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Cdn Royalties envisages open-pit mining at Mesamax
By Rob Robertson
Ungava-Nunavik District, Que. -- There is no huge gossan, just a few frost-heaved, weakly mineralized rustic boulders. In fact, it's quite an unspectacular showing . . . but within a few metres of surface lies the newly discovered, 1.4-million-tonne Mesamax deposit, rich in nickel, copper and platinum group metals.
Canadian Royalties (CZZ-V) discovered Mesamax last year while exploring a southern belt of ultramafic bodies, which parallel a series of deposits that comprise the Raglan nickel mining operation of Falconbridge (FL-T) in the Ungava Peninsula region of northern Quebec.
Based on 41 holes completed to the end of last year, the partially drilled Mesamax is estimated by consulting firm Strathcona Mineral Services to contain an indicated resource of 1.4 million tonnes grading 2.1% nickel, 2.7% copper and 0.08% cobalt, plus 0.3 gram gold, 1 gram platinum and 4.2 grams palladium per tonne. The indicated portion includes 700,000 tonnes of massive sulphides grading 3.5% nickel, 4.4% copper and 0.14% cobalt, as well as 0.5 gram gold, 1.4 grams platinum and 4 grams palladium. The remainder occurs as disseminated net-textured sulphides.
An additional 130,000 tonnes grading 2.1% nickel, 2.5% copper and 0.09% cobalt, plus 0.3 gram gold, 1.1 grams platinum and 3.9 grams palladium, are categorized as inferred. A further 150,000 tonnes of near-surface, partially oxidized massive and disseminated sulphides at similar grades are excluded from the resource calculation pending metallurgical studies to determine its economic significance.
This year, Canadian Royalties targeted the Mesamax area with further drilling, including both infill and exploration holes. "There were some areas that had to be infilled to raise the level of confidence of the resource figures," Canadian Royalties Chairman Glenn Mullan told The Northern Miner during a site visit.
Mesamax lends itself to open-pit mining. "Our goal here is to define the shape of it for the economics," confirmed project geologist Todd Keast. "Exploration for these types of deposits is drill-intensive because the lenses can be quite small and irregular in shape, and they change rapidly."
One of the new 2003 holes drilled within the resource calculation area cut a 48.6-metre interval of sulphides averaging 1.79% nickel, 1.62% copper, 0.07% cobalt, 0.13 gram gold, 0.78 gram platinum and 4.97 grams palladium. This included a higher-grade, 11.1-metre section that ran 4.1% nickel, 3.24% copper, 0.16% cobalt, 0.25 gram gold, 1.65 grams platinum and 11.45 grams palladium.
The 2003 drilling has extended the strike length of the mineralized zone by about 30% to 250 metres. "Mesamax is not yet completely cut off in any one dimension," said Mullan.
Significant mineralization, with sections of platinum group metals (PGMs) averaging as much as 38.8 grams across 6 metres, has been encountered on the western extension, 25 metres beyond the 2002 drilling. Hole 03-73 intersected 44.3 metres of 1.44% nickel, 1.78% copper, 0.08% cobalt, 0.14 gram gold, 0.57 gram platinum and 7.3 grams palladium. This included a higher-grade, 16.2-metre section of 2.28% nickel, 2.72% copper, 0.1% cobalt, 0.1 gram gold, 0.85 gram platinum and 3.54 grams palladium.
The most westerly drilling to date, a 25-metre stepout from hole 03-73, has intersected the favourable ultramafic host with narrow zones of mineralization, including 0.7 metre of 1.62% nickel, 1.75% copper, 0.3% cobalt, 0.13 gram gold, 0.05 gram platinum and 32.3 grams palladium in hole 03-75.
Lower-grade mineralization has been intersected near the surface in stepout drilling on the eastern extension of Mesamax. Hole 03-77 intersected 7 metres of 0.77% nickel, 1.08% copper, 0.04% cobalt, 0.06 gram gold, 0.51 gram platinum and 2.19 grams palladium.
