Global exploration spending slips again

As the year winds down, financial information has begun to trickle in quantifying just how tough 2014 was on the mining industry.

Industry analyst SNL Metals & Mining announced that the total estimated global budget for nonferrous metals exploration dropped another 25 percent in 2014, to US$11.36 billion, from US$15.19 billion in 2013.

Perhaps even more arresting is the precipitous fall in just the past two years from an all-time high of US$21.5 billion in nonferrous metal exploration in 2012, a decline of nearly 50 percent.

Prime factors contributing to this exodus from the exploration sector include higher mine operating and capital costs, lower ore grades, uncertain demand for commodities and investor discontent affecting the major producers.

In response, major producers spent much of the past year divesting noncore assets and cutting back on capital project and exploration spending, the latter of which has led to an unsurprising 25 percent drop in major company exploration budgets in 2014.

While cash conservation was going on, major companies continued to produce at nearly the same rates they have for the last half-decade.

Normally, this is an open invitation to junior and intermediate companies to provide producers with new deposits.

Unfortunately, junior explorers have been even harder hit than majors in 2014, as they battle lackluster investor interest, a general lack of risk capital and continuing declines in share prices.

The junior sector's total exploration budget fell another 29 percent in 2014 after falling a whopping 39 percent in 2013.

Alaska's exploration industry mirrors these global trends, with total exploration expenditures dropping from an all-time high of US$365.1 million in 2011 to US$175.5 million in 2013.

Based on my own crystal-ball estimates, 2014 will see a further decline in Alaska exploration spending, to somewhere in the US$90 million to US$100 million range, much of that from just a handful of projects.

The dramatic exodus of risk capital from the junior sector has forced companies into the bunker mode, in which they rein in spending in order to conserve ever-decreasing treasuries.

Shareholders and market makers give companies credit for fiscal restraint, but only for a year or so.

After that, the question "What are you doing with my money" is asked more often and more forcefully.

Perception is that a junior company is only as good as its last discovery, and doing nothing for going on three years leads nowhere good.

So this extended bunker mode period is forcing companies to search for alternative ways to finance their efforts, be that from private equity markets, loans, sovereign funds, convertible deals or a rich uncle!

Western Alaska

Teck Resources Ltd. and partner NANA Regional Corp. announced third-quarter 2014 results from their Red Dog zinc-lead mine, which turned in operating profits of US$206 million versus an operating profit of US$143 million in the same period in 2013.

For the quarter, the mine generated 147,700 metric tons of zinc and 29,100 metric tons of lead concentrate versus 142,500 metric tons of zinc and 23,400 metric tons of lead, respectively, in the third quarter of 2013.

The mine sold 182,700 metric tons of zinc and 63,800 metric tons of lead during the third quarter.

Average zinc and lead grades mined were 16.5 percent and 4.5 percent respectively, versus 16.3 percent and 3.8 percent in the third quarter of 2013.

Mill throughput was 1.079 million metric tons in the third quarter versus 1.03 million metric tons milled in the third quarter 2013.

The mine's zinc production increased by four percent compared with the same period a year ago due higher grade ore.

The 2014 shipping season was completed on Oct. 20 with zinc concentrate shipments totaling 1.025 million metric tons and lead concentrate totaling 205,000 metric tons.

Operating costs in the third quarter remained similar to a year ago, while royalty costs increased significantly due to higher revenues linked to rising zinc prices.

Graphite One Resources Inc. announced preliminary results from its 2014 field program at the Graphite Creek graphite project.

In total, 22 diamond drill holes were completed totaling 2,296.6 meters.

The 2014 drill program was designed bring drill spacing down to 50 meters between drill holes and allow more resources from inferred to indicated.

All drill holes were noted as having visible graphite mineralization.

These new drill results will be used to produce an updated mineral resource estimate to replace the current inferred resource of 284.71 million metric tons of 4.5 percent graphite including 37.68 million metric tons of 9.2 percent graphite.

IN addition, the company completed two drill holes from the two principle zones of mineralization for advance metallurgical test work to be completed over the winter.

