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Brian sylvester writing portfolio Document Transcript

  • 1. I N C A N A D A Photo credit: Shore Gold A 22-carat gem from Shore Gold’s Star kimberlite. BY BRIAN SYLVESTER duction by 2014, but to do so it would more signs of life,” Read says, adding that L et’s say for a moment that you are a need to start building work by late 2010. Shore could take on a partner, and has conservative investor with $1.6 billion That means Shore needs to spend, accord- looked at debt financing. to invest. You might be pleased to re- ing to the prefeasibility study, $123 million He’s right. Rio Tinto (RTP-N) recently ceive a guaranteed 10% return on your cash. at Star next year. raised by 15% the price it receives for dia- After all, that’s about $160 million annually. Shore got the ball rolling on its fundrais- monds mined in Canada. Rio also resumed But if that modest rate of return was ing push in October with an equity financ- a $1.8-billion expansion of its Argyle mine subject to fluctuating commodity prices ing that netted $27.5 million – 14.3 million in Western Australia, the largest diamond and highly sensitive to a U.S. to Canadian common shares at $1.05 each, and another mine in the world by volume. dollar exchange rate, perhaps you would 10 million flow-through shares at $1.25 But lenders and project partners de- seek other, less dicey options. apiece. mand substantial rates of return because of That’s pretty much the choice Shore With 224.5 million shares outstanding the intrinsic optimism that often finds its Gold (SGF-T) laid before investors after a (234 million fully diluted) as of mid-October, way into mining project economics. His- 209-page prefeasibility study on Shore’s and with its shares trading at $0.82 apiece, tory has shown revenues, especially those of wholly owned Star kimberlite in Saskatch- Shore had a market cap of $200 million. diamond projects, often fall shy of expecta- ewan said a mine would cost $1.67-billion The odds do not seem to favour Shore tions and operating costs typically exceed and generate a return of 10% over 12 years but don’t tell that to George Read, Shore prefeasibility estimates. (though it would take 5.2 years to recover Gold’s senior vice-president of exploration One recent example is the crippled Ta- capital costs and contingencies). – and, largely, the face of the company. hera mine in Nunavut, where much lower What’s more, Shore wants to be in pro- “The diamond market is showing a lot than expected diamond grades and rapidly November 2009 Diamonds in Canada 9
  • 2. I N C A N A D A escalating production costs forced the clo- sure of what was Canada’s third diamond ‘The important thing is that diamond price wasn’t chosen by Shore Gold, that mine. Even at the venerable Diavik, Canada’s diamond price was chosen by the consulting engineers. They thought that that second diamond mine in the Northwest was very reasonable in light of the behaviour of the diamond price over the last Territories, grades have averaged around number of years.’ 10% less than prefeasibility estimates, while costs continue to exceed projections. — George Read, Shore Gold’s senior vice-president of exploration Like Diavik, Star would be an open-pit operation. The study calls for the world’s largest processing plant, which would be capable of processing ore at a rate of 40,000 tonnes per day. Star’s after tax net present value, using a 7% discount rate, is $291 million. The economics are so marginal that if revenue falls 15% below the base-case level, the net present value of Star becomes negative, and that is certainly not outside the realm of possibility. In fact, there are several ways it could happen. One is a sharp rise in the Canadian dollar. Shore’s study assumes an exchange rate of US$0.85. At presstime, the U.S. to Ca- nadian exchange rate was about US$0.94. A lower Canadian dollar means higher mar- gins for Shore because its production costs would be in loonies, while it would sell NEW TECHNOLOGIES FOR THE FUTURE BHP Billiton is committed to resourcing the future and building a proud legacy for the communities in which we operate. Since operations began in 1998 at EKATI Diamond Mine, we have spent $4 billion dollars, 81% of which has been spent in the North and over $1 billion dollars with Aboriginal business. We’ve created almost 12,000 person years of employment and have directly funded numerous training initiatives from which many Northerners have benefited. Our commitment to building a sustainable future is demonstrated in our new Research and Development Department, where we are examining new and innovative mining techniques that could extend EKATI’s mine life. Surface mining technology, originally developed from road milling machines, is becoming an integral part of the resource development industry across the world, and BHP Billiton has purchased the first two of these units for use at EKATI Diamond Mine. With our sights firmly set on lowering our operating costs to $50 per tonne by 2012, these new surface miners could unlock much potential for EKATI, and possibly extend our mine life well beyond 2021, to our vision of 2040. Photo credit: Shore Gold www.bhpbilliton.com A parcel of Star diamonds is graded and analyzed at a lab in Anterwerp, Belgium. 10 Diamonds in Canada November 2009
  • 3. I N C A N A D A gems for greenbacks. Read admits the prefeasibility study numbers are most sensitive to the exchange rate but says history is on his side. “The US$0.85 exchange rate is a 50-year average and, if you want to tell me what the exchange rate is going to be hopefully in 2014 when we start selling, then (go ahead),” Read says. Secondly, the study uses a modelled diamond price of US$225 per carat, the highest in a range set by U.K.-based WWW Diamond Consultants in its March 2008 price book. The low end of WWW’s range was US$141 per carat. “The important thing is that diamond price wasn’t chosen by Shore Gold, that di- amond price was chosen by the consulting engineers (P&E),” Read says. “They thought that that was very reasonable in light of the behaviour of the diamond price over the last number of years.” Since WWW’s valuation, the global dia- mond market, in lockstep with the global recession, has seen rough prices dip by as much as 40% after reaching all-time highs in August 2008. WWW Diamond Consultants reports that diamond prices are now between 10- 15% lower than in March 2008, owing to a rise in diamond prices during recent months. Read explains that the decline in diamond prices was mostly offset by gains made by the Canadian dollar over the same period. “Our sensitivity studies have shown that (the economics) are most sensitive to ex- change rate and diamond pricing But, if you look at what the difference is if we use the high or the low modelled values for the different diamond prices, then there isn’t an enormous difference (in the overall economics),” Read argues. The study says Star boasts reserves of 171 million tonnes at a weighted average grade of 12 carats per hundred tonnes (0.12 Photo credit: Shore Gold carat per tonne), for a total of roughly 20 Rock bolts are inserted into the ceiling of an underground shaft at Star. The shaft was used to million carats. The only problem is that access bulk sample material. Shore boosted the grades on all of its large- diameter drilling tests by factors “that range ‘Our sensitivity studies have shown that (the economics) are most sensitive to from 1.62 to 1.67,” as published in an April exchange rate and diamond pricing But, if you look at what the difference is if we release. The grade boost was based on diamond use the high or the low modelled values for the different diamond prices, then losses and breakage Shore believes occurred there isn’t an enormous difference (in the overall economics).’ during large-diameter drilling. The deter- — George Read mination was made after more impressive diamond grades were recovered from an underground bulk sample taken from the November 2009 Diamonds in Canada 11
  • 4. I N C A N A D A Photo credit: Shore Gold A bulk sample processing plant sits atop the Star kimberlite. The plant would need to be moved if Shore decided to begin production there. same area where the drilling had been done. Shore’s “boost” left many in the Canadian diamond industry scratching their heads. “Are they allowed to do that?” asked a president and CEO of a Canadian diamond junior, who preferred to remain nameless. Skepticism abounds until you look at what could prove to be Read’s ace in the hole, just north of Star. There lies the Orion South kimberlite, 40% of which is owned by Newmont Mining (NMC-T) under the terms of the Fort à la Corne Joint Venture (FALC-JC). (Newmont recently raised $2.1 billion by selling bonds and was contacted for com- ment on the Star story but declined.) P&E Mining Consultants calculates the mineral resource at Orion South at 84 million tonnes averaging 13.83 carats per hundred tonnes (cpht). Another 98 million 12 Diamonds in Canada November 2009
  • 5. I N C A N A D A Photo credit: Shore Gold Cut and polished diamonds from Star. tonnes running 12.83 cpht are in the in- that would provide Saskatchewan Power we will ultimately plug into the Saskatch- ferred category (but inferred material can’t with up to $500,000 to carry out prelimi- ewan power grid is extremely favourable,” be included in the resource under National nary engineering and environmental studies Read says. Instrument 43-101 guidelines). to determine a preferred route of trans- Read estimates that if Star were situ- Orion South is one of the largest di- mission lines between the project and the ated in a location similar to Diavik’s in the amond-bearing kimberlites in the world, provincial power grid. The study says the Northwest Territories, one could add an- with a surface area totalling some 403 230-kilovolt transmission line would span other billion dollars to the project’s capital hectares. 16 km. The work should be done by the costs. Shore handed over its Star and Orion end of June 2010. Then again, what Read wouldn’t give for South data to P&E this fall and the firm “Certainly accessibility and the fact that Diavik’s grade. will complete a prefeasibility study on the economics of a combined operation. The results should be out by early 2010. A positive decision could lead to a bank- able feasibility study on both projects by late 2010. “We could spend time doing the com- bined detailed feasibility study on Star and Orion South next year and then still get into production in 2014 or sooner because of the more amenable stratigraphy on Ori- on South,” Read says. “The stratigraphy on Orion South is probably easier to mine than it is on Star.” Another positive for Read and his team is Star’s location, about 60 km east of Prince Albert, Sask., a supply centre for northern Saskatchewan. A paved highway, and a net- work of forestry roads provide year-round access to the Fort à la Corne Joint Venture. Shore recently signed a letter of intent November 2009 Diamonds in Canada 13
