Mining Explorers 2014: Diamonds draw industry interest

After ushering in devolution in concert with implementing the first phase of a well-reasoned mineral development strategy, the Northwest Territories is eager to attract new mineral resource investment in 2014 in hopes of building on an uptick in exploration activity in recent years.

"The Canadian North is the next frontier in mining and mineral development and nowhere is this more evident than in the NWT," said NWT Industry, Tourism, and Investment Minister David Ramsay.

Home to the third-richest diamond resources in the world and untold quantities of precious and base metals, the Far North jurisdiction currently hosts three operating diamond mines and the sole tungsten producer in the West. The territory also recently approved plans for a fourth diamond mine and is shepherding four more advanced mine projects through regulatory permitting.

"It's been an exciting season for us because on April 1, we took over management of mineral and oil and gas resources in the territory," said Pam Strand, director of Mineral Resources for the Government of Northwest Territories.

"Overall, we're seeing a consistent trend for exploration as well as a bit of a resurgence of interest in diamonds," Strand told Mining Explorers in a recent interview. "During the slow times, different projects were dropped and we have new companies coming in. They are also interested in gold. Some are public companies and some are private, and for the first time, we've got an aboriginal company based in Yellowknife - DemCo - working on a project."

Strand noted that one of the new diamond explorers, Canterra Minerals Corp., is led by Randy Turner, who as head of Diamondex discovered the NWT's Snap Lake Diamond Mine, now owned by De Beers.

"It will be interesting to see what comes out of these projects," Strand observed.

The Northwest Territories is expected to attract about C$71.5 million in exploration and deposit appraisal expenditures in 2014, down significantly from C$90 million in 2013 and the territory's recent peak level of C$108.7 million in 2012, according to Natural Resources Canada estimates.

Strand said she believes NRCan's estimate for 2014 is on the "conservative side," given the new interest in diamonds among explorers coming into the territory.

Another indicator of new interest in NWT exploration is a recent surge in the number of mining claims staked across the territory. Since April 1, 158 claims have been staked, compared with 177 claims for all of 2013 and 111 claims in 2012.

Diverse geology

Geoscientists have identified eight distinct and diverse geological provinces in the Northwest Territories - the Continental Shelf, Arctic Platform, Bear Province, Churchill Province, Cordilleran Orogen, Innuitian Orogen, Slave Province and the largest by landmass, the Interior Platform.

Since the early 1930s, the territory has produced more than C$60 billion in minerals across a range of commodities and minerals, including gold, diamonds and zinc. Those three products alone account for more than 85 percent of the value produced, according to the NWT & Nunavut Chamber of Mines, which is working to spread a strong pro-mineral development message throughout the mining industry.

"There is much more to the mineralization story with other key products, including tungsten, uranium, copper, silver and even radium. When the new mines currently in the approvals phase enter production, that list also will include bismuth, cobalt and rare earth metals, which are minerals found in only a few places worldwide," the chamber said in a recent statement.

"The Northwest Territories really is an emerging land of undiscovered opportunity," said Tom Hoefer, executive director of the Chamber of Mines.

Hoefer said recent exploration activity is due not to growing numbers of grassroots projects, which are suffering in the NWT as elsewhere in the world, but to sizable advanced projects like Gahcho Kué that are moving forward with some spending as their approval processes inch closer to completion.

"In essence, we are taking advantage of the downturn in the marketplace to improve the investment climate through the NWT Mineral Development Strategy, devolution, and regulatory improvement," he observed.

Enhancing economic development

The Northwest Territories is planning for a prosperous future by enhancing economic development through several new strategies - mineral development, economic opportunities, and energy action.

The government implemented a new Mining Incentive Program in 2014 that was oversubscribed by midyear, with strong interest shown by companies and prospectors in the Northwest Territories and across Canada.

The program was launched in June to provide funds to eligible prospectors and mining exploration companies that are already engaged in mining exploration projects or proposing new projects in the NWT. It aims to offset some of the financial risk associated with grassroots mineral exploration in the NWT.

Three prospectors and 11 companies made up the 14 applications that requested a total of over $1.02 million of funding support. The budget for the program is $400,000.

"The Mining Incentive Program helps our government support those with the energy, expertise and perseverance that this industry relies on to conduct mineral exploration in an environmentally sustainable way," Ramsay said. "I especially look forward to using this program to contribute to the success of northern and Aboriginal-owned businesses pursuing mining projects, so more northerners can enjoy the benefits of economic development and a healthy mining sector."

