The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Consolidating ownership of Niblack, company appraises economic viability of building a mine at Prince of Wales Island VMS project
By consolidating ownership of the Niblack copper-gold-silver-zinc-silver project on Prince of Wales Island in Southeast Alaska, Heatherdale Resources Ltd. is taking long strides in advancing the volcanogenic massive sulfide project toward development.
"After three years of successfully operating the Niblack project as a joint venture, the boards of directors of Heatherdale and Niblack (Niblack Mineral Development Inc.) have agreed that the best way to efficiently advance development of the Niblack project is to consolidate project interests into one company," said Heatherdale Chairman Scott Cousens.
"During this time we have had an excellent working relationship with the professional team at Niblack, and through our joint efforts we have achieved a number of milestones at the Niblack project over the past 24 months, including a significant increase in mineral resources and establishing the veracity of our geological model through discovery of new zones.
Work is now focused on progressing with engineering work toward completion of a preliminary economic assessment for the project."
Heatherdale and Niblack Mineral Development have agreed, subject to customary approvals, that the Hunter Dickinson-affiliated company will acquire all of the common shares of Niblack in exchange for Heatherdale shares, on the basis of one-half of a Heatherdale share per Niblack share. Based on the current number of outstanding shares in Niblack, Heatherdale anticipates the issuance of about 18 million shares to complete the transaction.
Niblack Mineral Development Dec. 16 mailed an informational circular asking its shareholders to approve the arrangement.
"The offer will provide Niblack shareholders with increased value provided through ownership of shares in a well structured company which is operated by strong management with years of Alaskan development experience," said Niblack President and CEO John Williamson.
A special meeting of Niblack shareholders will be held on Jan. 11 and the buyout is expected to be made official Jan. 13.
Resource growth continues
In late November Heatherdale announced that its 2011 underground drill program has increased the indicated resources at Niblack by 33 percent and added 29 percent to the inferred resources category. This updated resource will provide the basis for the PEA due out early in 2012.
Based on 373 holes drilled at Niblack through Nov. 4, the Lookout deposit now has an indicated resource of 5.64 million metric tons averaging 0.95 percent copper, 1.75 grams per metric ton gold, 29.52 g/t silver and 1.73 percent zinc.
Lookout and the nearby Trio zone contain an additional inferred resource of 3.93 million metric tons averaging 0.81 percent copper, 1.32 g/t gold, 20.1 g/t silver and 1.29 percent zinc.
A US$50 net smelter return cut-off was used to calculate these resources.
The previous resource estimate for Niblack project, released in March, delineated a higher-grade core zone within the Lookout deposit that Heatherdale considers to be an ideal starter zone for a mine. Heatherdale said the 2011 drilling has confirmed this higher grade zone.
At a US$150 NSR cut-off this core zone contains 1.16 million metric tons averaging 1.71 percent copper, 3.21 g/t gold, 62.28 g/t silver and 3.83 percent zinc. The company said the 29 percent expansion of inferred resource tonnage at Trio further demonstrates the potential for resource expansion at Niblack. Current outlined dimensions of the Trio deposit are approximately 335 meters by 105 meters, with an average thickness of some 65 meters.
In addition to defined tons and grade, the Heatherdale CEO noted that the geometry and continuity of the Lookout and Trio deposits - in particular their thicknesses - make them attractive candidates for low-cost underground mining.
"We now have a more refined understanding of the geometry and grade of the deposits at Niblack, an understanding that will significantly enhance the accuracy and longevity of the mine-model currently being developed within the Niblack Project Preliminary Economic Assessment study," said Heatherdale President and CEO Patrick Smith.
In July, Heatherdale announced that it had struck a new zone of deeper mineralization between Lookout and Trio rich in gold and silver. Five of the six holes targeting this lower stratum cut mineralization. U123, the best hole of this series, cut 2.4 meters averaging 19.51 g/t gold, 263 g/t silver and 1.67 percent copper.
"The project continues to become more robust with each phase of work," he said.