  • 6. ‘EFFIN’ faces Anderson Patrick F.N. Anderson helped make some Aurelian shareholders very wealthy and others, it would seem, not wealthy enough Rarely has mining seen a company-maker Fruta del Norte more polarizing figure than Patrick deposit, in Ecuador (see sidebar F. N. Anderson, the former president on Page 28). and CEO of Aurelian Resources. Shortly after the news became Those initials represent Fer- public in late July of last year, a se- gus and Neill, the sort of middle lect group of Aurelian sharehold- names that Irish immigrants from ers started to beat the drum about Belfast bestow upon their only how they had been “taken to the son. But it was probably lost on cleaners.” Phone calls were made. BY BRIAN SYLVESTER Anderson’s parents how appropri- Form-letter campaigns launched. Mining Markets ate those initials would become, Word of the “injustice” reached especially for disgruntled Aureli- editors at the Globe and Mail, Na- an shareholders bitter about what tional Post, and here, to Mining they perceived to be an insuffi- Markets’ parent publication, The cient price paid by Kinross Gold Northern Miner. (K-T) for mining’s biggest Cinder- One letter sent to this office ella story in a decade. reads: “Patrick Anderson and the When Kinross executives ap- Aurelian board of directors gave the proached Aurelian’s board about company away to Kinross Gold Cor- a takeover in June 2008, no one poration for a small fraction of its knew, least of all Anderson, the value. To be sure, the officers of Au- kind of vitriol that would be un- relian were well compensated. They leashed by Aurelian shareholders received millions of stock options when the dust had settled. while the rest of the shareholders In late July, Kinross offered were taken to the cleaners.” Aurelian shareholders about $1.2 The Globe called Anderson but billion (the deal was worth a little never printed a story. The Post less than $1 billion when it closed called, too, and printed a story but it Former Aurelian Resources president and in late September) in shares and was more about shareholder angst CEO Patrick Anderson warrants, or about US$85 for each than the supposed rotten deal. ounce in the 13.7-million-oz. “It’s really a minority. It’s a 24 – MINING MARKETS – MARCH 2009 –
  • 7. Digitally signed by Paula Andrea Paula Andrea DN: cn=Paula Andrea, c=CA, o=GSL, ou=26 01 09, email=palvarez@telus.net Date: 2009.01.26 10:16:28 -08'00' small, very vocal group of vitriolic shareholders who the discovery toward production, I with flying colours. I think we ran feel they got screwed on the deal. As time goes on I came to a realization about myself: a public company well. I think I think they are beginning to realize – and most are – that I really enjoy and know about ran a public company well.” that people didn’t get screwed on this deal. The rea- exploration. I really don’t know Maybe, but other money men sons we did the deal are unfolding…and it’s turned much about production but I know went as far as to launch a lawsuit out to be a very good deal for Aurelian shareholders,” enough to know that I prefer explo- after they watched their warrants Anderson explains. “It is the best deal we could have ration.” expire while, from their perspec- done.” Newsletter writer John Kaiser tive, Aurelian sat idle. He adds: “I think expectations were very high… followed the Aurelian story from In July 2006, Robert Cudney’s That group of shareholders was envisioning a share the beginning but never invested Northfield Capital, Jonpol In- price for Aurelian in the hundreds of dollars. There in the junior. Kaiser watched the vestments, Morrie Tobin, Mark was this 200 Club group of shareholders who were all remarkable story unfold and con- Monaghan and Kevin Everingham going to hold on until the stock reached two-hundred tends that Anderson and the Au- filed a $3-million claim against Au- dollars. They had sold themselves on this dream of relian board were the victims of relian in the Ontario Superior Court. another rocketing share price like we saw from the circumstance. The suit purported that Aurelian did forty cents to the forty-dollar level, which, barring an- “The Aurelian discovery was a not do what it could to get listed on other discovery on the property, I don’t see how that grassroots discovery of a world- the top tier of Vancouver’s TSX Ven- could have happened.” class deposit. Unfortunately, geo- ture Exchange. Such a listing would Anderson, though, was playing against the odds political problems prevented (Au- have allowed Aurelian to petition from the beginning and despite the obvious success relian) from getting acquired at full the TSX for a two-year extension of of delineating the biggest gold discovery in a genera- value,” Kaiser told Mining Markets. warrants that were owned by the tion, he did not hold the right cards. The Ecuadorian But for every mining industry plaintiffs. The listing did not happen government, meanwhile, led with a pair of aces. man in his corner, Anderson prob- in time, however, and the warrants In January 2008, the government levied a new 70% ably counts two on the other side, expired. The suit is ongoing but is commodity price-based windfall tax on miners and some of them big-time players. now Kinross’s property. almost simultaneously revoked hundreds of mining One executive with Toronto- “If we were still Aurelian, and licences. based Dundee Securities, a firm there had been no transaction, we By April, Ecuador’s government, led by Rafael Cor- that fronted some Aurelian financ- would never settle on that lawsuit. rea, had suspended all mining and exploration in the ings, once deemed Anderson “un- I don’t know what Kinross’s inten- country until a new mining law was in place. Ander- fit to run a public company.” tions are,” Anderson says. son could read the tea leaves and Kinross had a decent “I think they’re wrong,” An- Anderson ruffled more feath- offer on the table — a soft landing, even if it didn’t derson says, returning fire. “We ers among mining’s “old boys” come with a boardroom view. were conscientious. We were as network as part of a group that “I don’t know if I would have added much to the transparent as possible. We stood toppled the board of high-profile Kinross board,” Anderson admits. “As we were moving up under investigation and passed junior Noront Resources (NOT-V). • Angostura Gold/Silver Deposit, Colombia TSX: GSL • Over 926 core holes (301,000 metres) AIM: GSL • Feasibility Study underway • 11.55 million ounces M & I “one of the world's largest gold resources" Bogota • 3.5 million ounces Inferred COLOMBIA info@greystarresources.com Resources Ltd. www.greystarresources.com – MINING MARKETS – MARCH 2009 – 25
  • 8. Popular former Noront CEO Richard Nemis stepped other on the Gulf Coast, settling in down in late October after a proxy war for control Pascagoula, Miss., a port city east was launched by Rosseau Asset Management, a hedge of New Orleans. That’s where An- fund that owns just less than 10% of Noront. Backed derson grew up. by Rosseau, Anderson is now a Noront director. His family remains in Missis- After living in Vancouver at the time of Anderson’s sippi but Anderson returned to birth, his parents traded life on the Left Coast for an- Canada in 1986 to earn a bache- lor’s degree in geology from the University of Toronto. He would eventually graduate, but not be- fore a detour found him trying his hand at the culinary arts in 1988. In 1994, after his last exam but before graduation, he headed to Venezuela for a field-based job and remained there for years. It was where he would work with Keith Barron, who helped Ander- son found Aurelian. The junior’s story is the stuff of legend; part folklore, part reality. Anderson and Barron applied for their first concession in Ecua- dor’s Cordillera del Condor in Feb- ruary 2001, following six weeks of prospecting in some remote re- gions of the country. Two months later, in a turn of good fortune, the Ecuadorian gov- ernment announced new mining rules that gave individuals and companies one month to con- vert their outstanding concession applications – some more than 10 years old – into titles and be- 26 – MINING MARKETS – MARCH 2009 –
  • 9. Aurelian’s former exploration manager Steve Leary (left) and Tim Warman, vice-president of corporate development, above the camp at Fruta del Norte. gin paying patents. In May 2001, about Peñas and outlined 500,000 oz. gold at a 80% of the country’s concessions were grade of slightly more than 1 gram gold declared void, giving Aurelian the rare per tonne, certainly far less than bonanza chance to acquire a large, contiguous grade. land package. By the end of 2005, Aurelian was Seeing the opportunity, Aurelian per- wrapping up almost two years of region- sonnel took turns waiting in line at the al sampling that had outlined another patent office for weeks to be near the 33 gold targets at Condor. Those targets front when concessions became avail- were ranked and slated to be systemati- able. cally drilled in 2006 but Aurelian had lit- Aurelian augmented its land position tle cash left. Anderson says this was the by purchasing the La Zarza concession low point of his career. from private interests in July 2002 and “We were nearly out of money…We the concession became the core of the had no audience. The phone calls weren’t Condor project – 950 sq. km of mining being returned. That was very frustrat- concessions and home to Fruta del Norte, ing,” Anderson recalls. “The defining the epic gold-silver deposit. Aurelian Re- moment, of course, is when we made the sources went public in 2003, raising $3 discovery.” million at $0.50 a share. Earlier in 2005, Steve Leary had joined Going back a little further, exploration the company as exploration manager, on La Zarza by Australia’s Climax Min- bringing along experience in epithermal ing from late 1996 through mid-1998 systems. He reinterpreted a pull-apart turned up the Ubewdy, Bonza and Las basin identified by Climax, and decided Peñas prospects. But after minor drilling that the basin infill conglomerate was on other prospects returned only modest mostly post-mineralization and, there- grades, Climax let its concessions lapse. fore, epithermal deposits could lie buried In 2004, Aurelian sunk 28 holes to- below the basin sediments. talling 6,900 metres into Bonza and Las Leary and Anderson took the revised – MINING MARKETS – MARCH 2009 – 27
