Junior targets huge Darnley Bay prospect

You say the world's frontiers have all been conquered, and Nature's riddles have all been solved? Don't tell that to Darnley Bay Resources Ltd.

The Toronto-based junior is celebrating two decades this summer of working to unravel one of Earth's most intriguing mineral mysteries. The puzzle lies deep beneath the earth's surface in Canada's Far North in what potentially may be the strongest isolated gravity anomaly in the world and certainly, in North America.

Located near Paulatuk, Northwest Territories on the Arctic coast, the Darnley Bay Anomaly with gravity and magnetic amplitudes of 132 milligals (mGal) and 1,350 nanoteslas (nT), respectively, has been favorably compared by the Geological Survey of Canada to other prominent gravity anomalies in the world. The anomaly is larger and stronger than any of these comparatives by a wide margin, measuring 100 kilometers (62 miles) long north to south and about 80 kilometers (50 miles) wide.

In fact, it extends right under the hamlet of Paulatuk into Darnley Bay, which opens onto the Beaufort Sea in northwestern Northwest Territories.

The GSC discovered the anomaly in 1969, and its source has never been explained, despite numerous exploration programs carried out by the GSC and several companies that included seismic and aeromagnetic surveys as well as other tests, sampling and some drilling.

Between 1969 and 1991, the GSC conducted both ground gravity and aeromagnetic surveys over the region. In 1970 Northgate Exploration Ltd. flew a helicopter-borne magnetic survey over the most intensive part of the gravity anomaly and detected a coincident magnetic anomaly.

In 1993 the GSC collected samples from a number of basic sills east of the anomaly that contained minor amounts of nickel, copper, platinum, gold, silver and cobalt. Geologists believe these rocks and metals may be genetically associated with the anomalies.

But what is it?

Darnley Bay Resources has reviewed all available geophysical and geological data of the anomaly and surrounding area.

"There are two different schools of thought about the source of the anomaly; one is that it is similar to Sudbury basin in Ontario and Noril'sk in Russia, and the other theory is that it is an IOCG (iron-oxide-copper-gold) deposit like Olympic Dam (in South Australia). Both are associated with ultramafic rock," said Stephen W. Reford, P. Eng., Darnley Bay Resources' chief technical officer and director.

Available geophysical data indicate a large intrusive complex with interpreted similarities to the Sudbury Basin, the Norilsk deposits and the Bushveld Complex in South Africa. The discovery of diamonds on surface within the anomaly area, and diamondiferous kimberlites on the nearby Parry Peninsula to the northwest, indicate the potential for a new diamond district in the Northwest Territories.

Placer miners also have recovered gold and sulphides from local riverbed alluvials in the area of the anomaly. These minerals could have been derived from an overburden covered mineralized intrusive.

Based on the results of its extensive work, the GSC interprets the Darnley Bay gravity anomaly (132 mGal) to be much stronger than, but similar to, the following:

Four times stronger than Sudbury Basin (30 mGal), which hosts the world's largest nickel-copper sulphide deposits where production started in 1883 and is currently producing US$3 billion in metal sales annually. (Total resources at 2010 prices exceed US$370 billion of nickel, gold and base metals.)

Five times stronger than the Noril'sk deposits (25 mGal), where the mined grade of copper and nickel is the highest in the world. (Total resources at 2010 prices exceed US$900 billion of nickel, platinum and palladium

Twice as strong as the Bushveld Complex (65 mGal), estimated to contain 70 percent of the world's platinum and palladium. (More than 11.5 billion metric tons averaging 5.44 grams per metric ton of platinum group elements.)

The GSC also has concluded that the Darnley Bay anomaly has a moderate to high rating to host nickel-copper-PGE deposits.

Decades of exploration

Formed in 1993, Darnley Bay Resources has spent 20 years attempting to unlock the secrets of the coincident gravity and magnetic anomalies discovered at Darnley Bay.

In the mid-1990s, the mining and exploration company was granted by the Inuvialuit Settlement Region the rights for exploration over some 566,572 hectares (14 million acres) which encompass the coincident anomalies.