The deepest mineralized drill intercept into Mesamax is a 2.4-metre-long section in hole 03-74, which assayed 2.32% nickel, 1.32% copper, 0.15% cobalt, 0.06 gram gold, 0.61 gram platinum and 5.35 grams palladium at a depth of about 100 metres.
Drilling 350 metres east of the resource area has returned some interesting values in the favourable ultramafic host. Hole 03-85 intercepted 26 metres of disseminated sulphides carrying 0.25% nickel, 0.27% copper, 0.13 gram gold, 0.18 gram platinum and 0.79 gram palladium. The area is considered worthy of further drilling.
"The quickest way to add tonnage is by answering some of the obvious questions," said Mullan. "There are still some off-hole conductors and some other recent features that are completely unexplained at Mesamax."
Two drill rigs have been turning on the Raglan South trend since early July and will continue until poor weather forces the field season to an end. The sub-Arctic climate in the Nunavik region of northern Quebec typically provides a short, mild summer field season of 3-4 months before the return of high winds and winter weather. Temperatures during the "harsh" winter range between 0 and minus 50°C.
Nunavik is an immense region representing a third of the province. Some 8,700 Inuit reside in Nunavik, and almost all of the region's 14 villages are on the coast. Raglan is an area of gently rolling topography, north of the tree line. Moderate-to-steep, east-west-trending ridges and valleys, interspersed with small streams and lakes, characterize the topography. Vegetation is sparse and the permafrost extends from surface to depths of more than 400 metres.
To the end of August, Canadian Royalties had completed well over 100 holes in more than 15,000 metres of helicopter-supported drilling on the Expo, Mequillon and Tootoo areas. Assay results will be reported in batches over the next several months.
Canadian Royalties holds interests and royalties on a 1,074-sq.-km package, which consists of 38 properties. The properties are positioned mainly along the South trend, 90 km west of the coastal village of Kangiqsujuaq and 1,800 km north of Montreal. The properties are accessible by helicopter from the coastal communities of Kuujjuaq, Salluit and Kangiqsujuaq, all of which have daily air service from Montreal. The Donaldson air strip at the Raglan mine is operated year-round by Falconbridge. Permission may be obtained for scheduling charter flights in and out of the landing strip, which is just a few kilometres away from Canadian Royalties' exploration camp.
The South trend properties are centred on the Expo-Ungava project, under option from Ungava Minerals. The 206-sq.-km project contains a number of mineralized prospects, including the Mesamax and Expo deposits.
By completing exploration expenditures of more than $1.7 million, Canadian Royalties has earned a 70% interest, which will jump to 80% when it delivers a bankable feasibility study. Thereafter, should Ungava Minerals not contribute its pro rata share of expenditures, Canadian Royalties will acquire an additional 1% interest in the Expo-Ungava property for each $150,000 spent on behalf of Ungava. If Ungava Minerals' ownership is reduced to 10%, its interest will automatically be converted to a 1% net smelter royalty (NSR), and Canadian Royalties, at its option, may purchase the NSR during a 12-month period following the commencement of commercial production, at a price of $1.5 million.
The Expo-Ungava option agreement is subject to ongoing litigation. In the spring and summer of 2002, Ungava Minerals commenced arbitration proceedings against Canadian Royalties in an attempt to annul the Expo agreement and claim entitlement to Canadian Royalties' 100% interest in the neighbouring Phoenix property. An arbitrator ruled in favour of Canadian Royalties and dismissed each and every claim by Ungava Minerals. The arbitration award had the effect of preserving all of Canadian Royalties' rights under the Expo option and joint-venture agreement. The judgment was approved by the Quebec Superior Court, making it legally enforceable.
In response to Canadian Royalties' registering of the arbitration award in Ontario on Feb. 18, 2003, Ungava Minerals has filed a statement of defence and counterclaim against Canadian Royalties. Many of the claims raised by Ungava Minerals relate to, or were previously raised in, the 2002 arbitration hearing. The next motion on this matter is scheduled for early October.