Metallurgical test work will include optimization flotation studies at varied head grades and mineralization styles, followed by additional upgrading test work on several graphite product lines for both high-end spherical graphite and large flake graphite.

These data will be used in the company's preliminary economic assessment, scheduled for completion in 2015.

Interior Alaska

Freegold Ventures Ltd. announced continued metallurgical work at its Golden Summit project. The current program underway is being conducted by McClelland Laboratories and consists of further bottle roll tests and column leach tests. The technical data being generated from the metallurgical test work program is aimed at providing adequate data to allow evaluation of the potential for a standalone valley leach operation on all material (oxide and sulfide) as well as to investigate a higher recovery milling operation which will be incorporated in the preliminary economic assessment currently being managed by Tetra Tech.

International Tower Hill Mines provided an update of activities on its Livengood gold project.

The mine plan outlined in its September 2013 feasibility study was reviewed and modified to include changing pit slope designs, improvement of scheduling ore release, waste mining and stockpile management.

The metallurgical test work was reviewed to identify opportunities for optimization that may be confirmed by additional test work.

Potential benefits include improvements to head grade, gravity recovery, reductions in power consumption, reductions in reagent consumption and cost, and reductions in leach retention time.

Power supply alternatives were reviewed to determine how changing energy supply dynamics might impact electrical costs.

Construction and operations camp alternatives were reviewed to better define the costs of supporting the manpower requirements for the project.

The company has also continued to advance environmental baseline work in support of future permitting.

Project expenditures for the first nine months of 2014 were US$1,957,849, compared with US$6,868,226 for the first nine months of 2013.

Total project expenditures for 2014 are forecast at US$8 million.

Corvus Gold Inc. announced updated resource estimates for its LMS gold project in the Goodpaster District.

The resource estimate was calculated incorporating new drilling conducted in 2010 and 2011 by First Star Resources Inc., the company's former joint venture partner.

At a 0.5 grams-per-metric-ton gold cutoff, the new resource estimate contains 8.32 million metric tons, grading 1.0 g/t gold, for 267,000 ounces of gold.

Previous efforts on the project targeted a folded stratiform breccia horizon.

However, high-grade vein mineralization (>5 g/t gold) has been encountered in the rock unit below this zone in every drilling campaign.

Review of these data suggest the presence of an upright fold in the breccia horizon and the distribution of higher grade veins in a series of axial planar folds within the footwall gneiss.

These northwest trending high-grade target zones constitute high-priority future drilling targets.

5 g/t gold) has been encountered in the rock unit below this zone in every drilling campaign. Review of these data suggest the presence of an upright fold in the breccia horizon and the distribution of higher grade veins in a series of axial planar folds within the footwall gneiss. These northwest trending high-grade target zones constitute high-priority future drilling targets.

Alaska Range

Miranda Gold Corp. announced execution of a definitive working agreement with Gold Torrent Inc. on the Willow Creek gold project.

Gold Torrent plans to fast track the Coleman into production; and conduct aggressive underground exploration during construction and production in order to significantly expand the resource.

Numerous historic high-grade drill intercepts suggest extensions of mineralization below the Coleman, down-dip extensions of the Lucky Shot Mine, and significant potential in the Murphy zone.

These areas adjoin the Coleman and could be rapidly brought into a mine plan.

Gold Torrent will initiate discussions with the permitting agencies as well as other stakeholders that may be affected by the development of the Willow Creek project.

By utilizing pre-existing roads and tunnels and off-site processing, the operation will have small visual and physical impacts.

Coventry Resources Inc. announced that it has entered into agreements that allow it to acquire 80 percent interest in the road-accessible Caribou Dome copper project in the Valdez Creek District.

The project, previously known as the Denali copper prospect, hosts near-surface sediment-hosted stratiform copper mineralization with significant past drilling results, including 18.1 meters grading 9.34 percent copper, 18.4 meters grading 6.25 percent copper, and 15.4 meters grading 7.01 percent copper.

Mineralization has been defined over 4,000 meters along strike but drilling has concentrated in only 250 meters of that zone.

Previous metallurgical work indicated copper recoveries of 91.7 percent.

