Mining sector about to rocket ... or not

Seven days of near-continuous rain did nothing to dampen the mood at the recently concluded Cordilleran Roundup Convention in Vancouver. The event was buoyed by a realistic optimism we have not seen in over five years. This change from half-empty to half-full glasses is due to a number of things including strong commodities prices, increasing global demand for metals and current or looming supply shortfalls in many of the metals produced by this industry.

The event was attended by every facet of our industry from major and intermediate producing mining companies through junior explorers and prospectors to the industry's vibrant and diversified support sector.

Over the last month we have approached the inevitable annual inflection point in our industry, where the steep trajectory set by the first month of the year is followed by a fork in the road, where one fork leads to ignition of the second stage rocket, propelling the industry to new heights for the remainder of the year.

The other fork, unwillingly followed by the industry in 2012-2016, leads to rocket booster failure and an ignominious crash and burn cycle.

While there is a strong feeling that "this year will be different," and there is ample economic data to support the feeling that the industry is on the upswing, few can honestly claim to have predicted the industry's annual trajectory with any accuracy, leaving us to follow the sage advice of Yogi Berra: "When you come to a fork in the road, take it!"

WESTERN ALASKA

Teck Resources Ltd. and partner NANA Regional Corp. announced fourth quarter and year-end 2017 results from its Red Dog mine. Zinc production was 3 percent lower in the fourth quarter compared to 2016 production, due to lower mill throughput and lower grades. Lead production declined by 10 percent primarily due to lower recoveries that were partially offset but higher lead grades. In the fourth quarter the mine produced 141,200 metric tons of zinc in concentrate and for the year the mine produced 541,900 metric tons of zinc in concentrate. Zinc ore grade for the year were down 1.5 percent to 15.5 percent and mill recoveries were steady at 82.1 percent. The mine also produced 25,000 metric tons of lead in concentrate during the fourth quarter and 111,300 metric tons of lead in concentrate for the year. Lead ore grade for the year increased slightly to 5 percent while mill recoveries decreased to 52.3 percent. Year-on-year, zinc production was 13 percent higher in 2017 while lead production was 29 percent lower. Gross operating profit for the fourth quarter was $311 million, compared with $288 million in 2016. Gross operating profit for the year was $874 million, compared with $668 million in 2016. Mill throughput for 2017 was up slightly 4,270,000 metric tons. During 2017 the mine paid royalties of $412 million versus royalties of $282 million in the year-previous period. During the year higher-grade Qanaiyaq ore being sent to the mill was reduced due to complex metallurgy and weathering during the early stages of this pit's development. As less weathered ore was reached, the amount of Qanaiyaq ore in the mill feed blend increased to 20 percent and is expected to remain at this level trough 2018. In the latter part of 2017 the company began a $110 million mill upgrade designed to increase average mill throughput by about 15 percent over the remaining mine life, helping to offset lower grades and harder ore in the Aqqaluk pit. This project will permit lower grade material to be processed and will allow production to remain unchanged through 2031. The mine's production of contained metal in 2017 is expected to be in the range of 525,000 to 545,000 metric tons of zinc and 95,000 to 110,000 metric tons of lead.

NovaGold Resources Inc. released its year-end financial results and project update for its flagship Donlin gold project, owned 50 percent with Barrick Gold. Major milestones for 2017 include advancing its permitting process to an expected completion later in 2018. This effort included supplying cooperating agencies and the U.S. Army Corps of Engineers with all requested information in preparation for the final EIS, with the Record of Decision (ROD) to follow later this year. The company received its Prevention of Significant Deterioration permit from the Alaska State Department of Environmental Conservation, Division of Air Quality and the draft water discharge and integrated waste management permits were released for a 60-day public comment period on December 15. Other key state and federal permits and approvals are scheduled to be finalized concurrently with or shortly after the Corps' ROD in 2018. The company also completed a 16 hole, 7,040 meter core drilling program designed to support its ongoing optimization work. Optimization work continued to be advanced with the objective of establishing opportunities for reducing the owners' initial capital expenditures. The company also continued a wide-ranging community outreach program in conjunction with mineral estate owner Calista Corp. and surface estate owner The Kuskokwim Corporation. The partners anticipate spending $14 million in 2017 to advance the project, including permitting costs of $9 million and project optimization costs of $5 million.

TNR Gold Corp. announced its intent to attract a joint venture partner with one of the gold major mining companies for its 90 percent-owned Shotgun gold deposit. Using a 0.5 gram of gold per metric ton cut-off, the deposit has an inferred resource of 20,734,313 metric tons grading 1.06 grams of gold per metric ton for a total of 705,960 ounces of contained gold. Mineralization in the resource area is associated with granitic porphyries intruding Cretaceous sedimentary rocks of the Kuskokwim Group. Mineralization was emplaced within a compressional environment evidenced by northeast oriented right lateral strike slip faulting and open folding with northwest oriented axes. At the Shotgun Ridge prospect, northwest oriented dilatational jogs or relay zones host mineralized quartz breccias.

