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The mining newspaper for Alaska and Canada's North
In hopes of securing future concentrates, Dowa agrees to invest US$22M to expand VMS deposits at Constantine's Palmer project
A US$22 million option and joint venture agreement forged with Dowa Metals & Mining Co., Ltd. earlier this year is providing Constantine Metal Resources Ltd. with the ability to resume the expansion of a high-grade volcanogenic massive sulfide deposit at its Palmer project in Southeast Alaska.
In addition to a cash infusion during tight financial markets, Dowa brings 130 years of experience in the mining and smelting of VMS ores to its newly forged partnership at Palmer.
"They bring expertise with financial resources to join our team in the next steps to realize the full potential of the Palmer project," said Constantine President and CEO Garfield MacVeigh.
Dowa, which began mining and smelting VMS ore in the 1880s, has refined the science of separating the precious and base metals common to these complex deposits. Today the company operates the largest zinc smelter in Japan.
With most mines on the Japanese Isles shuttered, Dowa now looks overseas for concentrates to feed its smelters. Palmer, a copper- and zinc-rich deposit situated some 35 miles (60 kilometers) from the Pacific Rim deep-sea port of Haines, may fit the bill.
"In this case, their interest, in part, is to lock up a strategic source of smelter feed," Constantine Vice President of Exploration Darwin Green told Mining News.
To earn a 49 percent stake in Palmer, Dowa has agreed to invest some US$20.75 million on exploration at Palmer and pay Constantine US$1.25 million in cash over a four-year span. For Constantine and its shareholders, this means a substantial investment into the expansion of the existing high-grade VMS resource at Palmer without diluting share prices or giving up a controlling interest in the project.
"It is a good deal in a good market, it's a fantastic deal in this market," Green said when Constantine and Dowa inked a preliminary agreement last November.
Dowa will get its feet wet at Palmer with a US$3 million investment in Palmer during 2013, which includes a US$500,000 payment to Constantine with the balance going to the exploration program.
"It will give our partners a chance to really get familiar with the project before ramping things up more aggressively," Green explained.
Glacier Creek expansion
The 2013 exploration at Palmer, which got underway in mid-June, includes a 4,000-meter drill program targeting the expansion of Glacier Creek, the most advanced of a number of VMS prospects known across the 15,000-acre (6,300 hectares) property.
Five zones of mineralization have been discovered to date at Glacier Creek - RW East, RW West, and South Wall zones 1, 2 and 3.
The South Wall zones consist of parallel layers of steep-dipping VMS mineralization. At the upper extent of South Wall a fault cuts and folds the three layers at which point they lay into a more horizontal orientation. South Wall Zone 2 and Zone 3 are of the same age strata as two strata drilled at RW, the flat lying limb of the mineralization.
Based on 32 holes drilled into the RW and South Wall zones through 2009, an inferred resource of 4.75 million metric tons averaging 1.84 percent copper, 4.57 percent zinc, 0.28 grams per metric ton gold and 29 g/t silver (using an NSR cut-off of US$50/t) has been calculated for Glacier Creek.
This resource calculation does not include 10 holes Constantine drilled into the Glacier Creek deposit in 2010, a program that expanded the breadth of the zones at both South Wall and RW.
Hole CMR10-40, an 80-meter step-out to the east of the resource of South Wall zone 1, cut 20.8 meters grading 1.03 percent copper, 5.01 percent zinc, 0.14 grams per metric ton gold and 11.3 g/t silver, including 12.05 meters grading 1.41 percent copper, 6.13 percent zinc, 0.17 g/t gold and 14.4 g/t silver.
Hole CMR10-39, drilled into South Wall zone 3, cut 2.45 meters averaging 1.1 percent copper, 4.52 percent zinc, 0.13 g/t gold and 24.8 g/t silver. This represents the deepest massive sulfide intersection to date and expands zone 3 110 meters down plunge to the west.
South Wall mineralization has now been defined from surface to a vertical depth of 525 meters and over a strike length of 450 meters.
Hole CMR10-35, a step-out along strike to the west-northwest, cut 7.1 meters averaging 2.1 percent copper, 1.52 percent zinc, 0.18 grams per metric ton gold and 16.8 g/t silver.
Hole CMR10-38 cut 10.15 meters of RW mineralization averaging 0.7 percent copper, 6.51 percent zinc, 1.02 percent lead, 0.39 g/t gold, and 89.7 g/t silver. Immediately below this intercept, the drill cut a 13.65-meter zone of precious metal-rich, base metal-leached oxide zone mineralization grading 1.13 g/t gold and 148 g/t silver.
To continue adding tonnage to the Glacier Creek VMS deposit, Constantine and Dowa have one rig targeting South Wall and a second at RW.
"This year is all about expansion, focused on South Wall and RW," Green told Mining News. "There is RW East and RW West; and at South Wall there are zones 1, 2 and 3. So, there is really fives subzones and they are all open to expansion."