In the meantime, having earned a 70% interest in accordance with the Expo-Ungava option agreement, Canadian Royalties requested the transfer of that interest on Dec. 12, 2003. To date, Ungava Minerals has not executed the documentation, and Canadian Royalties has begun arbitration proceedings against Ungava.
South trend
The South trend is a belt of mafic volcanics and related sediments into which a series of ultramafic rocks have intruded. Its counterpart is the Raglan trend, 15-20 km to the north, where a series of nickel-copper deposits enriched in PGMs trend east-west and form the basis of the Raglan mining camp. Raglan hosts proven and probable ore reserves of 18.1 million tonnes grading 2.88% nickel and 0.79% copper, with significant credits in cobalt and PGMs. In addition, there are 2.9 million tonnes of measured and indicated resources grading 1.95% nickel and 0.72% copper, plus 3.4 million tonnes of inferred resources at 2.7% nickel and 0.87% copper.
The Raglan area occupies the central part of the early Proterozoic Cape Smith fold belt, a rifted continental margin and arc-continental collision zone that strikes in an east-west direction across the Ungava Peninsula. This belt of rocks separates the Superior and Churchill provinces and can be correlated with other Proterozoic rocks to the southeast in the Labrador Trough and to the west of Hudson Bay in the Thompson nickel belt.
The stratigraphy of the Cape Smith belt is broadly subdivided into a lower sedimentary group, a central division of tholeiitic basalts and sediments (Povungnituk group), and an upper division of komatiitic basalts (Chukotat group). The Raglan trend is a regional, locally exposed, mappable horizon of mafic and ultramafic volcanic and shallow intrusive rocks, with minor interflow sediments.
The deposits at Raglan consist of clusters of discrete, sulphide lenses associated with peridotitic flow bodies along the contact of the Povungnituk and Chukotat groups. Economically significant mineralization has been found in nine different localities stretching across a 55-km distance. The nine areas are, from east to west: Donaldson, Boundary, West Boundary, Zone 13-14, Zone 5-8, Katinniq, Zone 2-3, East Lake and Cross Lake. These ultramafic bodies contain pervasive sulphide mineralization of mainly 1-3% finely disseminated pyrrhotite and pentlandite.
The individual ore lenses, which number more than 60, consist of a narrow zone of massive sulphides along the footwall contact overlain by net-textured and disseminated sulphides. The sulphide lenses are in channels and troughs at the base of the peridotitic flow, and they vary considerably in size and shape, ranging anywhere from 10,000 to 1.4 million tonnes in size. The Katinniq deposit alone contains more than 20 discrete lenses.
By comparison, the newly discovered Mesamax is one lens containing 1.45 million tonnes near the surface, making it a significant high-grade find.
"The South trend is the real gem now because Mesamax shows that it's not a low-grade environment," said Keast. "The challenge now lies in finding multiple deposits of high-grade massive sulphides."
History
Nickel and copper mineralization was discovered in the Cape Smith-Wakeham Bay area in 1937, but it wasn't until the 1950s that a number of exploration companies began to systematically explore the Ungava Trough, taking advantage of the Quebec government's geological mapping work. Asarco drilled off some resources at the Katinniq and Cross Lake targets. Raglan Nickel Mines and a Falconbridge subsidiary, Bilson Quebec Mines, followed Asarco in the late 1950s, and discovered a series of nickel-copper occurrences. Falconbridge consolidated its interest along the belt by merging with Raglan Nickel in 1966, whereupon it began examining development options. An exploration shaft was sunk on the Donaldson deposit in 1969.
Feasibility studies through the 1970s could not make the project work, and these efforts were halted when it was determined that the Raglan deposits would not economically support the construction of a greenfield smelter and refinery, based on resources in the 14-million-tonne range.
However, in the late 1980s and early 1990s, several significant events occurred, which advanced the project's prospects for development. These included the following:
-- Ice-breaking commercial vessels were developed, and these extended the traditional 4-month marine shipping window to eight months or more.