Geological model
While drilling at Lookout and Trio zones have outlined a robust deposit with volumes and grades worthy of considering the viability of building a mine, the modeling done by Heatherdale geologists suggests the felsic horizon that hosts this mineralization extends more than 10 kilometers (6 miles), of which only about two kilometers (1.2 miles) hosts the current resources.
"At best only about 20 percent of this prospective horizon has been tested by drilling - and that has been focused on the outcropping mineralization only. This is also a three dimensional opportunity so mineralization might very well occur below seemingly barren surface rocks," Smith told Mining News.
The Heatherdale CEO explains that all of the known sulphide mineralization at Niblack is hosted in a felsic horizon that was deposited on the seafloor some 565 million years ago. This metals-rich stratum has been folded and deformed into the geometry that Heatherdale is revealing through its exploration.
"The Niblack deposit(s) differ somewhat from the classic model in that the majority of the sulphide deposition appears to have taken place beneath the seafloor, within permeable, possibly unconsolidated fragmental volcanic rocks. The known deposits on the Niblack property generally represent surface exposed mineralization discovered by early explorationists," he explained.
In May and June, a helicopter-supported surface drill rig was added to the program to test several exploration targets. Heatherdale said six of the seven exploration holes drilled from surface at Niblack cut sulphide mineralization.
Additionally, three exploration holes drilled from underground firmly established the continuity of the mineralization hosting felsic horizon between the Lookout and Trio zones as well as to the northwest of the Lookout zone, and have provided positive indicators for the next stage of drilling in these areas.
"I am extremely pleased with the results of the 10 exploration holes - three of which were drilled from underground and seven from surface. These holes are confirming the excellent potential of the stratigraphy that hosts mineralization at Niblack and have validated the application of the new geological interpretation," said Smith.
Priority targets
With an enhanced understanding of the VMS mineralization at Niblack, Heatherdale geologists have generated some new ideas about additional targets as the felsic horizon wends its way through Lookout Mountain.
Lookout West, Trio, Niblack Mine zone and Dama are priority exploration targets the team has generated for 2012.
Heatherdale identified the Lookout West target through mapping of the felsic host-stratigraphy west of the Lookout Zone. Smith said this target is difficult to drill from the underground drift and will be a target for surface drilling later in 2012.
"There are priority surface drilling targets to test both down plunge extensions of the main Lookout mineralization and to test Lookout West," the Heatherdale leader explained.
At Trio, the company plans to upgrade the resource already outlined there and continue tracing the mineralization toward the Mammoth Zone, located some 915 meters to the northwest.
"The prospective stratigraphy is folded back around to the limb between Trio and Mammoth. The surface drilling program will focus on adding resource at Trio and exploring extensions along the limb to Mammoth as well," Smith said.
The exploration drift from which Heatherdale is conducting its underground drilling is collared into the Mammoth zone. U112 - drilled at Mammoth in 2011 - cut 5.8 meters averaging 3.32 percent copper, 0.49 g/t gold, 3.14 percent zinc and 28 g/t silver.
Further northeast the felsic horizon surfaces in the area of the historical Niblack Mine, which from 1905 to 1908 miners extracted some 20,000 tons of ore grading 4.9 percent copper, 2.2 g/t gold and 30 g/t silver from underground workings here.
From the historical mine, the mineralization appears to turn sharply to the southeast and surface geochemistry suggests it may continue for at least 5,000 meters in this direction. A historical hole drilled in the Dama zone - located about 2,000 meters along this projected path - cut 19.2 meters averaging 6.4 percent copper, 1.37 g/t gold, 53 g/t silver and 3.2 percent zinc.
Smith told Mining News that Dama is high-priority target and the area warrants several drill holes.
Infrastructure needs
While geologists continue to chase the multitude of exploration targets Niblack has to offer, other members of the Heatherdale team are busy identifying power sources and other infrastructure needs for developing the project.
Anticipating an operation of similar scale as Hecla Mining Co.'s Greens Creek silver mine near Juneau, Heatherdale foresees the need for some 11.5 megawatts of power to operate a mine and mill at Niblack.
