The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Following two years of robust exploration, company scales back; large shareholders fund 2014 program, seek to trim corporate G&A
Indicative of the state of mineral exploration in Alaska, and around the world, no drills are turning at NovaCopper's Upper Kobuk Mineral Projects in 2014. Instead, crews crated up 12,918 meters of core from historical drilling at the northern Alaska project and shipped it to Fairbanks where it can more economically be re-logged and readied for re-sampling.
At an expected cost of around US$2.7 million, this relatively modest program follows two years of exploration expenditures that topped US$15 million annually and catapulted Bornite from a historical resource with roughly 1.25 billion pounds of copper to a 6-billion-lb copper deposit that meets the stricter modern standards for defining a resource.
In addition to the resampling program, NovaCopper is continuing to support the Alaska Industrial Development Export Authority in initiating the permitting process on the Ambler Mining District Industrial Access Road, a 211-mile- (340 kilometers) long road, extending west from the Dalton Highway to the Upper Kobuk region of Northwest Alaska.
"Our strategy in the upcoming months is to build upon the success of last year's program," explained NovaCopper President and CEO Rick Van Nieuwenhuyse.
Strings attached
Originally hoping to raise US$20 million through a financing that would have combined monies from a public offering matched by its largest shareholders, NovaCopper ended up settling for less than half.
In July, NovaCopper announced three of its largest stockholders - Thomas Kaplan's Electrum Strategic Resources, John Paulson's Paulson and Co., and Seth Klarman's Baupost Group - agreed to invest US$7.5 million to continue the company's progress at the Upper Kobuk Mineral Projects.
Electrum now owns 16 million NovaCopper shares, representing 26.6 percent of the company's issued and outstanding shares; Paulson owns another 11.5 million shares, an 18.8 percent stake in NovaCopper; and Baupost holds 6 million shares, or about 10 percent of the company. At a combined 33.5 million shares, these companies own more than half of NovaCopper's 60.2 million outstanding shares.
"NovaCopper continues to enjoy strong support from its principal shareholders who are clearly endorsing the steps the company is taking towards enhancing the shareholder value. The re-logging and re-assaying programs at Bornite coupled with a continued focus on working closely with AIDEA on initiating the permitting process for the access road are key elements of that strategy," said Van Nieuwenhuyse. "
This infusion of cash, however, came with some strings attached.
As a condition, NovaCopper's impressive group of primary investors are requiring the company to restrict its general and administrative spending to US$4 million and program expenditures to US$2.7 million over the next year. The remaining US$800,000 provided in the private placement is earmarked for expenses related to trimming the G&A.
As a result of the need to cut costs, NovaCopper had to make tough personnel decisions. The first round of staff reductions included letting go Senior Vice President of Exploration Joseph Piekenbrock and Vice President of Corporate Communications Patrick Donnelly.
Expressing heartfelt appreciation for the work put in by the exiting employees, Van Nieuwenhuyse said, "It has been an honor to have worked with such a fine group of people. On behalf of the entire company, I would like to thank all of departing employees for their professional services over the years and wish them well in their future endeavors."
9.5B lbs. copper
With a year's worth of funding in place, NovaCopper continues its preliminary goal of defining 10 billion pounds of high-grade copper at the Upper Kobuk Mineral Projects, a long-term partnership between NovaCopper and NANA Regional Corp. The UKMP alliance combines Bornite and a number of other mineral prospects on NANA-owned lands with the world-class Arctic deposit and dozens of similar volcanogenic massive sulfide prospects located on NovaCopper's state, federal and patented mining claims in the Ambler Mining District.
In March, NovaCopper provided an updated resource that increases the contained copper at Bornite by 2.56 billion pounds.
This includes: indicated resources of 14.1 million metric tons grading 1.08 percent (334 million pounds) copper and inferred resources of 109.6 million metric tons grading 0.94 percent (2.3 billion pounds) copper for the potentially open-pittable portion of the Bornite; and inferred resources of 55.6 million metric tons grading 2.8 percent (3.4 billion pounds) copper for the deeper, potentially underground minable portion of the project.
"This robust new Bornite resource remains open along the one-kilometer-wide northern margin of the deposit as well as the up-dip projection of the South Reef zone," said Van Nieuwenhuyse. "Given the scale of the mineralization, which now measures 1.5 kilometers along strike and 2 kilometers down dip, we expect that further exploration could potentially make the Bornite deposit of similar size and grade to the geologically comparable Mount Isa deposit of Queensland, Australia - which ultimately extracted 405 million (metric tons) grading 2.12 percent copper."
Between Bornite and Arctic, the equivalent of roughly 9.5 billion pounds of copper has been identified, so far, at Upper Kobuk Mineral Projects, when you calculate the worth of the zinc, lead, silver and gold found with the copper at Arctic.
Efficient, effective re-sampling
Finding out just how big Bornite is, however, is going to have to wait. Instead, the company will fill in gaps inside the already defined deposit by re-sampling of core from drilling carried out by Kennecott Mining from 1957 until 1975.
A similar re-sampling program completed last year played a crucial role in adding some 2.6 billion pounds of copper when the resource was updated earlier this year.
Kennecott, which was focused only on the highest grade portions of Bornite, did very little sampling of regions considered to be low grade. These areas, however, are an important piece to NovaCopper's strategy of open-pit mining the shallower lower grade areas as well as an underground operation to tap the high-grade portion lying deeper.
Of the 33 Kennecott holes sampled during 2013, 26 had intervals of copper greater than 0.5 percent copper, and 29 holes contained mineralization greater than 0.2 percent copper.
"The re-logging and re-sampling program was highly successful in confirming the historic results from the work carried out by Kennecott. This effort represented a low-cost means of demonstrating continuity of the lower-grade mineralized material which was previously un-sampled," Van Nieuwenhuyse said.
Continuing this very efficient and effective way of adding copper to Bornite with a re-sampling program that meets today's quality assurance protocols, NovaCopper crews have selected another 12,918 meters of Kennecott core to re-log and assay.
This year, though, the work won't be carried out at the Bornite camp. Instead crews crated up 4,030 boxes of core and shipped it to the company's warehouse and core logging facilities in Fairbanks. NovaCopper expects this program will find enough lower grade copper in areas now considered waste to reduce the strip ratio of the potential open-pittable portion of Bornite.
While advancing UKMP on a budget, NovaCopper will continue to support AIDEA's work on permitting a road to the copper-rich Ambler District, an overland route that is key to the economics of mining Arctic, Bornite and the number of other deposits that dot this region of northwestern Alaska.
In April, AIDEA was given the go-ahead by its board of directors to begin the permitting process for the Ambler Road and to engage a firm to prepare the environmental impact statement for the project under the direction of the federal agencies.
In addition to providing a means of shipping copper and zinc concentrates to market, the road would open up the possibility of trucking liquefied natural gas from the Interior Energy Project, an LNG facility that AIDEA is developing on Alaska's North Slope.
NovaCopper anticipates signing a memorandum of understanding with AIDEA to explore the feasibility of utilizing LNG from the plant to replace diesel as the primary source of fuel for the potential mines at Arctic and Bornite.
"An effective program of re-logging and re-assaying at Bornite coupled with our focused effort of working closely with AIDEA on initiating the permitting process for the AMDIAR should allow NovaCopper to continue building shareholder value at a relatively low cost," Van Nieuwenhuyse added.
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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