-- As a result of the James Bay agreement, each village received its own airstrip.
-- Cost-effective modular buildings became available, greatly facilitating construction of housing and other facilities on site, while reducing labour requirements and costs.
-- Additional reserves were discovered.
In February 1995, the Falconbridge board of directors voted to approve the $486-million cost of constructing the Raglan mine facilities. Commercial production began in April 1998. A dried concentrate is produced at the Katinniq mine, which is trucked 120 km north to Deception Bay for transport via ship to Quebec City, and then railed to the Sudbury smelter.
Over five years, Raglan has progressed from startup to design achievement and a 25% expansion through optimization to nearly 1 million tonnes of sulphide ore production per year. The mine has 18 years of life remaining.
To the end of 2001, about 3.2 million tonnes of ore grading 2.98% nickel, 0.88% copper, 0.06% cobalt and 3 grams combined platinum-palladium have been mined from open-pit sources on Zone 2-3 and by underground methods at Katinniq. Another 868,000 tonnes at 3.35% nickel and 0.97% copper were processed in 2002, resulting in production for the year of 24,636 tonnes nickel, 6,500 tonnes copper, and 386 tonnes cobalt in concentrate.
For the first six months of 2003, Raglan output totalled 13,412 tonnes nickel and 3,422 tonnes copper, compared with 11,513 tonnes nickel and 3,074 tonnes copper in the same period of 2002. Recent operating cash costs have not been disclosed by Falconbridge, but in 2000, the mine had a reported cash cost of US$1.16 per lb. nickel.
Ultramafic
The general geology of the South trend and Raglan horizons display similarities in that both areas host nickel-copper-PGM mineralization associated with peridotitic ultramafic rock types. Although the two areas exhibit similar sulphide minerals, with similar textures, the nickel-copper ratios differ. The Raglan horizon displays a 3-to-1 ratio, whereas the South trend generally displays a ratio of 1-to-1.
Drawn to the region by the shear number of multiple deposits that comprise the Raglan camp, Canadian Royalties zeroed in on the "underexplored potential" of the South trend, which was known only for two historic deposits: Delta and the low-grade Expo. Delta occurs on the western end of the South trend and is owned 51% by Falconbridge and 49% by Melkior Resources (mkr-v). Delta hosts a resource of 817,600 tonnes grading 3.05% nickel and 1.26% copper, plus 0.22 gram gold, 1 gram platinum and 1.65 grams palladium.
"Our thinking was, Why couldn't the South trend be as prospective as Raglan North?" explained Mullan. "What little work that had been done there had already found one deposit, and although it was low grade, Expo was the biggest single deposit in Ungava, at 17 million tonnes." Expo was drilled-off at wide-spaced centres by Amax Exploration in the late 1960s, and estimated to contain a resource of 17.3 million tonnes grading 0.46% nickel and 0.51% copper, including a higher-grade 3.8 million tonnes grading 0.75% nickel and 0.85% copper. Amax evaluated the viability of an open-pit mining operation before returning the property to the original owners. The property remained essentially dormant until 1997 when Ungava Minerals optioned it to High North Resources, a company then led by Harvey Keats. High North put six infill holes into the Expo deposit, looking for massive sulphides in the trough of the peridotite intrusion. High North later walked away from the project, citing poor market conditions, but not before Ungava Minerals tried to terminate the option agreement.
The South trend has got a bad rap because people have misunderstood the Expo deposit, said Mullan. Going back through the historic drill sections of Amax and the newer holes by High North, Canadian Royalties noted the narrow hits of massive sulphides, which it considered significant, and began re-evaluating the deposit for its previously unrecognized platinum-palladium potential. The company demonstrated, by re-assaying the preserved sample pulps from High North's drilling, along with split core samples from Amax's historic drilling, that significant PGM mineralization is scattered throughout the deposit.
