Junior advances project at Pine Point

During the most challenging mining season in nearly 20 years brought on by constraints imposed by the coronavirus pandemic, one mineral exploration company has forged ahead in its quest to develop a robust zinc-lead mine at the Pine Point project near Hay River in Northwest Territories.

Unlike most companies with mining projects in northern Canada this year, Osisko Metals Ltd. is reporting significant advances in developing Pine Point, including updating the project's mineral resource estimate, completing a preliminary economic assessment, mounting a 2020 exploration program, reporting early results from drilling and substantially advancing discussions with stakeholders and shareholders toward the next stage of the project's development.

Now, the Quebec-based junior is preparing an environmental assessment of the project for governmental review as it advances toward completing a feasibility study for the project.

"Concurrent to the restart of drilling announced last month, the forthcoming submission of the EA will mark an important milestone towards advancing the project to a 'shovel ready' stage by late 2023," Osisko Metals President and COO Jeff Hussey said Sept. 24.

The company is also working on key recommendations arising from a preliminary economic assessment it completed in June in preparation for conducting a mine feasibility study.

"We are committed to rapidly advancing the Pine Point Project to be well-positioned to take advantage of a forecasted deficit in the zinc market supply," Hussey explained.

Osisko also reported entering new marketing agreements with Swiss Resource Capital AG in Europe and Independent Trading Group, Inc. in Canada.

Advantages for development

A package of mining claims and leases covering a 46,552-hectare (115,030 acres) area, Pine Point is one of very few mining projects in northern Canada that benefits from existing infrastructure on site, a network of haulage roads and access to power.

Though a relative newcomer to Canada's far north, Osisko secured ownership of Pine Point in a friendly acquisition in 2017 and began actively exploring the property in 2018.

Three years later, the junior believes the potential for new discoveries on the property is excellent.

Pine Point is a brownfields project with mineral exploration dating back more than 120 years to the gold rushes of the late 19th century. Yet no mining occurred on the property until the 1960s, when Cominco Ltd. developed Pine Point, a historic mine that produced more than 64 million metric tons of zinc-lead concentrates over 23 years until 1988.

Today, only about a third of the favorable stratigraphy thickness at Pine Point has been tested. This leads Osisko to believe the property remains highly prospective for mineral resource expansion and offers exceptional shallow depth potential as well as considerable promise for underground mining.

The 11 deposits included in the 2020 mineral resource estimate for Pine Point have unconfined high-grade drill intercepts, indicating mineralization may extend into open areas of sparse drilling immediately adjacent to reported mineral resources.

The explorer's conviction stems partly from the effect of applying modern technology not available in past years to its search for new mineralization at Pine Point. The company used these techniques in selectively converting and upgrading more than 40 undeveloped historical deposits to conform with current regulatory guidelines, and in identifying potential targets for resource expansion.

This work paid off with Osisko converting roughly 25.5% of Pine Point's global resource to indicated resources earlier this year.

The company further reported a positive preliminary economic assessment of the project in June.

In the PEA, independent analysis shows the Pine Point deposit can support a combined open-pit and underground mining operation that would yield high returns, while being relatively inexpensive to develop.

The PEA outlines a proposed 11,250-metric-tons per-day mine that would produce an average of 32.7 million pounds of zinc and 14.3 million lb of lead annually over an initial mine-life of 10 years.

This operation is calculated to produce a net present value (8% discount) of US$500 million with a 29.6% internal rate of return.

Both figures are after-tax and are calculated based on US$1.15/lb zinc and US$0.95/lb lead

Relatively low initial costs and a moderately high yield would enable Osisko Metals to pay back capital expenditures in 2.9 years.

Hussey said the proposed mine "would be sourced mainly from small, near-surface open pits with additional contributions from eight high-grade, shallow deposits mined by underground methods from the West and Central zones."

The PEA is based on an updated mineral resource estimate that includes indicated resources of 12.9 million metric tons grading 4.56% zinc and 1.73% lead (6.28% zinc-equivalent) with a cut-off grade of 1.85-2.05% (pit-constrained) and 5% (underground), and inferred resources of 37.6 million metric tons grading 4.89% zinc and 1.91% lead (6.80% zinc-equivalent).

"On a zinc-only basis, Pine Point could potentially, if it entered into production, become a low-cost zinc-lead producer ranking 4th largest in the Americas and ninth in the world, yielding an exceptionally clean and high-grade zinc concentrate," Osisko Metals Executive Chairman and CEO Robert Wares said in June. "Furthermore, the concurrent release of an updated 2020 MRE for Pine Point demonstrates that continued drilling will improve the classification of the resources and potentially yield further expansion of known deposits."

Hussey said "while the PEA already outlines a base-case for a potential top-10 zinc producer of high-quality clean concentrate, we foresee several areas for improvement as we continue to optimize these great initial economic metrics and move towards initiating a feasibility study."

Favorable drilling results

Osisko reported encouraging assay results from four holes in the company's 2020 exploration drilling which began Aug. 30.

The initial phase of drilling was designed to expand deposits modeled in the company's 2020 mineral resource estimate with focus on prismatic and high-grade tabular mineralization.

"Following the successful increase in tonnage in the East Mill Zone in the 2020 MRE, we sought similar targets across Pine Point. Our initial work highlighted 11 open deposits within the East Mill, Central and North zones with widely spaced and high-grade intercepts located outside of deposit boundaries," Hussey said.

The latest holes were drilled near the O53 deposit (Central Zone) at Pine Point to better define the vertical extent of prismatic mineralization in the core of that deposit.

Highlights include 17.5 meters grading 11.53% zinc and 2.52% lead in drill hole O53-20-PP-001 and 28.8 meters grading 23.9% zinc and 6.24% lead in drill hole O53-20-PP-012. The latter hole extends the high-grade prismatic mineralization roughly 10 meters below the currently modeled pit boundary in the immediate area of the hole.

The O53 deposit has a strike length of 313 meters, an average width of 50 meters and maximum depth of 63 meters.

Hussey called the drill results "impressive," noting the potential for extension of the O53 prismatic deposit indicating new high-grade tabular mineralization in drill hole O53-20-PP-003 located 135 meters to the west of the 053 deposit and that visual estimates in holes with pending assays confirm that mineralization remains open in the area.

"Regionally we have numerous targets defined around 10 more deposits in the resource model that are open, as well as stranded historical mineralized holes and geophysical targets," Hussey added. "There is ample potential for new discoveries and continued expansion of resources across the entire Pine Point project."