Today, Darnley Bay Resources has 100 percent control of exploration and potential development of the property, subject to certain back-in and other rights of Inuvialuit Regional Corporation, which holds the land on which the anomaly occurs.

In 1997 the company completed a high-resolution aeromagnetic survey within and around the area of the anomaly. The survey covered 607,050 hectares (1.5 million acres) and was flown at an elevation of 120 meters in an east-west direction with a line spacing generally 800 meters apart, tightened to 400 meters over the core of the anomaly, and loosened up to 1,600 meters apart northwest of the anomaly.

Results of the survey indicated that the main source of the anomaly is a buried intrusive body lying 1,000-3,000 meters below surface, and that it is complex and may be a multiple injection intrusion with parts re-mobilized after the original event. The magnetic data suggest that there are several high angle fault zones and dyke systems that show both vertical and horizontal displacements. The data indicated that the project area has been well prepared structurally to host mineral deposits.

Gas resources in the general area of the anomaly are hosted by the same source rocks that host significant reservoirs elsewhere.

Advantages of location

Despite its remote Arctic location, the Darnley Bay project has significant advantages.

The Inuvialuit Settlement Region has a C$1 billion infrastructure as a result of oil and gas development. The explorer's project site offers power, water, sanitation, waste disposal, and telephone and communication services. It also is directly accessible by commercial airlines in addition to winter roads, barges and ocean traffic.

Yellowknife, 885 kilometers (550 miles) southeast of Paulatuk, and Whitehorse, 870 kilometers (540 miles) southwest of Inuvik, Nwt. are the main transit locations for developments in the western Arctic. Tuktoyaktuk, Nwt., 351 kilometers (218 miles) by air to the west, is the service center for oil and gas developments in the Beaufort Sea. It has a commercial airstrip, and transit warehouse facilities for western Artic materials delivered by water transportation from the railhead at Hay River, NWT.

The Darnley Bay project is also unique in that it is the first mineral resource venture of this potential magnitude in which the Inuvialuit have participated, and have been entitled to a cost share participation.

"This is an important project for the Inuvialuit; it is an opportunity for the people of Paulatuk and the Inuvialuit Settlement Region to participate in a meaningful way in their northern economy. We urge Darnley Bay Resources to continue to consult closely with Paulatuk and with the Inuvialuit generally to maximize the opportunities for local people to gain skills and experience from work on the project. The people of Paulatuk who have invested a great deal in this initiative, are anxious for work to proceed, said IRC Chairwoman and CEO Nellie Cournoyea in support of the project.

In April the company made a payment of C$440,896 comprised of expenses, administrative fees and interest owing with respect to a previous drill program, to the regional corporation. The payment brings the mineral concession agreement entered into between Darnley Bay and IRC in 2009 into good standing and represents part of more than C$3.8 million paid to the regional corporation since 1995.

"We are happy to get these payments behind us and focus our funds on finding the source of the gravity anomaly. We look forward to working with the Inuvialuit Regional Corporation on this initiative" Darnley Bay Resources Chairman Kerry Knoll said in a statement April 10.

Significant diamond potential

The 1997 aeromagnetic survey located four clusters of magnetic anomalies in the area, which prompted Darnley Bay Resources to also embark on a diamond project.

In 2000, the company collected till samples within the area of the two most northerly clusters. The samples were found to contain many kimberlite indicator minerals, three of which carried diamonds. This is significant as only one in 30,000 till samples actually carry diamonds.

Regional sampling results of stream sediments suggest that the main in-situ source(s) of recovered indicator minerals and diamonds within the anomaly may be structurally associated with a southeast trending mafic dyke swarm.

Darnley Bay Resources, in a follow-up aeromagnetic survey at 200-meter line intervals on parts of the northerly clusters, identified 39 kimberlite targets which together with 55 from the 1997 survey totaled 94. Ground geophysical surveys were completed on 41 of the kimberlite targets with 28 selected as priority drill targets. Only one of the targets is located under a lake.

The explorer also collected some 22,000 pounds (10 metric tons) of till and drill core samples for chemical analysis and 44 stream sediment and beach heavy mineral samples were collected and processed for indicator minerals. The junior then drilled 13 kimberlite targets; 10 intersected kimberlite and seven contained diamonds.