"The fact that there is an additional sweetener called platinum-palladium, that's a pretty big bonus that they didn't have in the 1960s and 1970s," said Mullan. "It's a huge, twenty-five-to-forty-per-cent credit ratio, depending on commodity prices. That's why we are going back to some of these known historic occurrences again to look at the precious metals component."
Historic hole 67-8, near the centre of the Expo deposit, assayed 2.53 grams PGMs, 0.79% nickel and 0.74% copper over a true thickness of 56.4 metres, including a higher-grade section of 3.84 grams PGMs, 1.18% nickel and 1.06% copper across 24.4 metres.
Preliminary drilling
The company has re-assayed 17 historic holes in the heart of the deposit and confirmed that PGM mineralization occurs throughout the entire mineral resource area. Another 100 holes on site remain to be sampled, but while a lot of the old core is preserved, some important intercepts and parts of holes have been removed. "We can re-sample what is there and get an idea of what the grades are, but to really confirm the grade, we need that whole interval of core," said Keast. In addition, a significant portion of the past analytical work for nickel and copper was completed at an on-site laboratory.
The historic core is deemed not usable for a 43-101 resource calculation. With this in mind, Canadian Royalties has completed an initial preliminary program of 25 holes at the Expo-Ungava site this summer, including infill holes within the confines of the original resource area and exploration holes along the northern limit of the deposit.
The first hole, drilled safely between two areas of known massive sulphides, intersected the highest grade and thickest massive sulphides ever drilled at Expo. Hole 03-1 averaged 2.82% nickel, 2.82% copper, 0.14% cobalt, 1.05 grams gold, 0.8 gram platinum and 2.28 grams palladium over 17.3 metres. When combined with additional mineralization in the hole, the mineralized zone ran 1.38% nickel, 1.45% copper, 0.07% cobalt, 0.41 gram gold, 0.45 gram platinum and 1.62 grams palladium across 50.6 metres.
"That first hole was a really important lesson for us," said Keast. "It showed us that over a distance of a hundred feet, you can go from sixty feet down to six feet of massive sulphides. You can't go at this thing with two-hundred-foot spacing, like in the past."
Results from the first seven holes included high PGM values of 10 grams or more in all but one hole, with the highest individual palladium value running 48.9 grams over an interval of 1.5 metres. Hole 03-7 cut extensive PGM mineralization in primarily disseminated sulphides assaying 0.54% nickel, 0.91% copper and 0.13 gram gold, plus 0.24 gram platinum and 2.64 grams palladium over 58 metres.
Third season
Into its third field season on the South trend, Canadian Royalties is now looking at many of the historic occurrences from a different vantage point, with the help of new technology. A recently completed airborne survey is highlighting certain discrete features based on the company's own experience and success.
"With the new airborne survey, we're looking at the mineralized peridotite horizons in particular, and the intensity of the anomalies," said Keast. "Promising areas are followed up with prospecting. It's the grassroots prospecting that has really delivered the goods consistently from day one. Whether it's mapping on surface or drilling, we're looking at the rock and the styles of mineralization to get us in closer and closer to where massive sulphides are. Mesamax was not a highly ranked target. It was an area where they had a couple of holes, with some spotty copper and nickel."
The airborne work has generated a huge response over Cominga, 3 km west of Expo. "The signatures we got off of the airborne survey are comparable to Mesamax and Expo," Keast continued. "Cominga is one of these areas where we have pulled out a really interesting target that we're going to drill when we start moving the drills back toward camp with deteriorating weather.
Said Mullan: "They had good historic values at Cominga in the 1960s and '70s. The values were particularly high in copper, so there is some real PGM potential."
Exploration work to date has established a channel or trough-like geometry to some of the ultramafic bodies on the South trend. The ultramafic bodies are generally 100 to 200 metres wide on surface and extend laterally for several kilometres. Those that have been drilled exhibit a trough depth of less than 200 metres, without any downdip component. Massive and disseminated sulphides occur at the bases of these ultramafics. In the search for high-grade massive sulphides, the identification of disseminated and net-textured sulphide mineralization is a priority, as it indicates proximity to a possible massive sulphide component.