  • 10. LOOKING BACK Kinross Gold’s Takeover Offer for Aurelian On July 24, 2008, Kinross Gold (K-T) offered for each Aurelian common share, 0.317 of a Kinross common share, plus 0.1429 of a warrant, with each warrant entitling the holder to acquire one Kinross common share. The Kinross warrants have an exercise price of $32.00 per Kinross common share and will expire five years after the date on which Kinross first pays for Aurelian common shares tendered to the offer. Kinross issued about 47 million common shares related to the transaction or about 8% of Kinross’s outstanding common shares at the time (Kinross issued another 24 million shares as part of an equity financing in January 2009). Based on the preceding 20-day volume-weighted average price (prior to the date of the bid) of Kinross’s common shares on the Toronto Stock Exchange (TSX), and assuming a value of C$0.92 per fractional warrant, the value of the offer is C$8.20 per Aurelian common share, which at the time represented a premium of roughly 63% over the preceding 20-day volume-weighted average price of Aurelian common shares. Visible gold in core from Fruta del About 94% of Aurelian shareholders tendered to Kinross’s offer. Norte. interpretation and exploration “I checked (the assay results). surfed in Costa Rica, and Anderson now owns a sea kay- model to the board and pitched the Re-checked them. Called up the ak. Anderson, in many ways a child at heart, has anoth- members on spending Aurelian’s lab to make sure there weren’t any er hobby – sharing a growing collection of remote-con- remaining treasury to drill one of errors,” Anderson recollects. “I was trol helicopters with Aurelian’s former vice-president of Condor’s most favourable targets, terrified, terrified that we screwed corporate development, Tim Warman. The helicopters Fruta del Norte. up somehow.” are something Anderson describes as “just fun.” The deposit is an intermediate When everything checked out, When he’s not toying, Anderson serves as direc- sulphidation epithermal gold-sil- he ran into the street to share the tor of several juniors: U3O8 Corp. (UWE-V), Colossus ver system, hosted in andesitic vol- news with anyone he could find Minerals (CSI-T) and Noront. canics and buried inside a Jurassic until he had a sudden revelation. “I’m generating a few other projects in the back- pull-apart basin that basically pre- “I had two different shoes on,” room, exploration projects in other parts of the served most of the epithermal sys- he recalls. world,” Anderson says. “I usually invest in an industry tem. The third hole into Fruta Del Since that moment Anderson I know, our industry. I look at the projects and I look Norte hit the buried, gold-rich sys- has been on something of a roll. at the people. I look at the philosophy behind the ex- tem. One intersection returned 8.4 He recently turned 40 and lives ploration and the discovery.” grams gold per tonne uncut across in English Bay in Vancouver with Chances are he will never find another discovery 205 metres. Another hit 189 me- his new wife, a former mining ana- like Fruta del Norte, but investors, disgruntled or oth- tres averaging 24 grams gold per lyst with Genuity Capital Markets. erwise, might be wise to follow Anderson on his next tonne uncut. They have travelled to Spain, adventure. MM 28 – MINING MARKETS – MARCH 2009 –
  • 11. faces Agnico-Eagle Mines executive vice-chairman and CEO Sean Boyd at his company’s Kittila gold project in Finland. Photo credit: The BUOYED Northern Miner BY BOYD Agnico-Eagle’s Sean Boyd may be Canada’s most unassuming company builder BY BRIAN SYLVESTER Mining Markets don’t make a statement; his off-the- to the University of Toronto, where S rack suits are invariably pressed he earned a bachelor of com- Sean Boyd will never be mis- and tidy. He’s not about to change. merce degree, in 1981. taken for the world’s most memo- “I live a mile from where I grew During his “off” summers, Boyd rable CEO. Until recently, even up,” Boyd says. learned the ins and outs of the bro- some close family members did Boyd was born in Scarborough, kerage business at AE Ames but the not know what he did for a living. an eastern suburb of Toronto. But “big time” was around the corner “My mother-in-law didn’t really when Sean was still young, Boyd’s — articling at Clarkson, Gordon know what I did until a few years father, an Irish police officer partial and Co., a popular accounting firm ago,” Boyd says, with a shy grin. to discipline, decided to move the among the miners. But if you are an Agnico-Eagle family to the countryside, settling on There, he learned to crunch Mines (AEM-T) shareholder, that’s Stouffville, about 45 minutes north. mining numbers from the inside probably just how you like it. Boyd and his wife, Peta, still live out, mostly by combing through You are more than content to in Stouffville where they raised four Noranda’s books, as well as some let the world’s Ian Telfers and children. In fact, the 49-year-old brokerage firms’. Robert Friedlands hog the spot- Boyd passes the 800-sq.-ft. Boyd In 1982, Clarkson Gordon light, while you quietly and reli- family farmhouse (now his brother’s added a client to the roster: Paul ably squirrel away your Agnico property) on his drive to the office. Penna’s Agnico-Eagle. With his dividends — a plum in investors’ Is there a better measure for a experience auditing mining com- pudding for 26 straight years. CEO of a multi-billon-dollar com- panies, the new account went to As a chartered accountant and pany to keep his ego in check than Boyd’s audit team and for the next chief executive of the steadfast gold seeing the modest family home- three years the Agnico books were company that he has helped shape stead every morning? under his methodical, meticulous into a mid-tier producer within After going to high school in care — by then a Boyd trademark. earshot of being a major, Boyd has Aurora, when it was still mostly a “I was over (in the Agnico been more measured and method- community of farmers, he made offices) for months and months ical than bold and brash. His ties the pilgrimage down Yonge Street and months, and finally they just 36 — MINING MARKETS — SEPTEMBER 2008 –
  • 12. said: ‘You’re here everyday any- mining was concerned but management was doing to market forces and this sum- ways, why don’t you just come things foreign to most companies of its size, such as mer’s relentless punishment of and work here?’” recalls Boyd. “I listing on New York’s Nasdaq exchange. The American gold stocks. Agnico shares were left on the Friday as an employee listing provided Boyd, then Agnico’s controller, with trading at around $50 at presstime of Clarkson Gordon and I returned ample exposure to the U.S. markets, and more impor- — a staggering plunge considering on the Monday as an employee of tantly, its regulatory framework. that just a few months ago, Agnico-Eagle. Same office, same Penna also eschewed the bought-deal in favour of National Bank Financial issued a desk, didn’t miss a beat.” market financings but this meant taking Agnico’s “go “buy” recommendation for Agnico That was 1985. He wouldn’t slow” road show to the banks, fund managers and bro- with a $92 target price. miss many over the next 23 years, kers for weeks at a time. What’s more, Penna shunned Gold investors, it seems, have either. the limelight, leaving Boyd to tell the Agnico story to not been as enthusiastic about In 1998, when Boyd was well-heeled Canadians, Americans and Europeans, investing in gold equities as they named CEO after a time as chief again and again. . . and again. have about exchange-traded funds, financial officer, Agnico had about “You got to do a lot more than you otherwise which has created some competi- 1 million oz. gold in reserves; would have if you had joined a bigger company,” tion for investment dollars. “I think today, the number is close to 17 explains Boyd. that’s positive because that forces million. The share price reached But perhaps Penna’s most lasting impact was the the mining companies to be more $4.40 in 1998; in late March 2008, way he sweated the details. He took his own calls (a disciplined,” explains Boyd, who is Agnico shares peaked at $82.80. custom Boyd continues), knew his staff, and often more than familiar with discipline. The company’s market cap was added his personal touch to things. Boyd has sidestepped offers to around $250 million 10 years ago; “He was a guy that if you said ‘I like lemon pies,’ the be on the boards of other compa- as of early August, the company next day he’d show up with ten lemon pies and every- nies (he is on the World Gold was worth about $7.5 billion. one in the office would get lemon pie,” says Boyd. Council board), choosing instead But maybe even more impres- The core group of Agnico’s management team, to focus on building Agnico-Eagle. sive is what Boyd and his team including president Eberhard “Ebe” Scherkus, chairman Boyd predicts another round of have done for shareholder value. James Nasso, and senior vice-president of exploration consolidation during the next few In a 2007 ranking of Canadian Alain Blackburn, and others — many of whom were years will leave names without companies, Agnico was 40th in hired by Penna — has been in place for about 20 years. companies. Will Agnico remain terms of market cap, but only Penna died in 1996 following a lengthy fight with standing when the dust has set- three other companies in the top lung cancer. tled? It doesn’t matter — Agnico, 50 — Research in Motion (RIM-T), “He was the driving force,” says Boyd, who was much like Boyd himself, will not Potash Corp. of Saskatchewan clearly taking notes during Penna’s time. veer from its “go slow” course. (POT-T) and Fording Canadian But since Boyd took the helm, Agnico has reached Investors will do well either way. Coal Trust (FDG.UN-T) — beat heights Paul Penna likely thought unimaginable. It’s the measured and methodi- Agnico in return on investment. Despite its success, though, Agnico is not immune cal approach. MM “We’re patient. We’re very @COMPANYINARTICLE:025042467; 019760215; @ARTICLECATEGORY:2403; 1398; 2411; patient,” says Boyd. He adds: “We had opportunities over the last ten years to really leapfrog our competitors and we chose not to do those deals because they were not going to create a lot of value for a our shareholders — even though we would have been bigger. . . We took the ‘go-slow approach’ and that fits our style.” Much of the style Boyd refers to can be traced back to Paul Penna. In the Penna era, Agnico was a fairly small company as far as — MINING MARKETS — SEPTEMBER 2008 — 37
