont and Mindecom Industrial Constructors Ltd. in 2006 after the mine closed, and the remainder of the buildings from Newmont in 2008. Valuable assets salvaged from the mine for use at Nico include buildings, grinding mills, the crushing plant, flotation cells, compressors, boilers, generator, conveyors, pumps, motors, overhead cranes, transformers, assay laboratory, and electrical switch gear.

Fortune said the amended agreement with Newmont will allow it to maintain the service complex building and store its assets at the Hemlo site until required, but no later than April 1, 2011.

The junior said it generated significant cash proceeds from sale of gold recovered from residues and other materials collected during cleanup of the Ontario mine's assets.

It shipped about 135 metric tons of high-grade materials to refineries in Canada and the United States.

The company also sold about 8,200 metric tons of recyclable scrap steel, copper and other metals from the mill, head frame and other buildings that were demolished at the Hemlo site.

Additional funds were generated from the sale of surplus equipment and buildings, including a jaw crusher, the paste fill plant and building, cold storage buildings, furnaces, office and other small equipment that were not required at Nico.