As an initial goal, the company will target the delineation of 5-10 million metric tons of mineralization at 2.5-4.0 percent copper.

Copper mineralization is predominantly stratiform and work dating back to 1963 has focused on nine outcropping lenses of high-grade pyrite-chalcopyrite mineralization over approximately 750 meters of strike.

Mineralization is hosted in argillites within a sequence of volcanic rocks.

Interbedded limestone appears to have had an important control on the location of mineralization.

Recent mapping, completed during September and October 2014, has indicated that there is considerable copper mineralization over a 4,000-meter distance along this contact.

Numerous drill targets have been identified both within previously drilled lenses and outside areas previously drilled.

Under terms of the agreement, Coventry can earn an 80 percent interest in the project by acquiring control of Aldevco Pty Ltd., who has acquired the property from Hatcher Resources Inc. by paying Hatcher US$75,000 in 2014, maintaining the claims in good standing, expending at least US$100,000 on the project in each of the next three years, expending at least US$2 million before the end of 2017, expending at least US$9 million or completing a feasibility study on the project before mid-2023 and making annual cash payments ranging from US$20,000 to US$100,000 between 2015 and 2022.

Hatcher controls the property through an agreement with claim owner C-D Development Corp. who retains a five percent net smelter return production royalty subject to Coventry's right to purchase the royalty for US$1 million per percentage point.

Northern Alaska

NovaCopper Inc. announced results from its re-logging and re-sampling program at the Bornite deposit, which is part of the Upper Kobuk Mineral Projects in the Ambler Mining District.

Of the 37 historic drill holes resampled in 2014, 5 holes had intervals of copper grading more than 0.5 percent copper, and 21 holes contained mineralization grading more than 0.2 percent copper.

When compared, the re-assay results for the high-grade copper intervals matched the original Kennecott assay results from drill holes completed in 1959 - 1976.

The company also identified additional low-grade copper mineralization within previously un-sampled sections of the drill core.

At a cutoff grade of 0.5 percent copper significant results include hole RC-22 which intersected 5.60 meters with a weighted average grade of 0.5 percent copper, hole RC-49 which intersected 9.25 meters with a weighted average grade of 1.18 percent copper, hole RC-71 which intersected 16.13 meters with a weighted average grade of 0.72 percent copper, hole RC-79 which intersected 16.45 meters with a weighted average grade of 0.52 percent copper and hole RC-112 which intersected 5.19 meters with a weighted average grade of 0.65 percent copper.

The company expects this updated data set to help determine the ultimate pit configuration and design at Bornite.

Southeast Alaska

Ucore Rare Metals Inc. announced the results of recent testing of its Bokan - Dotson Ridge heavy rare earth deposit using Molecular Recognition Technology.

From bulk sample material from the project, a heavy rare earth concentrate consisting of 99+ percent of rare earth elements was made from a pregnant leach solution.

A highly purified HREE concentrate can be considered an end product to be sold to independent rare earth separation facilities, or can be used as input material for an in-house individual rare earth salt separation facility.

The HREE concentrate from the project, in the form of a carbonate salt, contained 24.54 percent samarium, 4 percent europium, 21.82 percent gadolinium, 25.65 percent dysprosium, 3.14 percent holmium, 5.96 percent erbium, 1.71 percent thulium, 6.09 percent ytterbium, and 1.08 percent lutetium.

The high purity and recovery of the HREE concentrate produced using MRT is in contrast to conventional separation processes such as solvent extraction where as much as 30 percent of these metals remain unrecovered.

The MRT process also leaves behind several unwanted elements and compounds, including radioactive compounds as well as aluminum, iron and fluorine compounds.

Light rare earths, as well as yttrium, are preserved for further processing.

The company is working to develop a high-purity yttrium salt as an additional output product of the MRT process.

Author Bio

Curt is President of Avalon Development Corporation, a mineral exploration consulting firm based in Fairbanks, Alaska. He is a U.S. Certified Professional Geologist with the American Institute of Professional Geologists (CPG #6901) and is a licensed geologist in the State of Alaska (Lic. # AA 159).

• Email: [email protected]
• Phone: 907-457-5159
• Contact Curt Freeman