Administered by the Northwest Territories Geoscience Office, the incentive program awarded grants ranging from C$50,000 to C$80,000 to six exploration companies and split C$21,500 between two prospectors. The grantees were Proxima Diamonds (C$80,000 - diamonds); Songful Resources (C$65,000 - gold); DemCo (C$65,000 - multiple metals); Panarc Resources (C$64,544 - base metals, gold); TerraX Minerals (C$50,000 - gold); North Arrow Minerals (C$50,000 - diamonds); Lane Dewar (C$12,000 - gold), and Dave Nickerson (C$9,500 - gold).

Substantial mine development

Six companies have acquired the prerequisite permits, or are in the process of obtaining them, to bring mining projects into production in Northwest Territories.

The proposed Gahcho Kué diamond project received approval for a Type A Water License in late September and two other key permits in August, which paves the way for the project to proceed to construction and startup of operations in the third quarter of 2016.

Gahcho Kué, a joint venture between De Beers Canada (51 percent) and Mountain Province Diamonds Inc. (49 percent), has probable reserves totaling 31.3 million metric tons grading 1.57 carats per metric ton for 49 million carats in the Tuzo, 5034 and Hearne kimberlites.

A 2010 feasibility study demonstrated that an open-pit operation could produce an average of 4.5 million carats per year over an 11-year period, while employing nearly 700 workers during the peak of construction and roughly 400 mine workers once operational.

"As the world's largest and richest new diamond mine, Gahcho Kué will maintain Canada's position as a leading diamond producer," said Mountain Province CEO Patrick Evans. "Employment created by Gahcho Kué and revenues generated by the mine will contribute to growth and prosperity in the NWT."

The Gahcho Kué approvals were preceded by final regulatory approvals for the Prairie Creek zinc-lead-silver mine in the western NWT, and for the NICO gold-cobalt-bismuth-copper mine and concentrator in the central NWT.

An additional mining project proposal for the Nechalacho Rare Earth Elements Project, located at Thor Lake 100 kilometers (62 miles) southeast of Yellowknife, is also advancing through the regulatory phase.

Canadian Zinc Corp.'s Prairie Creek Project comprises a partially developed underground mine and plant that was constructed in the early 1980s.

The plant was three months away from operations but was never put into use.

In June 2012, Canadian Zinc Corp. released a pre-feasibility study projecting an 11-year mine life based on a measured and indicated mineral reserve estimate of 5.43 million metric tons of zinc, lead and silver with a mill rate of 1,000 tpd.

Inferred resources encompass another 6.2 million metric tons of the three metals, which have the potential to double the life of the mine.

The federal minister responsible for northern mining approved the project in September 2013.

Near-term, Canadian Zinc intends to focus on pre-construction optimization activities with site construction potentially beginning in 2014.

The company is currently seeking funding to bring the mine into production with the potential for first shipment of concentrate south in 2016.

The Nico gold-cobalt-bismuth-copper deposit of Fortune Minerals Ltd. is located 160 kilometers (100 miles) northwest of Yellowknife, and only 85 kilometers (53 miles) north of the major highway to the capital.

Construction of an all-weather road is proposed to allow metal concentrates to be trucked to southern markets.

A 2012 Front End Engineering and Design Study outlines pre-production capital costs estimated at C$441million for a vertically integrated project with a mine and mill in the Northwest Territories and a refinery planned for Saskatchewan.

The study indicated life-of-mine average operating costs of mine at C$61.97 per metric ton of ore processed.

The Tlicho and federal governments have given the go ahead for the NICO mine and mill with permitting and financing requiring completion prior to the commencement of mine construction.

The proposed mine site boasts reserves of 33 million metric tons containing gold, cobalt, bismuth and copper with a projected mine life of 20 years.

Fortune Minerals has begun site preparations for construction at NICO that is targeted to begin in 2014.

In April Avalon Rare Metals Inc. received a land use permit to start pre-construction at Nechalacho, which is contemplated as a 2,000-metric-ton-per-day underground mine and concentrator, with a hydrometallurgical secondary processing facility being proposed for the south side of the lake and a refinery located in Louisiana. Avalon completed a feasibility study in 2013 that confirmed strong economics with a 22.5 percent pre-tax internal rate of return and average annual revenues of C$645.8 million, with initial production projected for the second half of 2017.

Total capital requirements estimated for the feasibility study are C$1.575 billion and more than 200 new jobs are expected to be created in the NWT, mainly at the Nechalacho site.

Proceeds from a C$2 million financing funded a 2014 summer drilling program and other exploration work along with engineering, permitting and market development work for the project.