  • 13. COPPER–NICKEL–ZINC–PLATINUM–PALLADIUM–CHROMIUM The McFauld’s Lake Ring of Fire This highly mineralized region in the James Bay Lowlands of Northern Ontario appears to be on its way to becoming one of Canada’s major mining camps. by Brian Sylvester The Noront Resources Esker exploration camp that services the company’s various Ring of Fire projects in the McFauld’s Lake region of the James Bay Lowlands of northern Ontario. Photo courtesy Noront Resources Ltd. 6 www.resourceworld.com M AY 2 0 1 0
  • 14. G old mining sage Pierre Lassonde told bearing kimberlites below 30-130 metres published the news after staking 64 square the National Post in 2008 that the of sandstone and limestone. De Beers was kilometres around the discovery hole in Ring of Fire camp in far northern targeting prospective diamond anomalies late October. Ontario was the “most exciting” discovery using the Spider-KWG geophysical and “We staked (64 square kilometres) of the last 10 years in Canada. geochemical database Novak had assem- around that discovery and that’s all we It still is. Six years before Lassonde uttered bled a few years earlier. could afford,” Novak recalls. “I wish we those prophetic words, geologist Neil Novak, In May 2002, on land optioned from could have staked the whole area.” then vice-president of Spider Resources Spider-KWG, a De Beers reverse-circula- Novak told business associate and friend Inc. [SPQ-TSXV], entered into a joint ven- tion drill tested what was thought to be Richard Nemis, then President and CEO of ture with De Beers Canada Exploration a kimberlite anomaly. Instead it cut mas- Noront Resources Ltd. [NOT-TSX] and he to help the diamond titan seek diamonds in sive sulphide mineralization. The hole immediately hired contractor Greenstone Ontario’s James Bay Lowlands. returned 8 metres grading 1.61% copper, Exploration to stake claims in the Ring of Novak and his joint venture partner, including a 0.5-metre section running 7% Fire based on a map derived from an airborne KWG Resources Inc. [KWG-TSX], had copper and almost 5% zinc. The find was magnetic survey flown by the Geological found five 1.1-billion-year-old, diamond- kept quiet until November when Spider Survey of Canada in 1959-60. M AY 2 0 1 0 www.resourceworld.com 7
  • 15. outlined earlier by Novak. Nemis’s move to secure the claims even- tually proved vital. In August 2007, an angle hole into the Condor claims, later dubbed Eagle One, returned 1.1% nickel, 0.9% copper and 2.1 grams palladium/ tonne over 71.5 metres of magmatic rock. A second hole at Eagle One found more mineralization, but two holes east and west of the discovery hole came up empty. With costs exceeding $100,000 per hole, Nemis paused drilling and flew in long- time friend and ex-Falconbridge executive John Harvey. Harvey examined the evi- dence and recommended the anomaly be drilled vertically. “I suggested that they drill a verti- cal hole down through the centre of the anomaly. That was hole number five and The PDAC Bill Dennis Prospector of the Year Award honours the memory of past PDAC president that turned out to be the best one to Bill Dennis. Left to right, Ed Thompson, Past President of PDAC, presents the 2010 Prospectors of the that date,” says Harvey, who would later Year awards to Mac Watson, President, Freewest Resources Canada, Dick Nemis, former President become Noront’s Chief Operating Officer. of Noront Resources, John Harvey, former COO of Noront Resources, Don Hoy, VP Exploration for Freewest, and Neil Novak, President of Spider Resources. The men were honoured for their Ring of Hole 5 went straight down and returned Fire discoveries. Source: Envisiondigitalphoto.com 117 metres averaging 4.1% nickel and 2.2% copper, plus platinum and palladium In the fall of 2003, Mac Watson, then discoveries, three if you count Novak’s values. Within six weeks of that discovery President/CEO of Freewest Resources kimberlites. Nemis says the GSC map, more than 100,000 hectares were staked Canada Inc. [FWR-TSXV], staked nine known as 1009G Grieg Lake, outlined along the Archean-age greenstone belt claims based on an airborne geophysi- some “unusual geophysical signatures” that forms a kind of ring in the vicinity of cal survey flown by Inco years earlier. along trend and contiguous to claims McFauld’s Lake. Not long afterward Nemis In exchange for the map and other geo- Nemis had already staked west of the and Harvey were at a downtown Toronto physical data, Inco received an off-take Spider-KWG land. Nemis set his sights watering hole when they dubbed the agreement on any nickel or copper on two particular claims held by Condor camp the Ring of Fire after the song made Freewest discovered. Diamonds, a junior that was in the camp famous by country music legend Johnny Four of those Freewest claims were hoping to piggyback on Spider’s diamond Cash. optioned to Noront, which in turn exploration success. “We were thinking of calling it the Rim optioned them to Probe Mines Ltd. [PRB- “I knew I wanted those [Condor] claims,” [of Fire],” Nemis recalls. “We decided to TSXV]. The other five were optioned to the Nemis says. “These claims were punched call it the Ring of Fire …[the name] turned Spider-KWG joint venture in 2005. into a computer so we were well aware of out to be very good because it really In March 2006, Novak was on-site with the status of the claims at all times.” caught on.” Noront even named the two the Spider-KWG joint venture, drilling Fate favoured Nemis when Condor filed drills at the camp Johnny and June after claims optioned from Freewest, when a for bankruptcy. Following some litiga- the late Cash and his wife. hole returned two intersections containing tion, the claims were awarded to two Further drilling at Eagle One, since a deep black mineral. Condor investors, who, of course, wanted rebranded the Eagle’s Nest due to its series “This other geologist and I, Howard to sell. Prior to the litigation, Novak had of repeating mineralized lenses at depth, Lahti, kind of scratched our heads,” Novak worked on Condor’s claims as a consultant has outlined an indicated resource of 6.9 says. “We eventually convinced ourselves to maintain their good standing. Once the million tonnes grading 2.04% nickel, that it was chromite.” courts settled the dispute, Novak brokered 0.95% copper, 1.3 grams platinum/tonne Originally known as the SKF (which a deal with Nemis on behalf of the court and 3.4 grams palladium/tonne; another stood for Spider-KWG-Freewest) property, appointed claim winners. Nemis took title 4.3 million tonnes grading 1.42% nickel, the find was renamed Big Daddy. of the claims after agreeing to drill at least 0.87% copper, 0.8 gram platinum/tonne The camp now had two significant one hole to test an anomaly that had been and 3.4 grams palladium/tonne are in the 8 www.resourceworld.com M AY 2 0 1 0
  • 16. inferred category. But that’s not the camp’s biggest dis- covery. That title belongs to Black Thor, possibly the richest chromite deposit on the planet. “It’s a world-class chromite deposit. Very large, very high grade,” says Don Hoy, the former Vice-President of Exploration with Freewest. In September 2008, Freewest conducted a ground gravity survey along a magneti- cally distinct ultramafic sill. Hoy ranked the gravity targets, which he thought could be nickel-copper deposits, using Inco’s airborne geophysical survey data. Drilling on the first target intersected more than 100 metres of high-grade chromite mineralization in the hanging wall of the nickel-copper target. After the second hole hit chromite, Hoy decided to test another A helicopter brings in supplies and equipment to the Noront Resources Esker exploration camp in anomaly along trend, 1.6 kilometres away. Northern Ontario’s Ring of Fire region. Photo courtesy Noront Resources Ltd. That hole intersected almost 100 metres grading roughly 30% chromite. Follow-up a number of reasons to undertake the bid travel about 75 kilometres west of Marten drilling defined the deposit over a 1.6-km for Freewest. It wasn’t solely driven by Falls. Hanson says First Nations chiefs in strike length. chromite.” the area were confused by the mixed mes- Black Thor contains an inferred mineral He says it was part of an effort to con- sages they received from camp players. resource of 69.5 million tonnes grading solidate the camp and augment its other Cliffs is proposing a one-kilometre-long 32% chromite, which is transformed into assets, most notably two smaller chromite open-pit chromite mine, whereas Noront ferrochrome and then alloyed with steel to deposits, known as Blackbird One and Two. says its development – even the chromite make stainless steel. He adds: “It’s not very often you get a col- deposits -- would be mined exclusively American steel maker and coal miner laborative effort from a half a dozen mining underground. The blockade was lifted on Cliffs Natural Resources [CLF-NYSE] liked companies in a developing camp. It’s highly March 19. Black Thor’s size and grade enough to competitive and the people with the eco- “The blockade was never specifically launch a friendly takeover bid for Freewest nomic deposits generally make the rules.” directed at Noront. We carried the burden in the fall of 2009. The bid trumped a hos- The rules changed this winter when of the blockade because we were the only tile offer from Noront, which was under members from the Marten Falls and ones planning any work,” Hanson says. new management after Nemis decided to Webequie