The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
NovaCopper plans nearly $10M in exploration for 2015 that includes new resource drilling at VMS deposit; budget for Ambler Road seen as 'modest'
NovaCopper Inc. plans to invest roughly US$20 million over the next two to three years on finalizing a feasibility study for its Arctic deposit, the next step toward the exploration company's vision of developing mines at the world-class copper projects found in the Ambler Mining District of Northwest Alaska.
Arctic is the most advanced of the Upper Kobuk Mineral Projects, a venture formed by NovaCopper and NANA Corp., the Alaska Native regional corporation that represents the Iñupiat of Northwest Alaska. This partnership brought together the Arctic deposit and dozens of similar volcanogenic massive sulfide prospects located on NovaCopper's public and private mining claims with Bornite and a number of other mineral prospects on NANA-owned lands.
Located a mere 16 miles apart, Arctic and Bornite are each considered world-class copper assets that would have long since been developed if not for their remote location, some 200 miles off the beaten path in Northwest Alaska. It is believed that advancing these deposits in tandem will improve the economics of both.
Since formation of the Upper Kobuk Mineral Projects at the end of 2011, NovaCopper has expanded Bornite to 6 billion pounds of copper in a (March 2014) resource averaging roughly 1.5 percent copper.
"In less than three years, our exploration team has increased six-fold the scale of the Bornite deposit. When combined with our high-grade potentially open-pit resource at Arctic, we have nearly achieved our initial objective of defining approximately 10 billion pounds of copper-equivalent resources in the (Ambler) district," NovaCopper President and CEO Rick Van Nieuwenhuyse said in releasing the latest Bornite resource estimate last March.
With Bornite showing its world-class potential, NovaCopper is now focused on finishing what it started at Arctic.
"We see Arctic as the first mine to be developed and Bornite as the second; and we will work on the synergies between the two projects," Van Nieuwenhuyse told Mining News.
Arctic feasibility
Arctic was originally envisioned to be developed as an underground mine. This plan, however, was predicated on the idea that the VMS deposit would be developed as a standalone operation; once a part of the Upper Kobuk Mineral Projects, however, the idea of open-pit mining this copper-rich deposit began to emerge.
The viability of such an operation was affirmed in a preliminary economic assessment completed in 2013.
Over a 12-year mine-life outlined in the PEA, a 10,000-metric-ton-per-day mill at Arctic is anticipated to produce 1.5 million pounds of copper, 1.8 million lbs. of zinc, 289,000 lbs., of lead, 30.5 million oz of silver and 349,000 oz of gold.
Initial capital to build a mine at Arctic is estimated to be US$717.7 million. Another US$164.4 million in sustaining capital and US$81.6 million in closing costs also are anticipated.
The base-case scenario for the PEA uses long-term metal prices of US$2.90/lb. for copper, US85 cents/lb. for zinc, US90 cents/lb. for lead, US$22.70/oz for silver and US$1,300/oz for gold.
Using these price assumptions, the mine would produce roughly 125 million lbs. of copper per year at US62 cents per lb., with the other metals calculated as a by-product.
As a result, this scoping level study finds that the open-pit mining scenario at Arctic would produce an after-tax net present value (8.0 percent discount) of US$537.2 million; an after-tax internal rate of return of 17.9 percent; and would pay back the capital expenses in about five years.
NovaCopper plans to refine and potentially improve the project economics as it completes a feasibility study for Arctic, scheduled for completion as early as 2016.
To finish this study, NovaCopper intends to carry out an US$8- to US$10-million program at the Upper Kobuk Mineral Projects in 2015. This work, which is currently slated to begin by June, will focus primarily on infill drilling aimed at upgrading inferred resources in the proposed Arctic open-pit from to the measured and indicated categories.
The open-pit for Arctic encompasses an indicated resource of 23.85 million metric tons averaging 3.26 percent (1.71 billion lbs.) copper, 4.45 percent (2.34 billion lbs.) zinc, 0.76 percent (400 million lbs.) lead, 0.71 grams per metric ton (550,000 oz) gold, and 53.2 g/t (40.8 million oz) silver. Additionally, Arctic has an inferred resource of 3.63 million metric tons averaging 3.22 percent (239 million lbs.) copper, 3.84 percent (285 million lbs.) zinc, 0.58 percent (43.2 million lbs.) lead, 0.59 g/t (60,000 oz) gold.
According to the PEA, it will only take about 4,400 meters of drilling to upgrade the inferred resources to measured and indicated. Another roughly 4,000 meters is needed to gather the geotechnical, hydrological and metallurgical data needed to complete the feasibility study.
