Manitoba's Mineral Industry

Exploration and Development Highlights 2006

Base Metals
Precious Metals
Specialty/Industrial Minerals

Surging metal prices driven by sustained high demand continued to stimulate exploration spending in Manitoba in 2006. Company spending intentions for the year are estimated at $52.0 million, comparable to the $52.9 million spent in 2005.

Base Metals

Historic highs in nickel prices coupled with Manitoba’s proven world-class nickel deposits generated new exploration activity and spurred new development and expansion plans for existing facilities in the province.

Inco Limited reported a significant boost to its capital spending budget, which includes a $45 million investment in a new deposit, the 1-D Lower orebody located at the north end of its Thompson facility. Construction started early in 2006 and first production began in October, sooner than originally anticipated. Overall, the company is planning on spending an average of $150 million annually over the next two years on its infrastructure at Thompson.

Ongoing drilling by Inco near its Thompson mines has demonstrated significant potential for open-pit mining of two new deposits, the Thompson 1-C Surface zone and the 1-D Surface zone. Drilling projects to locate new zones of nickel mineralization within and near existing infrastructure are also returning encouraging results at depth at both the Thompson and Birchtree mines.

On October 24, Companhia Vale do Rio Doce (CVRD) of Brazil acquired control of Inco Limited, a deal which will ultimately create the world’s second largest diversified miner. CVRD reported they have no plans for selling any of Inco’s assets; their mandate is to grow the nickel operations. Once the acquisition is finalized, Inco shares will be delisted and the new company, to be called CVRD Inco Limited, will be based in Toronto and responsible for CVRD’s global nickel business. To ensure the long-term success of CVRD Inco, Canadian expenditures will be increased in a number of areas, including exploration and research and development for a three-year period.

Crowflight Minerals Inc. has a number of projects under option from Xstrata Nickel (formerly Falconbridge Limited) in the Thompson Nickel Belt. The most advanced is the past-producing Bucko Lake nickel deposit at Wabowden where Crowflight has completed a program of infill drilling to upgrade Bucko’s Indicated Resource figure. Based on the 2006 drilling, the deposit is now estimated to contain NI 43-101 compliant Indicated Resources of 2.5 million tonnes grading 2.01% nickel plus Inferred Resources of 1.2 million tonnes grading 2.23% nickel. The upgraded figure represents a 32% increase in Indicated Resources compared to a NI 43-101 report filed in January 2006. The company has acquired a used hoist and headframe as well as a used concentrator. Construction of the foundation for the headframe commenced in the fall and additional work is underway on related surface support infrastructure buildings. Crowflight has applied for an environmental licence and hopes to have the mine in production by the end of 2007 to take advantage of high nickel prices.

Crowflight also made two new nickel discoveries near Wabowden earlier in the year. At the M11A North zone located 3 km northeast of Bucko, the discovery hole intersected 15.5 m of 0.97% nickel while a second hole returned 30.2 m of 1.02 % nickel. Both drillhole intercepts contained shorter intervals of higher grade material. At the other new discovery, the Apex zone located approximately 3 km north of Bucko, the initial hole intersected 11.4 m grading 0.91% nickel, including 4.1 m of 1.11% nickel. The Apex zone discovery was made based on results of a MIDAS airborne magnetic survey flown in 2005 that identified a number of previously unexplored targets requiring follow-up, many of which remain untested.

Independent Nickel Corp. completed a first-phase drill program on mineral leases which cover the past-producing Lynn Lake nickel mine. The company reported intersecting new mineralization over appreciable core widths. A preliminary economic assessment completed in September concluded the property contains Measured and Indicated Resources of 14.6 million tonnes of 0.7% nickel and 0.4% copper. A 20 000 m second phase drill program is planned for 2007 testing the highest priority targets in the mine.

North American Palladium Ltd. (NAP) completed a program of line cutting and a 3-D Induced Polarization geophysical survey on a nickel property near Lynn Lake optioned from Rare Earth Metals Corp. The property covers five separate mafic-ultramafic intrusions with similarities to the mafic intrusions that hosted the historic Lynn Lake nickel deposits. NAP later decided not to renew its option and has returned the property to Rare Earth Metals in order concentrate on their more advanced exploration projects.