First Nations blockaded two ice “I think at the end of the day the block- step down following a coup attempt by airstrips serving the isolated McFauld’s ade will end up being a benefit to Noront institutional investors in the fall of 2008. Lake area. The groups were protesting the because we have broken through to the After several escalating bids from both lack of consultation on development, espe- (First Nations) communities. We have dem- sides, Cliffs landed Freewest for $240 mil- cially a proposed 350-kilometre railroad onstrated to them that we’re willing to lion in February 2010. that would extend north from Nakina, work with them to improve their future.” Noront President and CEO Wes Hanson, Ontario, where the rail line now ends. Noront hired Missanabie Cree Chief who took the helm of the promising junior A railroad would be used to haul ore Glenn Nolan as its Vice-President of in June 2009, describes Noront’s relation- from mines in the McFauld’s Lake area. Aboriginal Affairs. He is also in line ship with Cliffs as “cordial.” Rail or road are the only cost-effective to become the future president of the “The Noront story has gotten cloudy means of shipping ore from such a remote influential Prospectors and Developers because of our bid for Freewest. I think location. Association of Canada. Noront has also a lot of people thought that it meant that The Marten Falls First Nation wants secured a government lobbying firm based we were removing our focus and starting any railroad or road development to go in Ottawa. to think that chromite was the be-all and through Marten Falls, which, in their The Ring of Fire is certainly on the end-all in the Ring of Fire and that’s not view, would encourage development. Ontario government’s radar. In a March 29 the case,” Hanson explains. “There were Under the current proposal, the line would speech, Ontario Finance Minister Dwight M AY 2 0 1 0 www.resourceworld.com 9
  • 17. Duncan called the Ring of Fire “one of earn up to a 60% interest (30% each) in Big the most exciting opportunities for all of Daddy from Cliffs. Each junior now owns Ontario… This could be as exciting as the 26.5% of Big Daddy. discovery of nickel in the 19th century (in Probe Mines is planning its most exten- the Sudbury basin).” sive exploration program yet, where all of The Ontario government has set aside its McFauld’s Lake properties will see con- $45 million to train members of First current work programs. Phase III drilling Nations and other northerners to become is planned on its high grade Black Creek skilled tradesmen such as carpenters, Chromite discovery, as well as additional mechanics and heavy equipment operators exploration on the nickel-copper potential – the kinds of jobs necessary to develop on claims adjacent to Noront’s Eagle’s Nest a camp without any infrastructure. The Deposit. (see sidebar P for more details) .14 Ontario government will also introduce Fancamp has launched a 3,000-metre drill apprenticeship programs and other train- program on its McFauld’s property. Initial ing initiatives in the coming years. targets include the shallow nickel mineral- Hanson says he is not expecting much ization encountered in holes FN-08-02 and more support than that – yet. “The FN-08-10 at a vertical depth of 45 metres. government’s role is to develop infrastruc- Drilling is also planned on a major gravity ture – roads, highways, hospitals and anomaly, which is believed to be an offset power lines. It’s too early for government extension of the Big Daddy and Black Thor involvement. They have to be to able to con- chromite deposits, situated immediately ceptualize the future and it’s good that they east. recognize that development of the Ring of While the drilling in the Ring continues Fire as potentially something that’s coming and discoveries add up, Hanson cautions down the track,” Hanson says. those who think development is around Noront will spend between $20 and $25 the corner. million on drilling in 2010. Most of that “There is still nobody (in the Ring of will be spent upgrading the resource in the Fire) who has demonstrated that they have upper 1,200 metres of Eagle’s Nest nickel- a reserve up there. There’s lots of miner- copper-gold-PGMs project. Noront also alization, lots of exciting discoveries but hired consulting firm Micon International nobody has proven that they can bring it to conduct a feasibility study on the project. to market at a profitable rate,” Hanson said. Cliffs, meanwhile, plans to do some drill- However, that may only be a matter of ing of its own. Cliffs will upgrade its Black time as further drilling is upgrading min- Thor resource to the measured and indi- eral resources to the reserve category and cated category by the end of 2010 through feasibility studies get underway. n an $8 million, 20,000-metre drilling pro- gram employing as many as three drills. “The immediate goal at Black Thor would be to upgrade our inferred resource to measured and indicated,” says Hoy, who is now Vice-President of Exploration and Development with Cliffs. “We expect that to begin in July.” The Spider-KWG JV has wrapped up drilling on the Big Daddy Chromite Project, situated roughly six kilometres west of Black Thor, and is about to publish a mea- sured and indicated resource estimate. The early read is that Big Daddy won’t be the biggest but could be the highest-grade chro- mite deposit in the camp. Spider-KWG can 10 www.resourceworld.com M AY 2 0 1 0
  • 18. Nevada shopper by Brian Sylvester Three dig rigs at work on the Pumpkin Hollow Copper Project located 100 miles southeast of Reno, Nevada. Photo courtesy Nevada Copper Corp. NEvAdA COPPEr IS IN TAlkS wITH TwO CHINESE COMPANIES ANd A NOrTH AMErICAN ‘MAJOr’ ABOUT POSSIBlE TAkEOvEr BIdS. CAPSTONE MINING ANd A CHINESE COMPANY AlrEAdY OwN SIZEABlE STAkES. THAT lEAvES ONlY TwO qUESTIONS – wHEN ANd HOw MUCH? To listen to Nevada Copper Corp. [NCU- shares, it would amount to just slightly the same deal, Capstone promised Nevada TSX] President and CEO Giulio Bonifacio tell less than a 5% stake. ZTS also secured the Copper that it would not push its stake in the it, there are plenty of well-heeled companies right to take a direct interest in Nevada junior beyond 20% without Nevada’s board kicking the tires of his company’s flagship Copper down the road. approval. Nevada Copper, in turn, would Pumpkin Hollow copper-gold-silver-iron Then there are the discussions Bonifacio drop the Capstone takeover stipulation if project in Nevada. He should know; he’s has had with a North American major about another company took a run at it. Capstone the one shopping it. Bonifacio flew to China a possible takeover. One North American- operates the Cozamin Mine in Mexico and about a dozen times in 2009 and readily based producer, Capstone Mining Corp. the Minto Mine in the Yukon. The combined admits he’s courting the Chinese. [CS-TSX], already owns a significant chunk production from both mines is roughly 100 “It’s in our best interest to have and of Nevada Copper. In late October 2009, million lbs. of copper per year, which would nurture discussion with Chinese groups,” Capstone bought a 10% stake in the junior almost double if it acquired Nevada Copper. Bonifacio says, noting that at least two of for $11.3 million, or 4.5 million units at The deal with Nevada Copper certainly those groups are taking a serious look at $2.50 each. The units consist of one share places Capstone in a favourable position for Pumpkin Hollow. and half a warrant, with each whole warrant an eventual takeover bid. One state-owned Chinese company has exercisable at $3 for two years. If Capstone, “That’s why [the deal with Capstone] already plowed some cash into Nevada exercises its options, and that certainly was done. [Capstone] obviously wants Copper. In June 2009, Zhongtiaoshan Non- seems likely, Nevada Copper would net to do something, probably on a grander ferrous Metals Group, or ZTS, bought an another $6.8 million. scale,” Bonifiacio says. “Anytime you do a equity stake in the company via a US $2 That would give Capstone almost 17% deal that’s got non-aggression clauses on it million convertible debenture, which is of Nevada Copper, roughly 2% shy of the and a director’s seat at a certain percentage earning 7% per year and matures in late 19% it needs to get a board seat and access [of ownership] there’s a reason for that.” 2010. If ZTS converts the debenture into to all of Nevada Copper’s internal data. In Bonifacio says the deal gives Nevada 52 www.resourceworld.com February 2010
  • 19. MINING Copper almost enough cash to finance Another development scenario that leaves operations through to a feasibility study out the open pit would cost US $162 million. on Pumpkin Hollow, slated to be finished The mine life would be shaved by two years by late 2010 or early 2011. A prefeasibility to 12 and production would increase in each study is currently under way. of the first four years, from 2,500 tonnes per Pumpkin Hollow, near Yerington, day in the first year to reach peak produc- Nevada, in the walker lane mineralized tion of 7,500 tonnes per day in year four. belt southeast of reno, is an iron oxide The company would mine 26 million copper gold deposit (IOCG). It’s basically tonnes grading 1.95% copper to produce a skarn system associated with a cluster 853 million lbs. copper. The cash costs of porphyries. Most of the mineralization would be slightly lower at US $1.03 per Giulio Bonifacio, President and is in limestone, largely environmentally lb. At US $2.50 per lb. copper, the Irr is CEO of Nevada Copper Corp. friendly waste rock. The site is also close 42%, and the NPv reaches US $414 mil- Photo by Jeremy Neiuwkirk. to rail and power infrastructure. lion, using an 8% discount. The payback resources at Pumpkin Hollow use a 0.20% period would be 2.6 years. probably the most-mining friendly state in copper cut-off and are as follows: 125 million “The beauty of this asset is that it’s got America. tonnes grading 0.67% copper for 1.671 bil- ‘optionality’… we can do it on a staged “The one negative I look at relative to lion lbs. copper, 331,000 oz. gold, and 9.78 basis. You’ve got the ability to take it for- state-owned [Chinese] companies is that million oz. silver in the measured category. ward in an underground scenario at a they take a long, long time [to make a deci- Another 363 million tonnes running 