A joint venture with an optionee, Diadem Resources Ltd., that has the right to earn a 50 percent interest in the Franklin diamond project, completed 52,000 line-kilometers of an airborne survey and has added an additional 11 highly rated kimberlite targets to the drilling inventory. A total of 27 high-priority kimberlite targets for ground surveys have been identified and, as warranted, will be drilled.

The Darnley Bay dyke swarm (723 Ma) in the project area is parallel to The Mackenzie Dyke Swarm (1270 Ma) where the Lac de Gras diamond corridor hosts three Canadian diamond producers (Ekati, Diavik and Snap Lake), and one past-producer (Jericho).

Company geologists say the Lac de Gras diamond corridor apparently has been offset to the west and may continue north through Darnley Bay. The Darnley Bay dyke swarm conditions for diamond exploration are similar to those in the Lac de Gras diamond corridor. The Mackenzie Dyke Swarm might have been reworked in the Darnley Bay dyke swarm's geological time providing the loci for both dyke intrusions and perhaps still younger dykes and kimberlite pipes of another magmatic event.

In May, Darnley Bay Resources entered into a definitive agreement with Diadem that provides for the sale of Darnley Bay's interest in the Franklin diamond project. In consideration Diadem will pay to Darnley a significant number of shares, C$40,000 in cash to cover the cost of clean-up from the 2010 drilling program and a 2 percent net smelter return royalty on the sale of all diamonds and other minerals from the property. In addition, Diadem agreed to incur a minimum of C$1.5 million in expenditures on the property within 24 months of the definitive agreement. The deal, which is subject to TSX approval, is expected to close June 30.

Elusive source of anomalies

The gravity and magnetic anomalies at Darnley Bay remain unexplained.

While Diadem hunts for diamonds nearby, Darnley Bay Resources is focusing its attention on the anomalies. The company's on-site exploration has been concentrated in two periods: 1997-2000 and 2010-2011, including one drill hole in the former and four drill holes in the latter. None of the drill holes reached their targets for technical reasons.

In 2000 DBL drilled a vertical drill hole on the Thrasher Zone magnetic target that encountered considerable mechanical problems prior to reaching its targeted depth at 2,300 meters. It was terminated at depth of 1,812 meters due to extreme ground water pressure and gravel run-in from aquifers.

The drill hole revealed a considerable amount of information about the geology of the region and intersected the contact between the Precambrian and younger overlying sediments (Phanerozoic) at a depth of 1,168 meters.

The Precambrian formations outcrop just east of the anomaly suggesting that the igneous intrusive may be shallower to the east and therefore more accessible and less expensive for continued drilling.

Between 2007 and 2012, Darnley Bay Resources conducted three-dimensional modeling of the gravity and magnetic data that confirms the interpretation of an extremely large intrusive source, with upper reaches that are within mineable depths for one or more large tonnage nickel-copper-PGE or IOCG deposits.

Difficult drilling conditions

A number of issues recurred on the four holes the company drilled for base metals in 2010-11, according to Reford, who served as president and CEO of Darnley Bay Resources from June 2008 to June 2011.

In a technical report released in February 2012, Reford reported that previous drilling for kimberlite pipes with the same drill contractor (Northtech), drill and crew on the Parry Peninsula in August 2010 went smoothly. In that area, the overburden ranged in thickness from 4.2 meters to 19.2 meters. The holes were drilled at dips of 45 degrees or 50 degrees. Bedrock consisted mainly of dolomite and didn't present any difficulties.

The four drill holes on the base metals targets encountered 156 meters to 161 meters of unconsolidated sediments, incorporating sands, clays, boulders and voids of up to 3 m. Figure 37 shows an example of the glacial till in the area.

In 2010 the junior drilled three drill holes over base metals targets interpreted from the airborne surveys, with follow-up ground geophysics, but did not reach the targeted formations due to glacial overburden, blocky ground, clay seams and deteriorating weather conditions.

