The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Securing a C$4.4M financing, Heatherdale launches exploration at SE Alaska VMS project; eyes Ketchikan-area sites to set up mill
Despite owning a Pacific Rim deposit of gold, copper, zinc and silver worth some US$1.44 billion, Heatherdale Resources Ltd. has not completely escaped the financial paralysis gripping the junior mining sector.
While the value of Heatherdale's stake of the Niblack project has nearly doubled over the past year, its share price has plunged some 75 percent.
Notwithstanding, the Hunter Dickinson-affiliated junior has successfully pulled together the funds it needs to continue to advance the high-grade VMS deposits at Niblack toward pre-feasibility and permitting.
On July 17, Heatherdale raised C$4.4 million by selling to Rathdowney Resources Ltd. - a fellow Hunter Dickinson company focused on zinc deposits in Poland and Ireland - 22 million shares at C20 cents per share.
Rathdowney - which now owns 18.4 percent of the issued voting shares of Heatherdale - said the private placement purchase is for investment purposes only.
"Rathdowney is fortunate in having a very strong treasury in a very challenging market.
The company completed a large financing when it went public in 2011, and we also have been able to advance drilling programs at Olza over the past year at a lower cost than anticipated," said Rathdowney President and CEO John Barry.
"We also have adjusted our broader corporate strategy to take advantage of opportunities that arise under current market conditions.
Hence, we see this investment as a compelling opportunity for exposure to a quality project like Niblack, which is closer to production than Olza, with metal diversification but still with a common zinc theme.
There is real value available in these depressed markets, and we are in the happy position to be able to take advantage while still having sufficient funds to continue to advance our larger-scale Olza Project."
With funding from its sister company, Heatherdale has launched its 2012 drill program as it continues to complete the environmental baseline and engineering work need to complete a prefeasibility study by mid-2013.
Expanding the resource
A 1,000-meter exploration drift has provided Heatherdale with great positioning for expanding the Lookout and Trio deposits over the past three years, but as these zones are plunging deeper into Lookout Mountain, the underground development is becoming less advantageous. To trace these zones deeper Heatherdale has laid out a series of surface holes on the backside of Lookout Mountain.
"Upon reviewing all of the results from previous underground drill programs, it became apparent that a surface drill program was the most effective way to offset mineralized drill-hole intercepts and expand the resource," explained Heatherdale President and CEO Patrick Smith.
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 1.75 grams per metric ton gold, 0.95 percent copper, 1.73 percent zinc and 29.52 g/t silver.
Lookout and the nearby Trio zone contain an additional inferred resource of 3.93 million metric tons averaging 1.32 g/t gold, 0.81 percent copper, 1.29 percent zinc and 20.1 g/t silver.
A US$50 net smelter return cut-off was used to calculate the resources.
Tucked within the lower reaches of the Lookout deposit, there is a zone of continuous high-grade mineralization that, at a US$150 NSR cut off, contains 1.16 million metric tons averaging 3.21 g/t gold, 1.71 percent copper, 3.83 percent zinc and 62.28 g/t silver.
Heatherdale has five holes slated to expand the Lookout deposit at depth. Hole U074 - which previously pierced the Lookout resource expansion area being targeted by this year's drilling - cut 1.46 meters averaging 3.3 g/t gold, 2 percent copper, 23 percent zinc and 90 g/t silver.
In addition to the Lookout deposit, two holes will target the Lookout West zone and six holes are investigating the Trio deposit at depth.
This drilling is designed to add 1 million to 2 million metric tons of ore to the Niblack resource.
Key exploration targets
In addition to expanding the Lookout and Trio deposits, the some 4,600 meters of drilling planned for 2012 will test several other key targets along a six-mile (10 kilometers) belt of prospective stratigraphy at Niblack.
"We were not able to access those important drill locations last September due to poor weather conditions, so I am very pleased to finally get out there and drill-test these obvious targets and demonstrate this property's further resource potential," Smith said.
The 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 Mine, Dama and Lindsy zones are planned 2012 exploration targets along this prospective stratum.