0.54% significantly lower cap-ex – less than US sion],” Bonifacio says. “If you look at the copper for 3.947 billion lbs. copper, 652,000 $200 million – and you could be very Corriente deal, that deal was ongoing for oz. gold, 23.983 million oz. silver are clas- profitable at copper prices below US $2.00 a lengthy period of time, but at the end sified as indicated. The inferred resource is a pound,” says Bonifacio. of the day, shareholders have been served 440 million tonnes grading 0.42% copper A study in March 2008 looked at a very well by that transaction.” for 3.695 billion lbs. copper, 468,000 oz. 60,000-tonne-per-day combined open pit Others, too. when the Chinese firm gold and 21.214 million oz. silver. The total and underground operation. In that case, Jinchuan bought Tyler resources’ and its resource tallies to 9.3 billion lbs. copper, the NPv was US $552 million at US $1.75 Bahuerachi deposit in Mexico in 2008, it 1.45 million oz. gold, 55 million oz. silver per lb. copper or US $1.7 billion at US $3.00 paid about US 4.5¢ per lb. copper. Chinalco and 130 million tonnes of contained iron per lb. copper. Both scenarios used an 8% paid about US 3.5¢ per lb. when it bought in 361 million tonnes at an average grade of discount rate. The capital costs, though, Peru Copper in 2007. At presstime, shares 36% iron at a 20% iron cut-off. were estimated at US $780 million. in Nevada Copper were trading at around An ongoing drill program is expected Bonifacio is a certified general accoun- $3.20, or roughly 1.5¢ per lb. of copper. to convert a large portion of the inferred tant, and learned from Goldcorp’s Ian Telfer “This project is grossly undervalued,” resources into the measured and indicated with vengold, a junior that had properties Bonifacio says, perhaps not taking into categories. in the kilometre 88 district of venezuela. account that U.S. Steel Corp. [X-NYSE] A recent study on Pumpkin Hollow Two other members of Nevada Copper’s has a 6% NSr on Pumpkin Hollow. The examined a 7,500-tonne-per-day operation board, Joe kircher and Brian kirwin, were steel producer found Pumpkin Hollow that would employ a high-grade starter also with vengold. The management team in 1960 using airborne geophysics, but pit during the first three years of a 14-year at American Bonanza Gold is remarkably the major never developed the deposit. mine life. The capital cost was US $192 mil- similar to that of Nevada Copper, if you A private company bought it from U.S. lion at US $2.50 per lb. copper. The capital change some titles. kircher was once on Steel and in 2005 sold it to Bonifacio and costs were also the same at US $2.00 per lb. the board, too. The recent sale of Corriente private interests, which then took it pub- copper and US $3.00 per lb. copper. resources and its Mirador and Panantza-San lic through a shell company listed on the In total, Nevada Copper would mine 34 mil- Carlos copper projects to China’s Tongling TSX venture Exchange known as a CPC. lion tonnes grading 1.88% copper at a cash Nonferrous Metals Group Holdings Co. and The betting here is that it Pumpkin cost of US $1.06 per lb. (including byproduct China railway Construction Corp. (through Hollow will see yet another owner before credits). That would amount to almost 1.1 their jointly owned subsidiary CrCC- long, shopping or no shopping. n billion lbs. copper. At US $2.50-per-lb. cop- Tongguan Investment Co.) bodes well for per, the internal rate of return (Irr) is 44% Nevada Copper. and the net present value (NPv) is US $498 Chinese investors are looking with million at an 8% discount. It would take 2.4 increasingly regularity at large base metals years to repay the capital costs. projects in safe jurisdictions, and Nevada is February 2010 www.resourceworld.com 53
  • 20. I N C A N A D A Is commodity leveraging killing diamond exploration? BY BRIAN SYLVESTER in 2008 when Diamonds North drilled an hedging. I t was July 29 when an email appeared area with nickel potential. One hole re- “Anybody who was buying the stock in my inbox from Diamonds North Re- turned roughly 2.5% nickel over 9 metres was getting a shot at diamonds but also a sources (DDN-V). in a 35-metre zone containing 1.05% nickel shot at nickel,” Kolebaba says. “It diversifies The junior had sent out a message from and 0.26% copper. (investors) within the company.” president Mark Kolebaba telling sharehold- “Diamonds are not the most exciting ers that while Diamonds North still consid- thing on the market right now,” Kolebaba ered the Amaruk diamond project its top continues. “The majority of our sharehold- priority, that the cash-starved junior would ers are 100% diamond-based, they don’t continue to assess its “extensive diamond care about any other commodities. But they property portfolio” for other commodi- do like that they have a shot at something ties in these “unprecedented” economic else because they know (diamond explora- conditions. tion is) high risk.” And why not, in 2006 the junior spun During the previous five years, Dia- out 1.62 million hectares of uranium po- monds North has outlined a copper-silver tential in Nunavut to form Uranium North opportunity, 20 gold occurrences, about 10 Resources (UNR-V). nickel-copper prospects, and a couple more The land Diamonds North gave up had that could host rare earth elements. already been explored for diamonds and Diamonds North fed the market more seemed to offer little gem potential. fruit from its commodity leveraging plan in “When uranium was taking off, (raising mid-October when the junior announced money for) diamonds was still quite tough. Photo Credit: Diamond North Resources that it had found gold in surface samples And for us to have some uranium interests Mark Kolebaba, president, Diamond North (see story on page 22) at its PB1 gold pros- got people looking at the stock again. It al- Resources pect at Amaruk. lowed us finance and do what we do on the A continuous rock chip sample across diamond side, as well as spin out a uranium Diamonds North dubbed it Tunerq and an oxidized sulphide zone on PB1 yielded company,” Kolebaba explains. suddenly the diamond junior had a nickel 9.4 grams gold per tonne over 3 metres. Uranium North has since completed play. The junior recently raised $500,000 A nearby grab sample offered more than a National Instrument 43-101-compliant and Kolebaba says the nickel prospects twice that grade. inferred mineral resource of 19.3 million helped get him the money. The news sent the shares to $0.32 on lbs. uranium at a grade of 0.04% U3O8 “When we find something, we have two Oct. 19 from a close of $0.28 on Oct. 16, (at a cutoff of 0.01% U3O8) for the Main choices: take it and try to add value for our and volume increased about tenfold. But Zone deposit on its Amer Lake property shareholders, or leave it for somebody else,” after briefly flirting with $0.40, Diamonds in Nunavut. Kolebaba argues. North shares closed the week at about the The junior believes Main Zone is part Not every junior diamond explorer is same place they started. of a much larger deposit on the property. spinning out companies but others, like While Kolebaba argues that this sort of If that theory holds true, it would be good Arctic Star Diamond (ADD-V), are following leveraging pays dividends, other explorers for both juniors. in the path of Diamonds North and giving prefer to steer clear of commodity lever- Diamonds North once held about 10% base metals and gold discoveries top billing aging or risk alienating diehard diamond of Uranium North (Kolebaba is president on press releases. investors. and CEO of it, too) but has sold some That means some of Canada’s most “We never got to the stage where we shares to help fund ongoing exploration promising diamond explorers are spending wanted to change strategy and start go- work. Most of that cash — but not all of a lot of time and as much as one-quarter of ing after things other than diamonds,” ex- it — went toward advancing Amaruk. Most their limited funds searching for commodi- plains Matt Manson, president and CEO of the rest was spent examining the mam- ties that are not diamonds. of Stornoway Diamond (SWY-V). “We are moth Amaruk claims for signs of nickel, Kolebaba doesn’t see it that way. To a diamond explorer and that’s what we do. copper-silver and gold. him, leveraging other commodities on his Our shareholders invest in us because we’re And those efforts paid modest dividends property is strategic, something akin to chasing after diamonds.” 16 Diamonds in Canada November 2009
  • 21. I N C A N A D A mine their database to see what was there,” as is said, is history. Manson says. But if diamond explorers are seeking Another means of finding alternative commodities that may or may not pay commodities is to have labs analyze drill off, isn’t that reducing the chances of an- core for not only diamonds but precious other diamond deposit being discovered? and base metals, and uranium. While Kole- Or worse, taking more of them out of the baba has his core analyzed for all commodi- diamond exploration business altogether? ties, Stornoway doesn’t test its core for base Kolebaba, who has been working in dia- metals. mond exploration since 1991, says that if “We’ve never found anything peculiar his company found a significant gold de- enough to warrant a press release,” Manson posit, he would likely either spin out either says. “If we ever stumble across a world- the gold or diamonds assets. Either way, class deposit, I’m sure we’ll press release it diamond exploration continues, Kolebaba but it hasn’t happened yet.” says, adding that his first love is diamonds. Perhaps the most famous tale of a dia- “If you find a good diamond deposit, it’s Photo Credit: Diamond North Resources mond explorer finding another commodity more valuable than a good gold deposit. If Matt Manson, president and CEO, Stornoway is the Voisey’s Bay nickel deposit in Lab- you find and Ekati or a Diavik, the margin Diamond rador. Geologists from Diamonds Fields on those things is phenomenal.” Manson says that the diamond explora- Diamond exploration by its nature has tion business is cyclical and that the amount geologists prospecting in remote areas over of money going into the ground will be vast swaths of land that have rarely if ever largely determined by success. been subject to geological analysis. “The Peregrine (Chidliak) discovery, After airborne