Western Warrior Resources Inc. completed a 15-hole drill program at their Eppler Lake project west of Churchill in the Seal River area. This initial drill program was designed to test the shallow and most easily accessible anomalies for base and precious metal mineralization. An intersection of semi-massive pyrite returned 3.36 g/t gold over 1 m, while other holes returned stratigraphic horizons or sulphide zones carrying anomalous base metal or arsenic values.

Drilling program at Eppler Lake property.Western Warrior acquired 3 additional exploration licences known as the Caribou property located north of their Eppler Lake project area. The company completed a high resolution airborne magnetic survey and a major follow-up program of till sampling and/or diamond drilling is planned for both the Eppler and Caribou properties in 2007.

Callinan Mines Limited conducted geophysical surveys and drilling to further define nickel-copper mineralized zones discovered at their Philips Lake and Pine properties near Wabowden. In 2005, Callinan intersected thick intervals of low-grade mineralization at Philips Lake. At the Pine property drilling encountered a narrow interval of ore-grade material.

Callinan and joint-venture partner Bell Resources Corporation completed ground geophysics on their Fox River property southeast of Gillam. Since 2003, Callinan has acquired over 167 000 ha of ground in the area via exploration licences. The region is highly prospective for nickel sulphide deposits due to its proximity to the eastern extension of the Thompson Nickel Belt. Ground geophysics has outlined a very large and strong conductor that the partners plan to drill test as part of a proposed 20-hole drill program this winter. Furthermore, Callinan has outlined potential kimberlite targets in the southeastern portion of the project area.

East of Gillam, BHP Billiton Diamonds Inc. conducted drilling at the Stephens Lake property which was under option from ValGold Resources Ltd., Cream Minerals Ltd. and Sultan Minerals Inc. The property is extensively covered by glacial till and Paleozoic sedimentary rocks that overlie Precambrian lithologies believed to represent the extension of the Thompson Nickel Belt. Drilling on the property in 2005 intersected a thick, serpentinized ultramafic unit similar in composition to ore-hosting lithologies in the Thompson area. The ultramafic unit contained a narrow massive-sulphide band which has significant implications for the area’s potential to host nickel sulphide deposits. BHP Billiton recently returned the property to the vendors who are now assessing the many untested geophysical targets that remain on the property.

Nuinsco Resources Limited conducted drilling at the Minago nickel deposit located 225 km south of Thompson. Drilling to test the resource at depth returned a 551 m core length grading 0.55% nickel, including an 81 m interval of 1.12% nickel. Measured and Indicated Resources at Minago total 49.1 million tonnes of 0.52 % nickel. The results of a scoping study completed in November for Minago were positive, indicating the project has a net present value of $334 million with a total cash flow of $953 million. With total capital costs estimated at $441 million, the study concluded the project would support a 16-year mine life (open pit and underground) producing 314 million pounds of nickel, 15 million pounds of copper plus by-product credits at an average life-of-mine operating cost of $3.82 per pound of nickel. Nuinsco plans on completing a bankable feasibility study before the end of 2007 which will incorporate 11 000 m of additional drilling along with further metallurgical testing, environmental studies and project permitting.

In southeastern Manitoba, Mustang Minerals Corp. has two major nickel-copper projects in progress. At the Maskwa deposit, an independent resource study concluded the deposit contains an open pit and underground Indicated Resource of 6.02 million tonnes of 0.74% nickel and 0.15% copper. Preliminary metallurgical testing suggests that a marketable nickel concentrate with acceptable nickel recoveries can be produced at Maskwa. A scoping study to evaluate the economic feasibility of bringing the deposit into production commenced in September. Mustang entered a private placement agreement in November with Australian-based Western Areas NL. If the transaction is fully exercised, Western Areas will acquire a 19.9% interest in Mustang for an aggregate sum of $5 million. Mustang intends to use the majority of the proceeds to complete a feasibility study for an open-pit mine at Maskwa.