The Yellowknife Gold Project, Tyhee Gold Corp.'s flagship property, is located 90 kilometers (56 miles) north of Yellowknife and covers 12,635 hectares (31,221 acres) over five zones of gold mineralization. A feasibility study released in August 2012 estimated pre-production capital costs of C$193 million with an estimated mine life of about 15 years based on a production rate of 4,000 tpd at an average grade of 2.03 g/t gold. Proven and probable reserves are estimated at just over 1.3 million ounces of gold. The project owners are working to raise financing to advance the project through the approvals process.

Diamonds

In addition to the Gahcho Kué project, NWT's producing diamond mines and diamond exploration project invested substantial funds in exploration in 2014.

Dominion Diamonds Corp., which owns and operates the territory's largest producing diamond mines, reported exploration expense of C$6.8 million incurred during the second quarter of 2014, compared with C$3.1 million in the comparable quarter of the prior year. All of the spending went to work on the Jay kimberlite pipe within the Buffer Zone at the Ekati Diamond Mine located 310 kilometers (192 miles) northeast of Yellowknife, NT.

The proposed Jay Pipe Project is expected to enable the continued operation of the Ekati diamond mine, past its current projected mine life of five years. There is significant upside potential to extend the mine life if some or all of the mineralization in the Buffer zone is promoted to resource status. The Ekati mine's current annual production is estimated to exceed 7.5 million carats (1,500 kilograms, or 3,307 pounds) of diamonds.

Kennady Diamonds Inc. is exploring the Kennady North diamond project adjacent to the Gahcho Kué diamond mine project located 280 kilometers (174 miles) northeast of Yellowknife.

The company conducted 2014 exploration, delineation and mini-bulk sample drilling.

More than 129 meters of kimberlite was intersected in diagonal delineation drill hole KDI-14-058a at the far north of Kelvin kimberlite, the widest intersection drilled to date at Kelvin.

In response to multiple encouraging intersections of kimberlite on the property this season, Kennady extended its 2014 target of 12,000 meters of drilling to 14,000 meters and its target for the bulk sample program to 28 metric tons.

This is shallower than previously modeled and indicates the potential for additional tonnage at the high-grade Kelvin pipe," said Kennady Diamonds CEO Patrick Evans.

Kennady Diamonds also reported the recovery of a high-quality 0.94 carat diamond found during logging of core from the Kelvin kimberlite.

Margaret Lake Diamonds Inc. is another junior exploring for diamonds in Northwest Territories. Its efforts are focused on the 23,199-hectare (57,325 acres) Margaret Lake property located 10 kilometers (six miles) from the Gahcho Kué diamond project and within a 90-kilometer by 40-kilometer (56 miles by 25 miles) diamond field that also contains the Snap Lake mine operated by De Beers. The Margaret Lake property contains several indicator anomalies based on previous work done in the 1990s, and a number of untested kimberlite-like EM and magnetic anomalies. Margaret Lake Diamonds is proceeding with a similar gravity survey and strategy.

Margaret Lake Diamonds Inc. and Canterra Minerals Corp. entered into an option agreement whereby Margaret Lake has been granted, subject to the acceptance of the TSX Venture Exchange, the right to acquire up to an aggregate 49 percent right, title and interest in and to Canterra's 26,000-hectare (64,246-acres) Marlin Property in the Northwest Territories.

The property comprises 23 mineral claims covering an area of about 26,000 hectares and lies contiguous to the north and west of the Kennady North project and west of Margaret Lake's Margaret Lake Property.

To earn its interest in the Marlin Property, Margaret Lake must make staged cash payments totaling $100,000, issue an aggregate of 600,000 common shares and incur $1.75 million in exploration expenditures over a three-year period.

Canterra is the operator, and the initial exploration program which consists of basal till sampling is expected to commence immediately.

Canterra President and CEO Randy Turner, commented, "This option agreement with Margaret Lake Diamonds creates an opportunity between two companies that hold contiguous properties to the Gahcho Kué and Kennady North projects and share a similar geological environment. With the proximal nature of our land packages, the synergies of data collection and analysis, plus the additional capital to advance the Marlin Property expeditiously, we are delighted with this partnership and look forward to a mutually successful outcome."

Paul Brockington, president and CEO of Margaret Lake, said, "We are pleased to enter into this option agreement with Canterra, as we now have ground under option that surrounds all the northern and western boundaries of the Kennady North property. We look forward to combining the knowledge base of our two management teams."

Under the terms of the option agreement, Margaret Lake has the right earn an initial 30 percent interest in the Marlin Property over a two-year period and an additional 19 percent interest in the Marlin property by the end of the third year.

North Arrow Minerals Inc. also completed an exploration drilling program this year at the Redemption Diamond Project in the Northwest Territories.

The property is located in the Lac de Gras region, about 32 kilometers (19 miles) southwest of the Ekati Diamond Mines.

