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The mining newspaper for Alaska and Canada's North
Tough markets fail to slow resource expansion at SE Alaska VMS project
While many of its peers are struggling to find money to continue exploration at their promising mineral prospects and deposits, Constantine Metal Resources Ltd. has managed to forge ahead with hefty programs at its copper- and zinc-rich Palmer project in Southeast Alaska. This includes C$7.13 million invested in exploring the volcanogenic massive sulphide deposit in 2014.
Last year's program, funded by Dowa Metals & Mining Co. Ltd., along with drilling completed at Palmer in 2010 and 2013, have culminated in a 97 percent expansion of the resource, compared to the last time a calculation was completed for the deposit in 2010.
The results of the resource estimate published by Constantine on May 11 outlines an inferred resource of 8.125 million metric tons averaging 1.41 percent (252.6 million pounds) copper, 5.25 percent (940.4 million lbs.) zinc, 0.32 grams per metric ton (83,600 ounces) gold and 31.7 g/t (8.3 million oz.) silver for Palmer.
"The resource estimate significantly increases the size of the deposit, highlighting the tremendous success of recent drill campaigns and the growing potential of the project," said Constantine President and CEO Garfield MacVeigh. "It is open to expansion in most areas with the thickest part of the deposit located at the current down-dip limit of the South Wall Zone where mineral zoning and geophysics support potential for a high-grade copper core within a more extensive area of zinc-copper-barite mineralization."
Constantine and Dowa are continuing to explore this growth potential with a US$5 million program budgeted for this year.
Good deal
Most of the new resource reported by Constantine has been added since Dowa joined as a funding partner at Palmer in 2013.
According to an agreement inked between Dowa and Constantine in February of that year, the Tokyo-based smelting and mining company can earn a 49 percent stake in Palmer by investing US$22 million in the VMS project over a four-year span.
At the time, some analysts felt that Constantine was giving up too large a portion of the Palmer project for the money. Following two years of resource expansion in tough equity markets, however, the deal has worked out well for both parties.
"We felt from the beginning the scale of investment Dowa is making to earn 49 percent would give us a good chance to establish a resource at Palmer with potential for mine viability," Constantine Vice President of Exploration Darwin Green told Mining News.
Dowa, which got its start from mining Kuroko deposits in northern Japan, has more than 120 years of experience exploring for, mining and smelting ore from VMS deposits like the one at Palmer. This makes the Southeast Alaska project an ideal fit for the Tokyo-based company's expertise.
Additionally, being located only 33 miles from a Pacific Rim deep-sea port at Haines, a mine at Palmer would be well-situated to provide zinc and copper concentrates to Dowa's state-of-the-art smelters in Japan.
For its part, Constantine is benefiting from Dowa's vast VMS experience and a partnership deal that is structured in a way that allows it to complete multimillion-dollar exploration programs, while avoiding a significant dilution from selling shares in a market that has been unkind to junior mining companies.
"It has been very refreshing to be able to focus near 100 percent of our efforts at growing and building the asset at Palmer, and avoid the distraction of constantly chasing financings, which in this market has become a Herculean task," Green said.
As part of the agreement, Constantine receives annual cash payments totaling US$1.25 million over four years. This, along with any other option payments and management fees received, has allowed the company to maintain a healthy bank account.
"We are currently cash-flow positive, which is a bizarre and privileged position to be in," observed Green.
At the end of January, the company had C$636,135 in cash and its working capital totaled C$664,811.
Continued expansion
Over the previous two years, Dowa has invested roughly US$10 million in advancing the VMS deposit and has agreed to invest another US$5 million in 2015.
This work is primarily targeting expansion of Glacier Creek, a region of the project that consists of five inter-related subzones of massive sulfide mineralization - RW East, RW West, and South Wall zones 1, 2 and 3.
The South Wall zones are parallel layers of nearly vertical VMS mineralization. At the upper extent of South Wall, a fault cuts and folds the three layers at which point they lay nearly flat. South Wall Zone 2 and Zone 3 are of the same age strata as two strata drilled at RW, the flat lying limb of the deposit.
When Dowa began funding the project, these zones encompassed roughly 4.1 million metric tons of calculated resource and showed the potential for significant expansion.
Of the 16 holes drilled in 2014, two stand out for the width of the mineralization cut and the zinc and copper grades of the thick intercepts.
Hole CMR14-54, the first hole to intercept the large conductive plate identified with downhole geophysics, cut 22.1 meters grading 2.48 percent copper, 4.05 percent zinc, 24 g/t silver and 0.39 g/t gold. This intersection, a 150-meter down-plunge step-out, provided tantalizing evidence that a large and high-grade portion of the South Wall Zone continues further down the mountain.
"Hole CMR14-54 not only expands the footprint of the South Wall zones but opens up the opportunity for considerable further expansion and will be a focus for ongoing drilling," MacVeigh said at the time. "The thickness and high copper content associated with a large conductive target enhances the potential around this new area."
While not as rich in copper, CMR14-65 cut higher grade zinc across the widest mineralized intercept to-date at Palmer.
Intersecting the conductor plate at South Wall about 50 meters east and 50 meters above hole 54, hole 65 cut 89 meters grading 0.79 percent copper, 5.03 percent zinc, 21.1 g/t silver and 0.32 g/t gold. This long intercept included 15.4 meters of 0.5 percent copper and 7.9 percent zinc in an upper zone and 37.4 meters of 1.2 percent copper and 6.0 percent zinc in the lower zone.
Both holes targeted a 400-square-meter conductive plate that has proven to be a rewarding resource expansion target at Palmer, and will be the first area targeted when drilling resumes in early June.
In addition to expanding the conductor plate, the company is looking forward to testing an area farther down the mountain.
"We are also really excited about testing the faulted offset of the zone below the Kudo fault. The zone appears to be thickening with depth up to the edge of where it intersects the fault, and mineral zoning suggests increasing copper grade and potential for a copper-rich vent center at depth," said Green.
Barite-rich
Upon reporting the new resource, Constantine also noted that a significant portion of this deposit is barite, a high-density material widely used as a weighting agent in drill muds to prevent blowouts during oil and gas exploration.
Common throughout most of the mineralization at Palmer, barite presents multiple benefits for the potential development of the project.
First, unlike pyrite, barite is a stable sulfur-bearing mineral that is not prone to acid rock drainage.
Second, the mineral sells for more than US$100 per ton, providing the potential for selling a product that would normally be sent to tailings. According to the U.S. Geological Survey, the United States imports 79 percent of its barite, most of which comes from China.
The resource area at Palmer is estimated to consist of roughly 14 percent barite by volume or about 24 percent by weight, making the Southeast Alaska project a potential domestic source for the mineral.
While the junior still has to work out whether it can economically produce a marketable product from the barite at Palmer, management is hopeful.
"Of significance is the fact we would likely be pulling any barite from the rougher tails after already being milled, and passed through the copper and zinc flotation circuits. So (there) shouldn't be a lot of additional process cost," Green said.
In the meantime, Constantine and Dowa will continue efforts to expand the barite-rich VMS deposit.
"We are very pleased with progress to date and, with $12 million left to spend over the next two years, believe we are on the right track," Green 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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