From 1905 to 1908 miners extracted some 20,000 tons of ore averaging 4.9 percent copper, 2.2 g/t gold and 30 g/t silver from the historical Niblack Mine. One hole is planned to test for additional high-grade VMS mineralization in this area.
Lindsy, the target of two exploration holes, is found between Trio and the historical Niblack Mine.
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 a high-priority exploration target.
Nowhere for the mill
While geologists continue to expand the resource at Niblack, engineers are designing a mine and mill to process the gold-copper-zinc-silver ore. Heatherdale currently anticipates a 1,500- to 2,000-metric-ton-per-day operation - of similar scale to Hecla Mining Co.'s Greens Creek silver mine near Juneau.
Finding a place to put the mill is one of the primary obstacles engineers need to overcome. With the slopes of Lookout Mountain plunging steeply into the Niblack Anchorage, there is little room for the mill and associated infrastructure.
Instead of attempting to master the challenging topography, Heatherdale is considering barging ore to an offsite location.
Two of the three locations identified for a mill and tailings storage facility are industrial sites near the community of Ketchikan, some 40 miles (65 kilometers) to the northeast.
Gravina Island - the location of one of the industrial sites under consideration - was made famous by the proposed "Bridge to Nowhere." This span across the passage between Ketchikan and its airport became a poster-child for excessive government spending.
While a bridge does not link Gravina to Ketchikan, regular ferry service could transport mill workers from the Southeast Alaska town to the proposed mill site. If the processing facilities were positioned at the industrial park, the lower cost hydroelectricity available there is expected to help offset some of the costs of transporting the ore.
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," according to Smith.
Heatherdale has entered talks with Alaska officials regarding financing its energy and infrastructure needs through the Alaska Industrial Development and Export Authority.
The state-owned development corporation - which has a mission to promote economic growth and diversification in Alaska by providing various means of financing and investment - has helped build other mining-related infrastructure in the state.
Notable AIDEA projects include the DeLong Mountain Transportation System (road and port facilities utilized by the Red Dog Mine in Northwest Alaska) and the Skagway Ore Terminal.
"We are working with local communities and mine developers on infrastructure projects throughout Alaska, including port facilities and energy supply," said AIDEA spokesman Karsten Rodvik. "We are interested in the development of the Niblack project and an associated mill in the Ketchikan area because these projects could have a positive economic impact in the region and would create a significant number of highly skilled year-round jobs."
Local support
Ketchikan, a logging town of some 8,000 people, has been seeking a new source of employment since the demise of the timber industry in the region.
"In Southeast Alaska, where the federal government has decimated timber jobs, the private sector is establishing a beachhead of opportunity there for new jobs," Alaska Gov. Sean Parnell said, referring to Heatherdale and other mineral companies in the region.
Since becoming involved 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.
"In June 2012, I attended a three-day event, called the Prince of Wales Island-Wide Mining Symposium II, put on by the Organized Village of Kasaan - a forum that was focused on opportunities for economic development," said the Heatherdale CEO. "From that forum and many other engagements we've had in the region, it is abundantly clear that there is strong local support for responsible resource development in Southeast Alaska. We are proud to be working in partnership with local communities and local people to deliver a project that meaningfully addresses their priorities and concerns."
In addition to support from local residents, state and local lawmakers have put their weight behind the development of Niblack.
A bill to authorize the establishment of a Niblack mining-area road corridor was introduced in the U.S. Congress last June by Sen. Lisa Murkowski, R- Alaska, and co-sponsored by Sen. Mark Begich, D-Alaska. The road initiative is the result of a grassroots effort led by the communities on Prince of Wales Island.
The Niblack Project has also received support from elected officials, business and community leaders throughout Southeast Alaska as a potential solution to the employment and economic challenges facing the region.
"We gratefully acknowledge the support and proactive involvement of local communities, political leaders and government agencies like AIDEA," Smith said. "For its part, Heatherdale is committed to continuing to work with the people of Southeast Alaska to find ways to optimize local benefits associated with development at Niblack."
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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