A total of 799.8 meters of drilling tested seven targets located in the central part of the property near the up-ice termination of the South Coppermine kimberlite indicator mineral train.

None of the drill holes definitively encountered a bedrock kimberlite source for the South Coppermine KIM train.

Drill hole 14-RED23-08 (Az.

180 degrees; dip -60 degrees) tested a linear gravity low and encountered predominantly fresh to weakly altered granite that included a moderately to strongly fractured fault zone from 89.9 m to 99.7 m downhole.

This fault zone contained intervals of dull green clay gouge, which have been collected for kimberlite indicator mineral analyses.

North Arrow is exploring the Redemption property under an option agreement with Arctic Star Exploration Corp., in which the company can earn a 55 percent interest by incurring C$5 million in exploration expenditures prior to July 1, 2017.

Other exploration

Among other mining explorers in the Northwest Territories, three companies stood out in 2014.

North American Tungsten Mines Co. Ltd., which owns and operates the Cantung tungsten mine, believes there is good potential to expand resources on the property though the remaining established resources on the property are limited. Underground drilling continues, and the company is in the process of updating a technical report under NI 43-101 for the mine. N.A. Tungsten is also considering a project to extract significant quantities of tungsten concentrates from tailings accumulated in prior years. Favorable results of these projects could extend the Cantung mining operation for many years.

The company's 2014 underground diamond drilling program aimed to further define resources and develop an extended mine plan. A second underground diamond drill commenced drilling in June for a planned 13,000-foot drill program. Geophysical surveys were employed to supplement and guide the diamond drilling. A surface exploration drill program began in July 2014 to follow up on results from the company's 2013 summer drill program and to enable the exploration and evaluation of potential ore targets in the vicinity of the Cantung ore body. The company is also developing the Mactung tungsten project across the border in Yukon Territory.

Gold explorer TerraX Minerals Inc. is focused on the Yellowknife City Gold Project, which encompasses roughly 8,400 hectares (20,756 acres) of contiguous land immediately north of the City of Yellowknife and including TerraX's wholly-owned Northbelt property acquired in February 2013.

TerraX's field exploration in 2014 included mapping and prospecting and surveying over the contiguous Northbelt, Walsh Lake, U-Breccia and Ryan Lake properties that make up the project, followed by a drill program. The junior commenced its first drill program on the project in March. The 6,000-meter campaign tested three initial target areas; the Barney Shear, which is the extension of the Con/Giant shear system; the Crestaurum Zone, which is a high grade zone with nearly 200 historical drill intersections; and the Homer Lake base metal/precious metal target at the north end of the property.

TerraX Minerals Inc. also completed surface sampling results in a summer prospecting and mapping program. Combined with 2013 results, the company said some 718 grab, chip and channel samples collected during surface work led to the generation of more than 10 additional discoveries that could be quickly made 'drill ready' in the short term. Several of the new high-grade targets are oblique or high-angle veins that occur near the main Crestaurum and Barney structures, and they could be indicative of gold-bearing vein sets common to large mineralized systems.

Another explorer focused on gold in the NWT is Nighthawk Gold Corp., which mounted a 14,000-meter drill program in its Colomac gold project at the Indin Lake property located about 220 kilometers (136 miles) north of Yellowknife. The property covers 90 percent, or 930 square kilometers (229,791 acres) of the Indin Lake Greenstone Belt

2014 drilling, from which Nighthawk reported its first results Sept. 25, confirmed significant opportunities for expansion at Goldcrest and Colomac Main, two of a half-dozen gold deposits on the property.

Two Goldcrest holes, which substantiate a north plunging mineralized shoot; hole G14-05 intersected 20.25 meters of 4.83 grams per metric ton gold, including 5.25 meters of 10.21 g/t gold and hole G14-04 intersected 19.60 meters of 4.19 g/t gold, including 7.90 meters of 7.85 g/t gold.

At the Colomac Main deposit, hole C14-02 intersected 25.00 meters grading 2.38 g/t gold, including 8.75 meters of 4.98 g/t gold, effectively tracing Zone 2.0 mineralization down plunge of previously drilled higher grade shoots.

Goldcrest is a 2.5-kilometer (1.5 miles) long mineralized mafic sill similar to the Colomac intrusion located 400 meters to the east. As a primary candidate for resource expansion, Goldcrest hosts the highest average grade in the current resource estimate at 2.19 g/t gold; historic drilling was limited to a depth of 100 meters. Nighthawk's recent drilling has produced the first documentation of a higher grade shoot at Goldcrest.

Nighthawk released an updated mineral resource estimate for the project in mid-2013 of 39.815 million metric tons grading 1.67 g/t (2.1 million ounces) gold.