During the summer of 2002, Canadian Royalties completed 116 diamond drill holes at 10 target locations spanning more than 50 km along the favourable ultramafic hosts. Most of the 2002 drilling was concentrated in the vicinity of the Mesamax and TK sulphide zones, but some of the reconnaissance drilling intersected disseminated, net-textured and even massive sulphide mineralization up to 20 km west of the Expo deposit. Drilling on the most westerly target, Mequillon North, consisted of two setups spaced 200 metres apart along an extensive peridotite body, which is interpreted to extend for at least 3.5 km. A fan of three holes was drilled at each spot. At the most westerly setup, assay results from hole 02-1 included a 22.3-metre section containing 1.05% nickel, 0.93% copper and 0.04% cobalt, plus 0.11 gram gold, 1.01 grams platinum and 3.33 grams palladium. At the second setup, hole 02-3 encountered 26.7 metres of 1% nickel, 1.08% copper and 0.04% cobalt, as well as 0.13 gram gold, 0.72 gram platinum and 2.18 grams palladium.
The geological setting, together with the style and extent of the mineralization, indicates potential for high-grade massive sulphides. Canadian Royalties targeted Mequillon North for follow-up drilling in 2003.
The first round of holes on TK at the end of the 2001 field season resulted in a massive sulphide discovery of 5.4 metres grading 2.7% nickel, 0.78% copper and 2.67 grams PGM. Based on further drilling in 2002, Strathcona incorporated the results of 27 holes in the eastern portion of TK to come up with an indicated resource of 90,000 tonnes grading 1.6% nickel, 1.2% copper and 0.1%, 0.1 gram gold, 0.4 gram platinum and 2 grams palladium. A further 7,000 tonnes of similar grade material are inferred. Situated 3.2 km west of Mesamax, the smaller TK deposit would potentially be mined by underground methods.
At the end of last season, three holes were drilled from one setup on Tootoo, a pyroxenite body interpreted to be at least 5 km long on the western end of the Expo-Ungava property. Historical drilling in the Tootoo area had encountered "interesting" mineralization of around 1%. "To us, this indicated the right environment for net-textured and massive sulphide mineralization," said Keast. Canadian Royalties' first hole hit disseminated, net-textured sulphides grading 0.3% nickel, 0.4% copper and 1.19 grams PGM over 44.1 metres. The second hole penetrated the keel of the pyroxenite and hit 10.5 metres of massive sulphides grading 3.14% nickel, 2.56% copper, 0.17% cobalt, 0.05 gram gold, 0.8 gram platinum and 2.6 grams palladium. A wider section of the hole averages 1.28% nickel, 1.27% copper and 0.07% cobalt, plus 0.05 gram gold, 0.52 gram platinum and 2.13 grams palladium across 44.5 metres. The third hole was off to the side of the keel, cutting 11 metres of 0.3% nickel, 0.46% copper and 1.5 grams PGM.
"It's exciting because there is not one deposit," said Mullan. "It's Mesamax, TK, Expo, Mequillon, Tootoo and a gazillion geophysical features that we don't have our teeth into yet. It took Falconbridge fifty years to get to where they are, whereas this is just our third field season."
Canadian Royalties has $15 million in cash, with 39.5 million shares outstanding (49.2 million on a fully diluted basis). "The $15 million gives us three years of time to determine whether it's a stand-alone operation or something that could be mined jointly," said Mullan.
The company has farmed-out some of its satellite properties to Boulder Mining (YBR-V) and Montoro Resources (MNQ-V) in order to expedite exploration.
Fueled by Canadian Royalties' nickel-copper-PGM-rich massive sulphide discoveries, the hottest area in Quebec for exploration is the Ungava belt. Well over $12 million is being spent in the region this year by such companies as Falconbridge, Knight Resources (KNP-V), Novawest Resources (NVE-V) and Goldbrook Ventures (GBK-V).