"While it's early days, we believe Niblack will require the provision of some 3.5 megawatts of power to operate a 1,500- to 2,000-ton-per-day underground mine, and another 8 megawatts to operate a mill and processing plant," Smith said. "The final identification, permitting, development and realization of these facilities and services will take a number of years to accomplish, but we already have an impressive suite of local entities and institutions who are working collaboratively with us to identify the optimum solutions."
Heatherdale also has engaged with the Alaska Energy Authority and the Alaska Industrial Development and Export Authority, which regularly provides financing to public-private partnerships to facilitate infrastructure development and economic growth in the state.
In addition to power alternatives, Heatherdale is investigating locations for ore processing facilities, including the option of barging ore from Niblack to a suitable offsite location.
Smith said Heatherdale's efforts to identify sites that meet specific criteria for development of a processing plant and tailings storage facility for Niblack have been met with positive encouragement from a broad range of local entities. He expressed confidence that offsite milling is a viable option for Niblack, particularly given the proactive assistance being provided by state and regional institutions.
Alaska Department of Natural Resources Deputy Commissioner Ed Fogels told Mining News early in 2011 that state officials met with representatives from Heatherdale and Ucore Rare Metals Inc., a junior exploring the Bokan Mountain rare earth element project, to see if any synergies exist between these tidewater projects located about 25 kilometers (15 miles) apart.
One common thread revealed during the meetings is that both projects may need additional room for processing facilities.
Fogels said the state is investigating whether there are any state lands nearby that could facilitate a REE production facility for Ucore and/or a milling facility for ore mined at Niblack. The deputy commissioner suggested that a brownfields site or some other state-owned lands proximal to the two tidewater projects would be ideal.
While addressing the Alaska Strategic and Critical Minerals Summit held in Fairbanks in late September, Alaska Gov. Sean Parnell reaffirmed the state's commitment to assisting these Prince of Wales Island mineral projects.
"In Southeast Alaska, where the federal government has decimated timber jobs, the private sector is establishing a beachhead of opportunity there for new jobs. And we are exploring how there could be shared facilities on state land for both Niblack and Ucore's anticipated rare earth development at Bokan Mountain," Parnell said.
Community outreach
Heatherdale has also been actively involved in reaching out to its neighbors on Prince of Wales Island and keeping community, tribal and Alaska Native corporation leaders informed of the progress at Niblack.
"To the greatest degree possible, we want the Niblack project to benefit the people and communities of Southeast Alaska," Smith said. "Since day one, the priority at Niblack has been to employ local people, contract local companies and pursue local partnerships. We have every expectation that the attention we've paid to being a good neighbor now will be acknowledged in the future as the Niblack project proceeds through permitting and into construction and operations."
Since the outset of its involvement with Niblack in 2009, Heatherdale has maintained a commercial partnership with the Prince of Wales Tribal Enterprise Consortium - owned by the Craig Tribal Association and the Organized Village of Kasaan - to assist with supplying the manpower needs at Niblack. Through POWTEC, Heatherdale has trained and employed some 36 local people over the past three years.
"From the outset, Heatherdale has made it clear that it wants its mineral development activities on Prince of Wales Island to benefit local people and communities through local hire and contracting," said POWTEC CEO Bill Cole. "The economic development and partnership opportunities that this project represents for our company, our employees and shareholders, and all of Southeast Alaska, are really tremendous."
Smith said the residents of Prince of Wales Island and surrounding communities in Southeast Alaska are largely supportive of Heatherdale's efforts to advance Niblack toward development.
"Our efforts to expand known deposits of high-grade VMS mineralization at Niblack and prepare the project for development and permitting continue to receive widespread support and encouragement from the people, communities and institutions of Southeast Alaska," Smith said. "Southeast Alaskans want and encourage responsible development of their mineral resources, and are willing to work cooperatively with progressive companies that invest in programs that generate benefits for local communities while ensuring protection of valued natural resources. It is a very encouraging and supportive environment for Heatherdale and the Niblack project."
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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