NovaCopper, which ended its 2014 fiscal year (Nov. 30) with US$4.8 million in working capital, will need to raise additional funds to complete all of the drilling and other programs on the docket for 2015.
Van Nieuwenhuyse says it would be more efficient to complete all of this work in one field-season, but realizes that it could be tough to raise the required funds in the current markets. Depending on whether it takes one or two field seasons to complete the majority of this work, NovaCopper anticipates the feasibility study to be completed in 2016 or 2017.
Bornite synergy
While the 2015 program will primarily focus on advancing Arctic to a project that can be presented to banks and permitting agencies, NovaCopper intends to continue to investigate the viability of mining Bornite, which has been the primary focus of NovaCopper's exploration since the 2012 season.
"We will continue to work on Bornite but probably at a little slower pace," Van Nieuwenhuyse said.
The potentially open-pittable portion of the project contains 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; and the deeper, potentially underground minable portion of Bornite contains inferred resources of 55.6 million metric tons grading 2.8 percent (3.4 billion pounds) copper.
While NovaCopper did not complete any new drilling at Bornite in 2014, crews re-logged and re-sampled roughly 13,000 meters of core from 37 holes drilled by Kennecott Copper Co. between 1957 and 1976.
During its tenure at Bornite, Kennecott was focused on the highest grade components of the deposit and overlooked lower grade mineralization. For NovaCopper, these lower grade portions of the deposit could potentially convert to reserves in an open-pit mining scenario for Bornite.
To find the overlooked copper-bearing portions of the deposit, NovaCopper sampled 11,149 meters of untested core. This exercise identified five historical holes with grades topping 0.5 percent copper and another 22 with intercepts of more than 0.2 percent copper.
The program also re-affirmed results from Kennecott's previous assay work by re-sampling 1,503 meters of core already tested by its predecessor at Bornite.
"Previous work by Kennecott, which focused on the narrow high-grade copper intervals, has been confirmed by NovaCopper," Van Nieuwenhuyse said upon release of the assay results in October. "This year's program serves as an excellent quality control tool in relation to the historic results, and also builds upon the 2012 and 2013 re-logging and re-sampling campaigns to improve resource continuity by addressing zero grade gaps in the resource model. We expect this updated data set to form the basis for determining the ultimate pit configuration and design at Bornite."
If NovaCopper raises sufficient funds, the company would like to drill about five additional holes at Bornite this year.
NovaCopper is tentatively planning to complete a PEA of Bornite in 2016, a scoping level study that will assist the evaluation of synergies with Arctic and mark the first engineering step toward developing what would become the second high-grade copper deposit in the Ambler district.
Ambler Road
The viability of developing Arctic and Bornite rests largely on establishing a transportation corridor between the Ambler Mining District and Alaska's road system, located some 200 miles to the east.
The state of Alaska began studies on the potential of building a road to the Ambler District in 2009. These studies, initially carried out by the Alaska Department of Transportation and Public Facilities, were transferred to the Alaska Industrial Development and Export Authority, in 2013.
AIDEA, which is well-suited to arrange public-private partnerships, entered into a memorandum of understanding with NovaCopper. This agreement paves the way for the quasi-state-owned authority to investigate various ways to fund the construction and maintenance of the Ambler Road and create the framework by which NovaCopper will repay the investment from mines developed at the roads terminus.
In April 2014, 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. The authority is now seeking direction from Alaska lawmakers.
Alaska's new Gov. Bill Walker, however, included no additional funding for the Ambler Road in the budget he recently submitted to the state Legislature.
AIDEA, which has money set aside for the project, does not need funding during the state's current budget cycle. The authority, however, will need roughly US$6.8 million to finish an environmental impact statement and associated permits during the next two years.
AIDEA has asked the governor and legislators if it should proceed with permitting in 2015, delay the project or scrap it all together. The authority reasons that the state risks losing money already invested, along with jobs and other economic benefits that mines in the Ambler region would bring, if the plug is pulled on the endeavor.
Van Nieuwenhuyse argues that lumping the proposed Ambler Road into a pile of big budget, state-funded projects, collectively known as "mega-projects," is an unfair characterization of what is being proposed.
"From a state spending standpoint, it is not a mega-project," he explained. "It is in the neighborhood of US$10 million to permit the project, so it has a fairly modest budget."
Construction of the road, anticipated to cost US$190 million to $300 million, would be funded privately through the sale of bonds and repaid by users of the road.
A similar arrangement for the Delong Mountain Transportation System, a road and port facility linking the Red Dog zinc-lead mine to world markets, has proven to be a good investment for AIDEA and the state.
Above paying back the costs and potentially turning a profit, these infrastructure projects support economic growth and diversification in Alaska, which is AIDEA's primary objective.
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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