At target G09-01, the drilling difficulties were compounded by the underlying dolomite being vuggy in nature, with additional voids. These conditions resulted at times in the casing being shifted, dropped or broken and significant infill of sand and clay. Drilling in permafrost added to the difficulty in maintaining a proper temperature for the fluids. Drilling at G09-01 was further impacted by the early onset of winter in late October 2010.

The drill contractor undertook a number of measures to mitigate these issues, including casing to solid bedrock; telescoping the casing from P to H to N, maximizing the depth of each; maintaining the optimal temperature of the fluids to prevent freezing the hole in permafrost while minimizing any melting around the hole that would destabilize the casing; using of bentonite and other materials extensively to stabilize the hole; and testing tri-cone bits as well as diamond drill bits.

The company returned in March 2011 to re-drill one hole over a base metal target but did not reach the targeted formations due to ongoing difficulties with drilling through unconsolidated sediments and underlying vuggy dolomite.

This hole proceeded smoothly and efficiently to 242 meters (still in vuggy dolomite). However, the voids within the unconsolidated sediments resulted in movement of the casing, and ultimately, the hole could not be recovered after a week of attempts.

New combination drill plan

Reford recommended that the company continue to explore the 22 targets that have been identified on the anomaly with targeted seismic surveys, followed by a combination of reverse circulation and diamond drilling to determine its source(s).

"We're planning to start the holes with RC drilling down to depths of about 1,000 feet (300 meters) until we hit solid bedrock, and from there, do diamond drilling," he told Mining News in mid-June.

Reford said downhole geophysics will further guide drilling towards primary targets for economic mineralization.

"Additional gravity surveys over targets may be warranted depending on initial drill results. Other ground-based geophysical methods may be applicable depending on the physical properties, contrasts with host rock and overlying horizons and source depth determined from drilling. These may include time-domain electromagnetic, IP/MT (Titan-style) and/or 2D/3D seismic surveys.

In the 2012 report, Reford outlined budgets of about C$5 million and C$8 million for drilling campaigns in 2012 (four targets) and 2013 (seven targets), , respectively, but the junior has encountered "extreme" difficulty raising sufficient capital in the current tight financial markets to carry out the programs.

Earlier this year, Darnley Bay Resources appointed Jacquelin Gauthier, P. Eng., as project manager at Darnley Bay, and said Gauthier's duties would initially involve a detailed review of past exploration data in order to select drill targets, determining the best drilling methods, budgeting and permitting for the Darnley Bay project.

In April the junior reported plans, subject to financing, to initiate a new drill program on the gravity anomaly in 2013.

Reford, now vice president of Paterson, Grant & Watson Ltd. (Consulting Geophysicists, Toronto, Ontario), said Darnley Bay Resources intends to move forward this year with at least limited exploration, primarily downhole geophysics that will further guide future drilling towards primary targets for economic mineralization.

The junior reported June 24 that it has applied for permits to conduct a magneto-telluric (MT) survey and a geological survey on the Darnley Bay property this summer. The objective of the MT survey is to find alteration zones and dykes/sills with special chemistry, which could be indicators of metallic mineralization at depth. The geological survey will cover about 25 percent of the property where the probability of finding outcrops is greater, such as cliffs, canyons and riverbeds.

"We've done airborne geophysics, gravity and electromagnetic (VITEM) surveys and we've done ground surveys," said Reford. "We're looking at a magnetotelluric survey, which hasn't been tried in this area. The goal is mainly to sense deeper images, much deeper than those of any other technique of this kind."

In the 1990s, MT was used successfully to locate mineral deposits as deep at 1,750 meters in the Sudbury nickel camp. In the past 10 years, the technique, which is routinely used by the oil industry to better define deep targets, has seen a number of improvements, particularly with the development of modern 3D inversion, the company said.

The summer 2013 field program is estimated to cost C$300,000, and is subject to financing and final permitting.

Though the source of its anomalies remains a mystery, Reford said Darnley Bay is "one of those properties or targets that the whole industry keeps an eye on."

"It's kind of a 'go big or go home' type of deal. If it has economic potential, it could be gigantic. It's what they call, a company maker," he added.