CopperBank Resources Corp. announced that it has completed its radar survey on the Pyramid and San Diego Bay copper projects near Sand Point. The 3D Radar model defined surface and near surface structures over a 250-square-kilometer- (96.5 square miles) area of the two projects. Strike and dip measurements were extracted from interpreted structures and a series of maps were produced, including apparent resistivity, digital elevation model and structure analysis. The zones of high fracturing are of particular interest as they reflect ground preparation favorable for mineralization. The company intends to do diamond drilling at both Pyramid and San Diego Bay during the summer of 2018. No drilling has ever occurred at San Diego Bay. The company announced an updated resource at the Pyramid project. Utilizing 10,600 meters of drilling, including the 3,660 meters drilled during 2017, and using a 0.2 percent copper cut-off grade, the deposit now has inferred resources of 153.4 million metric tons grading 0.37 percent copper, 0.02 percent molybdenum and 0.09 grams of gold per metric ton. Additional drilling has been recommended, positive results of which would merit completion of a preliminary economic assessment of the project.

INTERIOR ALASKA

Kinross Gold announced fourth quarter and year end 2017 results from its Fort Knox mine. The mine produced 381,115 ounces of gold at a cost of $628 per ounce versus 409,844 ounces of gold at a cost of $741 per ounce in 2016. During the fourth quarter of 2017 the mill processed 3,239,000 metric tons of ore grading 0.96 grams of gold per metric ton. Mill recoveries were 82 percent for the quarter. During the fourth quarter the mine placed 4,464,000 metric tons of ore grading 0.23 grams of gold per metric ton on the valley leach facility. In late January, 2018, the mine reported production from the heap leach had reached the 1 million ounce mark since the facility was brought on-line in 2009. The facility contributes approximately 125,000 ounces of gold per year to the mine's total output. The mine also announced year-end revised resources, including proven and probable reserves of 88,858,000 metric tons grading 0.40 grams of gold per metric ton (1,245,000 ounces). Measured and indicated resources at the mine were 238,031,000 metric tons grading 0.40 g/t gold (3,229,000 oz). Inferred mineral resources were 56,458,000 metric tons grading 0.40 g/t gold (689,000 oz). The company announced drilling results from the East and South Wall regions of the main pit, including 35 meters averaging 0.9 g/t gold, 13.7 meters grading 1.7 g/t gold and 24.4 meters of 1.8 g/t gold. The company has continued permitting activities and has commenced a feasibility study on its recently acquired Gilmore prospect west of the main pit. The feasibility study, expected to be completed in mid-2018, is assessing a multi-phase layback of the Fort Knox pit and the construction of a new heap leach pad. The company also announced some of the more significant drill results from the Gilmore land, including 10.7 meters grading 4.12 g/t gold in hole FFR16-1585 and 10.7 meters grading 5.23 g/t gold in hole FFR17-1690.

Freegold Ventures Limited announced final 2017 drilling results from Shorty Creek porphyry copper-gold deposit near Livengood. In 2017, Freegold drilled five additional holes at Hill 1835 prospect. Significant results from these 100-meter spaced holes includes hole 17-01, which intersected 360 meters grading 0.24 percent copper, and hole 17-02, which intersected 339 meters grading 0.3 percent copper. Mineralization is associated with anomalous gold, silver, cobalt and tungsten. Holes 17-03 and 17-04 were both angle holes drilled on the eastern edge of the magnetic high at Hill 1835. Hole 17-03 averaged 0.27 percent copper over 105.2 meters and was lost at depth of 362 meters. This hole is expected to be completed during the 2018 program. Hole 17-05A was collared 125 meters north of Hole 15-03 and was designed to test both the northern portion of the magnetic high and the potential for gold mineralization in the area surrounding the magnetic high. Hole 17-05A returned 165 meters grading 0.29 percent copper. Five target areas have been identified at Shorty Creek, including Hill 1835, Hill 1710, Hill 1890, Steel Creek and the Quarry.

Contango ORE, Inc. announced that operator and joint venture partner Royal Alaska, LLC has contributed approximately $29.3 million through the end of 2017 toward exploration, development and project management of the Peak gold project near Tok. As of Dec. 31, Royal Alaska has earned a percentage interest of 39 percent in the joint venture. The company also announced that a preliminary economic assessment of the Main Peak and North Peak deposits has been commissioned and will be completed later this year. Plans for additional work on the project will be released prior to the summer exploration season.