To build tons and get a sense of the size of the Glacier Creek deposit, Dowa and Constantine plan to continue step-out drilling.
"The immediate focus is getting the existing resources up to some sort of critical size threshold," he added.
Though Constantine has not yet commissioned a scoping study for the Glacier Creek deposit, the company believes that, considering the grades encountered so far, a doubling of the tonnage of the current resource would easily generate positive economics for the Palmer project.
"We have always felt that the next US$10-US$15 million invested in this project would probably get you where you have reached that critical size threshold," Green explained.
To begin to see just how big the Glacier Creek deposit is, the 2013 program will include widely spaced step-out holes along the multiple open edges of the zones as well as test the 300-meter gap between RW East and RW West.
"The objective is to push the boundaries out. We will come back and fill things in after we frame in something that looks like it will work," the exploration vice-president told Mining News.
Though the 2010 program has expanded the South Wall and RW zones beyond the limits of the 2009 resource and the 2013 drilling is expected to continue adding tonnage to the Glacier Creek deposit, it is uncertain whether the partners will produce an updated resource calculation this year.
"We will evaluate that at the end of the season," Green said.
The exploration vice president said that calculating a new NI 43-101-compliant resource is not a priority for Dowa. Given the current state of the financial markets, even a robust expansion of the resource at Palmer would do little to bolster Constantine's share price and the company has little need to raise financing, leaving the company to weigh the technical merits of commissioning an independent resource estimate.
"It is a nice position to be in right now - to be somewhat independent, knowing that we have funding for the project," Green said.
Understanding metallurgy
Being primarily a smelting-refining company with a long history of processing complex VMS ores, Dowa has a keen interest in understanding the metallurgy of VMS the Palmer mineralization.
"In terms of smelters and refineries they are some of the most sophisticated operators in the world," Green said.
Dowa has been improving its expertise in separating the various precious and base metals from VMS deposits since it began mining Kuroko ore in northern Japan during the 1880s.
Kuroko is a black colored massive sulfide ore composed of sphalerite, galena, chalcopyrite, pyrite, barite and other minor minerals. Although Kuroko ore contained abundant precious metals such as gold and silver, they were difficult to smelt due to the ore's complex mineral composition.
As a result of technological improvement over the years, Dowa overcame the metallurgical challenges of Kuroko ore. Today, Dowa's Kosaka Smelter in northern Japan continues to be amongst the most technologically advanced smelters of complex ore in in the business.
"Since its establishment in 1884, Dowa has faced many dramatic changes and challenges but has weathered them with the courage to make changes and a strong emphasis on technology," said Dowa Group President Masao Yamada.
This long history of refining massive sulfide ores makes Dowa ideally suited for understanding the best techniques for achieving the most ideal metallurgy results from the polymetallic mineralization at Palmer.
"For us, it is a good fit that they have that familiarity with VMS deposits," Green said.
The 2013 program includes bench-scale metallurgical testing, work important to Dowa as it considers the potential of future concentrates for the Kosaka Smelter.
Sourcing concentrates
Dowa's interest in sourcing concentrates from the Pacific Northwest goes beyond Palmer and VMS deposits. The Japanese smelting and mining company holds a minority interest in Huckleberry and Gibraltar, porphyry copper mines located in central British Columbia.
The smelting and mining company owns 6.25 interest of Huckleberry, a B.C. operation that produced 35.11 million pounds of copper, 2,578 ounces of gold, 191,787 ounces of silver and 4,556 lbs. of molybdenum in 2012. Three of Dowa's Japanese counterparts own 43.75 percent of Huckleberry, Imperial Metals Corp. owns the remaining 50 percent of the porphyry operation.
Dowa holds a 6.25 percent stake in Gibraltar through its 25 percent stake in Cariboo Copper Corp., a Japanese consortium that owns 25 percent of the copper-molybdenum mine. Taseko Mines Ltd. owns the remaining 75 percent of the operation.
Gibraltar produced 89.7 million lbs. of copper and 1.3 million lbs. of molybdenum in 2012. Upgrades currently being commissioned are expected to push copper production to more than 165 million lbs. per year. Or more importantly to Dowa and fellow smelter, Furukawa Co. Ltd., 280,000 metric tons of copper concentrate.
Further afield but more akin to the Palmer project, Dowa owns 39 percent of Tizapa, a VMS mine in Mexico. Sumitomo Corp. holds a 10 percent interest of Tizapa; and Mexico-based Minas Peñoles S.A. de C.V. owns the remaining 51 percent.
Like Palmer, Dowa became involved in Tizapa during the exploration phase. Since commercial production began in 1994, concentrates from the Mexico mine have provided feed for the Kosaka Smelter and has been a cornerstone of Dowa's zinc business.
With a growing deposit of VMS mineralization situated a few short miles from a Pacific Rim deep-sea port in Southeast Alaska, Palmer may represent a future cornerstone of Dowa's business and an ongoing feedstock for the Japanese firm's state-of-the-art smelter.
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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