electromagnetic surveys for example, probably is creating new dia- are flown over thousands of square kilome- mond companies. New diamond compa- tres, geologists hit the ground to investi- nies are able to raise venture capital to gate any noteworthy anomalies the surveys go and explore for diamonds once again, revealed and determine if they warrant which really hasn’t been the case for the drilling. last couple of years,” says Manson, who has Samples are taken and sent to labs where spent about 15 years in Canadian diamond they are subjected to Inductively Coupled exploration. Plasma Mass Spectrometry or ICP-MS, an Manson adds: “You have a tradition in analytical technique used for elemental this country of creative and entrepreneur- determinations. ial explorers who explore for one thing or This helps diamond juniors find indica- Photo Credit: Shore Gold explore for another thing and their share- tor minerals that sometimes lead to kimber- George Read, senior vice-president of holders like that because there is always a lites and other targets. exploration with Shore Gold fresh story.” “With De Beers it was standard proce- Read agrees and says diamond explora- dure to collect a 30-kg geochem sample (later sold to Inco, now CVRD, for billions tion is not going anywhere. with every diamond sample, whether that following a fierce bidding war with Falcon- “There is always going to be a big fasci- would be an alluvial sample or a till sample, bridge, now Xstrata) set their helicopter nation in diamond exploration. It’s an ex- there were geochem samples collected over down to investigate a large gossan. The rest, citing thing to do once it’s in your blood.” the entire world on De Beers prospects,” says George Read, Shore Gold’s (SGF-T) senior vice-president of exploration, who spent 12.5 years working with De Beers. “And that was because (De Beers) went into a lot of unusual places and there were often opportunities in the geochem samples Since 1967 that were unknown by other people.” (Read Design and management Design and management adds that De Beers usually passed any “se- of exploration programmes, of exploration programmes, cret” information on to Anglo American independent technical and independent technical and (AAUK-N) and the now defunct Minorco.) valuation reports, property valuation reports, property evaluations, project generation, evaluations, project generation, “Most diamond companies end up hav- GIS and geophysical consulting GIS and geophysical consulting ing a big database of other anomalies that they’re really not going to focus on chasing. tel: Canada 416-365-0930 tel: Canada 416-365-0930 When the markets bottomed out last win- www.mphconsulting.com www.mphconsulting.com ter everybody sort of had their (geologists) November 2009 Diamonds in Canada 17
  • 22. AUTHORIZED REPRINT MARCH 19-25, 2007 VOL. 93, NO. 4 • SINCE 1915 FROM 1 Reprints of any article published in The Northern Miner or on our website are available. We will provide them in a www.northernminer.com PDF format. tnm@northernminer.com or 416-510-6768 PDAC sends Bill Dennis award to The Rock SIX OTHER AWARDS PRESENTED WWW.ENVISIONDIGITALPHOTO.COM From left: Allan Keats and Michael Stares, representing Newfoundland and Labrador’s Keats-Stares clan — winner of the Prospectors and Developers Association of Canada’s Bill Dennis Prospector of the Year Award — with former PDAC president Peter Dimmell at the awards ceremony during the PDAC convention. Allan Keats was careful to thank who stood by us through many Stares, Crockers, Barretts and Smiths — those who matter most when he lonely days and nights. And into prospecting over a 40-year period. took the podium as a represen- because without them, there It all started with patriarch Ted Keats, tative of Newfoundland and would have been many more Allan’s father, who now suffers from Labrador’s Keats-Stares clan, lonely days and nights,” Keats breathing problems and could not attend and winner of the Bill Dennis said in his Newfoundland the awards ceremony. Prospector of the Year Award — tongue, noting that the family Ted’s great grandfather, Suley Joe of the one of seven presented during had witnessed only two divorces Mi’kmaq First Nation, returned to Port the annual Prospectors and so far. Blandford, Nfld., in the late 19th century BY BRIAN Developers Association of SYLVESTER That’s not bad considering with a high-grade silver sample that he Canada awards evening. that the “family” has sent no less had found on a hunting trip. As legend has “And a special thank you to our wives, than 18 men from five clans — Keats, it, he talked of a massive silver showing
  • 23. AUTHORIZED REPRINT MARCH 19-25, 2007 VOL. 93, NO. 4 • SINCE 1915 FROM 2 Reprints of any article published in The Northern Miner or on our website are available. We will provide them in a www.northernminer.com PDF format. tnm@northernminer.com or 416-510-6768 back in the bush. Allan’s brother Calvin dis- The sample — and the legend — was covered the Linda and Snow passed down from generation to genera- White veins on the Golden tion. In 1969, Ted and Allan took the silver Promise gold property in cen- nugget to Noranda’s Newfoundland office tral Newfoundland and urani- where they were offered prospecting um showings in Labrador. The work in the upper Terra Nova River area. oldest brother, Suley, named They signed on for $250 per month plus after his grandfather, teamed food and supplies and were flown to a with Calvin to discover stibnite nearby lake. They never did find that lost boulders leading to the discov- silver showing, but they found some other ery of the Beaver Brook anti- impressive items along the way. mony deposit, also in central Throughout the 1970s and ’80s, Ted was Newfoundland. And brother- involved in exploration leading to the in-law Calvin Crocker has Point Leamington, Burnt Pond and Tally prospected all over the world, Pond-Duck Pond base metals discoveries most recently with Linear by Noranda. Gold (lrr-t, lgcff-o) on its Allan’s discovery of disseminated Ixhuatan property in Mexico. base metals mineralization and massive Ted Keats’ grandsons carry sulphide boulders, along with prospect- on the tradition. Stephen Stares ing discoveries by others, including his is the CEO of Benton brother Fred, kept Noranda in the Tally Resources (btc-v), which he Pond-Duck Pond area. This led to the runs with his brother Michael. discovery of the Boundary and Duck The two discovered massive Pond deposits by Noranda geologists in sulphides at the Aldina pros- 1977 and 1986, respectively. Duck Pond pect, west of Thunder Bay, Ont. WWW.ENVISIONDIGITALPHOTO.COM was recently brought into production by Michael joined his uncle on Alan R. Hill, president and CEO of Gabriel Resources, Aur Resources (aur-t, aurrf-o). stage to accept the award and accepts an e3 Environmental Excellence in Exploration Award for the work done at his company’s Rosia told the audience that Montana gold project in Romania. prospecting in northern ‘This is a great reward Ontario has provided him with so many time, more than 20 non-governmental adventures that even “Indiana Jones organizations opposed development of for doing things right would be jealous.” Rosia Montana; that’s now down to one. PDAC president Pat Dillon, master of “This is a great reward for doing things and being accountable.’ ceremonies for the evening, noted that right and being accountable,” Gabriel the mining community has “a lot to learn” president and CEO Allan Hill said. Alan R. Hill, president and from how the Keats-Stares clan raised its The existing Rosia Montana open pit CEO of brood. was operated by a state-owned company Gabriel Resources for decades. Over that period discharges e3 Awards were not monitored and now water sup- Adding to his earlier successes, Allan In a bold move, the PDAC presented plies contain 3.4 times the legal limit of worked with his son Kevin to stake and Gabriel Resources (gbu-t, gbrrf-o) arsenic, and zinc, 110 times. explore the Linear and Joe Batts Pond with its Environmental Excellence in The World Bank estimates that 500 gold properties in central Newfoundland, Exploration award, largely for the com- Romanian mines have been closed over both now under option to Paragon munity engagement work Gabriel has the past 15 years, leaving the Romanian Minerals (pgr-v, paonf-o). done at its 10-million-oz. Rosia Montana government cash-strapped. Brother Fred spent the last 35 years with gold project in Western Transylvania, Furthermore, the state-run RosiaMin Noranda (then Falconbridge and now Romania. operations officially closed at the end of Xstrata (xsraf-o, xta-l)). He is employed The project has been fraught with May 2006, as was required under the on the Raglan nickel project where he is problems since the company first started agreement governing Romania’s acces- credited with several discoveries. exploring the area in the late 1990s. At one sion to the European Union. But in its