ALASKA RANGE

PolarX Limited announced results of metallic screen assays from the Zackly prospect at its Alaska Range project. This sampling method, designed to test for coarse gold not capable of being measured by standard sampling techniques, returned gold grades which are significantly higher than those reported in initial assays on the same samples. The company re-submitted 35 drill core samples for metallic screen analyses which returned and average grade of 2.7 grams of gold per metric ton, versus standard fire assay results of 1.97 g/t gold. In almost all cases, the grade of gold in the coarser fractions is significantly higher than the average grade of the sample, reflecting the coarse nature of gold in the samples. The remaining 100 core samples have been re-submitted for metallic screen analyses. The company also announced that it has staked an additional 32 state mining claims covering 5,120 acres to cover potential extensions of the copper in soil anomalism at the Senator prospect and to extend both ends of the west-northwest trending Mars‐Zackly copper-gold porphyry corridor.

SOUTHEAST ALASKA

Hecla Mining Company announced year-end 2017 reserves and resources at its Greens Creek mine. Silver, gold and base metal production during the year was replaced and silver, gold, zinc, and lead reserves which increased by 2 percent, 8 percent, 7 percent and 4 percent, respectively. Increases in silver and gold reserves at the East, West, Southwest and NWW zones were partially offset by reductions of silver and gold reserves in the 5250, 200 South and 9A zones caused by production. Year-end reserves and resources included proven and probable reserves of 7,550,000 tons grading 11.9 ounces of silver per ton, 0.10 ounces of gold per ton, 3 percent lead and 8.1 percent zinc. In addition, the mine contains measured and indicated resources of 2,805,000 tons of indicated resources grading 11.2 oz/t silver, 0.09 oz/t gold, 2.9 percent lead and 7.7 percent zinc. The mine also reported inferred resources of 2,708,000 tons grading 12.1 oz/t silver, 0.08 oz/t gold, 2.7 percent lead and 6.9 percent zinc. The company also reported on fourth quarter 2017 exploration results including the East Ore Zone intersections from definition drilling, including 32.3 oz/t silver, 0.18 oz/t gold, 9 percent zinc and 4.8 percent lead over 19.8 feet, which compare favorably to previously modeled resource estimates. Step-out drilling, including an intersection of 54.2 oz/t silver, 0.43 oz/t gold, 4.25 percent zinc and 1.34 percent lead over 19 feet, suggest strong mineralization continues beyond the resource to the south and at depth. Definition drilling of the southern portion of the Deep 200 South Zone, including 40.1 oz/t silver, 0.03 oz/t gold, 6 percent zinc and 4.2 percent lead over 18.9 feet, upgraded this area to indicated resource. Exploration drilling south of the current resource has extended 200 South Bench mineralization another 300 feet with an intersection of 23.6 oz/t silver, 0.06 oz/t gold, 2.5 percent zinc and 1.3 percent lead over 19.5 feet. Drilling of the Gallagher Zone confirmed modeled thicknesses and may have increased the resource by defining mineralization further to the west and east beyond the current resource. Intersections from this program include 25.3 oz/t silver 0.01 oz/t gold, 0.7 percent zinc and 0.3 percent lead over 9.4 feet and 8.4 oz/t silver, 0.03 oz/t gold, 11.8 percent zinc and 6.4 percent lead over 11.2 feet.

Coeur Mining, Inc. announced year-end 2017 reserves and resources at its Kensington mine. Proven and probable reserves are 2,673,000 tons grading 0.195 ounces per ton (520,000 ounces) gold. Measured and indicated resources are 2,878,000 tons grading 0.271 oz/t (780,000 oz) gold. Inferred resources are 1,471,000 tons grading 0.271 oz/t (399,000 ounces) gold. Additional exploration results from continued drilling on the Jualin deposit will be released later in 2018.

Ucore Rare Metals, Inc. announced that it has selected Ketchikan as the location for its first U.S.-based Strategic Metals Complex. The selection criteria included logistical considerations such as the ease of access to international shipping corridors, industrial infrastructure, permitting considerations, and potential for local incentives and State funding programs. The location is in proximity to a major container port and rail head at Prince Rupert, British Columbia, 100 kilometers (60 miles) to the Southeast, with the two locales connected by routing via the Alaska Marine Highway. Ketchikan features a deep water port, barge-container facilities and direct access to markets in the US and the Pacific Rim by way of ocean vessel, the lowest-cost mode of bulk transport. Ketchikan offers a unique work force, ice-free harbors and is in close proximity to the company's flagship in-situ development project, the Bokan Dotson-Ridge rare earth project located on nearby Prince of Wales Island. Engineering and product specification criteria are being initiated targeting rare earth by-products and primary concentrates from non-Chinese sourced projects world-wide. The intent is also to maintain the processing flexibility and capacity to accommodate ore concentrate from the Bokan-Dotson Ridge project, once that project has been developed. The Alaska Industrial Development and Export Authority (AIDEA) previously received legislative authority for a $145 million financing package for the future development of the Bokan-Dotson Ridge mine and related processing facilities. A significant portion of this proposed financing is intended for the development of a proximal rare earth element separation facility.

Curtis J. Freeman CPG #6901

Avalon Development Corp.

P.O. Box 80268

Fairbanks, AK 99708

Phone: 907-457-5159,

Fax 907-455-8069

[email protected]

http://www.avalonalaska.com

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