  • 24. AUTHORIZED REPRINT MARCH 19-25, 2007 VOL. 93, NO. 4 • SINCE 1915 FROM 3 Reprints of any article published in The Northern Miner or on our website are available. We will provide them in a www.northernminer.com PDF format. tnm@northernminer.com or 416-510-6768 burgeoning California aggregates market. But before finding some promising deposits on Vancouver Island, the com- pany approached local First Nations bands and asked for permission to explore on their traditional lands. Polaris even asked First Nations representatives to join the search for deposits, and pro- vided First Nations with an early veto on development — uncharted waters for a mineral exploration company. The Orca deposit was found about 4 km from the town of Port McNeill, B.C., T.N.M. NUGGET PDAC AWARDS BILL DENNIS PROSPECTOR OF THE YEAR AWARD Keats-Stares Clan of Newfoundland and Labrador VIOLA R. MACMILLAN DEVELOPER’S AWARD James Gill, President and CEO, WWW.ENVISIONDIGITALPHOTO.COM Aur Resources Polaris Minerals president and CEO Marco Romero accepts the PDAC’s e3 Environmental Excellence in Exploration Award. THAYER LINDSLEY INTL absence, unemployment in the village of has already built a freshwater pipeline DISCOVERY AWARD Rosia Montana has soared to 70%. serving the nearby town of Bucium. Northern Dynasty Minerals Gabriel hopes to change that. The And to ease concerns that ancient E3 ENVIRONMENTAL company says its US$2.5-billion project Roman artifacts might be lost during EXCELLENCE IN will create an average of 1,200 jobs dur- development, Gabriel spent $10 million EXPLORATION AWARD ing construction. That number will drop on the Rosia Montana National Patrimony Gabriel Resources to around 600 once the mine enters pro- Research Program, which has already duction. At that point, a percentage of saved numerous artifacts. E3 ENVIRONMENTAL revenue from every ounce of gold will be The Romanian government will soon EXCELLENCE IN EXPLORATION AWARD set aside to reclaim the Rosia Montana decide whether to grant final approval for Polaris Minerals lands and waters affected by resource the project and the e3 award likely won’t extraction. hurt that process. DISTINGUISHED SERVICE Gabriel submitted a 5,000-page envi- The other e3 award was pre- AWARD ronmental impact assessment almost a sented to Polaris Minerals (pls-t, Canada’s Government year ago and since then, has held 14 pub- polmf-o) for the way the company Geoscientists lic meetings across Romania, as well as has built relationships with First SPECIAL ACHIEVEMENT two in Hungary. The assessment includes Nations communities on Vancouver AWARD restoration pledges that would be legally Island. Tom Schroeter, B.C.’s Senior binding for the 17-year life of the project. In 2001, Polaris began to search for con- Regional Geologist Gabriel plans to build a new school, struction aggregates along the B.C. coast medical clinic, and a community centre. It as part of an overall effort to supply the
  • 25. AUTHORIZED REPRINT MARCH 19-25, 2007 VOL. 93, NO. 4 • SINCE 1915 FROM 4 Reprints of any article published in The Northern Miner or on our website are available. We will provide them in a www.northernminer.com PDF format. tnm@northernminer.com or 416-510-6768 Dickinson acquiring interests in Pebble. A deal was struck in two parts. The first involved all of the resource lands that embraced the Pebble West deposit in exchange for 1.8 million shares worth about $10 million. A 50% earn-in on the surrounding exploration lands required 60,000 ft. of drilling. Northern Dynasty sent in a team led by international exploration manager Mark Rebagliati to examine the exploration lands. The team found two porphyry deposits with only moderate grades but completed its earn-in requirements. Rebagliati and his team refocused on Pebble West, initially re-logging some 16,000 metres of core from earlier WWW.ENVISIONDIGITALPHOTO.COM drilling. PDAC president Patricia Dillon with the team from Northern Dynasty Minerals, winner of The following season, Northern the Thayer Lindsley International Discovery Award. From left: Executive chairman Robert Dynasty returned and during that sum- Dickinson, president and CEO Ron Thiessen, resources manager David Gaunt and international exploration manager Mark Rebagliati. mer and the next, the company expanded the Pebble West deposit and upgraded on the edge of the Cluxewe River. silt recovered from the plant, which 75% of its resource to the measured and When Polaris applied for its mineral uses a closed-circuit water recycling indicated categories. exploration permits for the Orca aggre- system. During the 2004 drilling program the gate deposits, not one party opposed the geological team noted a gradual but pro- project, a rare feat for an extraction com- Thayer Lindsley International gressive increase in the intensity of alter- pany looking to mine on Vancouver Discovery Award ation, quartz veining and tenor of copper, Island. Even rarer were the numerous let- The Thayer Lindsley International gold and molybdenum concentrations ters of support Polaris received from Discovery Award recognizes explorers over more than 1 km. Island residents. credited with a mineral discovery any- Drilling the following season went on During exploration, Polaris stumbled where in the world. well into October 2005 but resulted in the upon waste that had been partially buried Northern Dynasty Minerals (ndm-v, Pebble East deposit — and it was of sig- by another company that had worked in nak-x) received the award for its massive nificantly higher grade than Pebble West. the area. Polaris decided to clean it up and Pebble East porphyry copper-gold- What’s more, the deposit remained open budgeted $150,000 for the job, but would molybdenum deposit in Alaska. in all directions. eventually spend about $600,000 to get it The original Pebble deposit, now The company recently released a new done. known as Pebble West, was discovered in resource estimate. At a 0.6% copper- Polaris owns 88% of the Orca quarry 1986 when a team from Cominco, led by equivalent cutoff, the estimated inferred with the balance held by the Namgis First Phil St. George, happened upon some mineral resource in Pebble East now Nation. The Kwakiutl First Nation negoti- gold showings in southwestern Alaska. stands at 3.4 billion tonnes grading 1% ated a similar interest in the form of an Despite outlining about 1 billion tonnes copper equivalent or 42.6 billion lbs. cop- impact benefits agreement. of inferred copper-gold-molybdenum per, 39.6 million oz. gold and 2.7 billion Orca is the largest sand and gravel mineralization, Cominco put the project lbs. molybdenum. quarry ever developed in Canada and on the shelf. Just before Cominco’s merg- London mining house Rio Tinto contains enough aggregate material for at er with Teck in 2001, Northern Dynasty (rio-n) has purchased 19.8% of Northern least 25 years of production. The $53-mil- executive chairman Robert Dickinson Dynasty’s shares. lion Orca plant will process 6 million and president and CEO Ron Thiessen Dickinson, Thiessen, Rebagliati and tonnes annually at full capacity. started talking to Cominco management resources manager David Gaunt accepted Some refilling will be done with about Northern Dynasty and Hunter the award.
  • 26. AUTHORIZED REPRINT MARCH 19-25, 2007 VOL. 93, NO. 4 • SINCE 1915 FROM 5 Reprints of any article published in The Northern Miner or on our website are available. We will provide them in a www.northernminer.com PDF format. tnm@northernminer.com or 416-510-6768 spirit of collaboration” between the GSC and the various provincial and territorial surveys. Special Achievement Award Tom Schroeter, the senior regional geolo- gist with the British Columbia Geological Survey, was presented with the PDAC’s Special Achievement Award. Schroeter is well-known in B.C.’s min- ing community, but his legacy will likely always be tied to the Canadian Institute of Mining, Metallurgy and Petroleum’s Special Volume 46: Porphyry Deposits of the Northwestern Cordillera of North America. In 1995, Schroeter steered a 12- member editorial board that published the nearly 900-page volume, after about three years of writing and editing. The publication is still considered the “bible” of porphyry deposits. Viola R. MacMillan Developer’s Award WWW.ENVISIONDIGITALPHOTO.COM The Viola R. MacMillan award — given to PDAC convention chair Rod Thomas (left) presents a special achievement award to Tom a person showing leadership in manage- Schroeter, senior regional geologist with the B.C. Geological Survey. ment and development of mineral Distinguished Service Award The invaluable support given to Canadian mineral exploration by government geo- scientists was recognized by the PDAC with its Distinguished Service Award. Public geoscience got its start in Canada under Sir William Logan, best known as the founder of the Geological Survey of Canada (GSC), which was cre- ated in 1841. Under Logan, the GSC published the first geological map of Canada in 1869. Public geoscience and this country’s geoscience knowledge continue to be a competitive advantage. Mark Corey and Grant Abbott of the Geological Survey of Canada accepted the award on behalf of Canadian govern- WWW.ENVISIONDIGITALPHOTO.COM ment geoscientists. From left: PDAC vice-president Jon Baird presents Mark Corey and Grant Abbott, co-chairs Corey acknowledged the work of the of the National Geological Surveys Committee, with the Distinguished Service Award. late Marie-Claire Ward, a staunch advo- Corey is the assistant deputy minister in the Earth Sciences Sector with Natural Resources Canada and Abbot is the director of the Yukon Geological Survey. Both men accepted the cate of government funding for geo- award on behalf of government geoscientists throughout Canada. science; while Abbott trumpeted the “real
  • 27. AUTHORIZED REPRINT MARCH 19-25, 2007 VOL. 93, NO. 4 • SINCE 1915 FROM 6 Reprints of any article published in The Northern Miner or on our website are available. We will provide them in a www.northernminer.com PDF format. tnm@northernminer.com or 416-510-6768 made the Louvicourt discovery in June 1989. ‘These are very good times. Yet I encourage you to Not since Texas Gulf’s Kidd Creek dis- covery in 1963, had anyone in Canada be open to new ideas in mineral exploration. We found a base metals deposit the size of can find new deposits Louvicourt. Louvicourt closed in 2005, but not here and develop them. Let’s get out before producing more than 1 billion lbs. of copper and about half that amount in there and do it.’ zinc. James Gill, president and CEO of Aur Resources Aur used the cash flow from Louvicourt to buy a 70% interest in the Andacollo copper-gold mine in Chile resources — was presented to James Gill, and 1989 that land package yielded eight (Aur now owns 90%). It also owns about president and CEO of Toronto-based Aur small gold deposits, two of which — three quarters of Chile’s Quebrada Blanca Resources. Norlarctic and Kierens — would become copper mine. Gill started Aur in 1981 with $250,000. operating mines. “These are very good times,” Gill said, The company now boasts a market cap of Not far away in the Val d’Or camp, Aur accepting his award. “Yet I encourage you roughly $2 billion — or 8,000 times its ini- owned a royalty interest on the to be open to new ideas in mineral explo- tial startup capital. Louvicourt property, held by Quebec ration. We can find new deposits here Gill started by buying a land package in Crown corporation Soquem. and develop them. Let’s get out there and Quebec’s Val d’Or camp. Between 1981 The ball really got rolling when Aur do it.” WWW.ENVISIONDIGITALPHOTO.COM WWW.ENVISIONDIGITALPHOTO.COM Aur Resources president and CEO Jim Gill accepts the Teck Cominco president and CEO Don Lindsay toasts the PDAC on its Viola R. MacMillan Developer’s Award. 75th anniversary.