Drilling at Mustang’s Mayville property, 35 km north of the Maskwa deposit, has partially outlined a large, low-grade, copper-nickel deposit called the M2 zone. With over 70 drillholes completed, M2 has been intersected over a 1.2 km strike length and remains open along strike and at depth. Mustang recently commissioned an independent mineral resource calculation for M2.

Copper-zinc producer HudBay Minerals Inc. announced in December they would boost early-stage exploration on their Manitoba properties to $26 million. In addition, they will invest $8.5 million at their Bur deposit near Snow Lake to conduct infill drilling, extract a 10 000 tonne bulk sample, obtain the necessary permits and complete a feasibility study. Bur hosts an NI 43-101 non-compliant Indicated Resource of 391 000 tonnes of 2% copper and 9% zinc. More recent drilling has shown the resource base can be expanded. HudBay hopes to complete the feasibility study by mid-2007.

In 2006, HudBay focused on drilling airborne geophysical targets in the Flin Flon, Snow Lake and Hargrave Lake–Moose Lake areas as well as structural and geological targets around existing and past producing mines. HudBay also has a number of small known deposits in the Snow Lake area (including Bur) that have been the subject of additional drilling and are returning some positive results. Recently negotiated option agreements with junior explorers Murgor Resources Inc. and Halo Resources Ltd. on some highly prospective HudBay properties will further stimulate base metal exploration in the Flin Flon–Snow Lake belt in upcoming years.

In the Sherridon area 70 km northeast of Flin Flon, Halo Resources has acquired up to 188 km² via claim staking and option agreements. The property covers a number of known copper-zinc deposits including the past-producing Sherritt Gordon Mines property (7.7 million tonnes of 2.46% copper and 0.80% zinc). Halo completed a VTEM and magnetic airborne survey and conducted detailed geological mapping. The company commenced a drill program in November to investigate untested volcanogenic massive sulphide (VMS) targets in the Sherridon area. The first drill location covers what is suspected to be the extension of the Sherritt Gordon East zone. A recent grab sample taken in the area returned 14% copper, 2.88% zinc and 7.41 g/t gold.

Murgor Resources signed option agreements with Hudson Bay Exploration and Development Company Limited (HBED) on four base metal deposits and two large property packages in the Flin Flon Belt in Manitoba and Saskatchewan. In Manitoba, Murgor can earn up to 100% interest in the Hudvam and Wim base metal deposits located between Flin Flon and Snow Lake by spending $2.25 and $2.0 million respectively over 3 years. Murgor also signed an agreement with HBED on the Snow-H Project, a grassroots project on an area covering 105 586 ha located east of Snow Lake. Murgor can earn a 50% interest in the project by spending $2.5 million over 3 years.

Rare Earth Metals conducted mapping and geochemical sampling programs at their Reed Lake and Sail Lake properties in the Snow Lake area. The company says that the Sail Lake property hosts a recently recognized alteration zone typical of VMS deposits, along with coincident ground and airborne geophysical anomalies. The program was intended to identify copper-zinc mineralized drill targets for the 2007 winter drill season. Work at Reed Lake was following up on several anomalous base metal sample results obtained from a late 2005 survey.

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Precious Metals

The stability of high gold prices continued to generate elevated levels of exploration activity, especially in the northern Superior Province and Bissett regions of Manitoba.

First gold pour at San Gold Rice Lake Gold Mine, August 23, 2006.In August, San Gold Corporation poured their first gold bars at the rejuvenated Rice Lake mine in Bissett in southeastern Manitoba. The mine and 1100 tonne per day mill, purchased from Harmony Gold in 2004, commenced commercial production in April. The Rice Lake mine contains total Measured and Indicated Reserves of 874 535 tonnes of 9.9 g/t gold. The company also brought the San Gold #1 deposit into production this year. Located just east of Bissett and accessed by a new decline, San Gold #1 contains 256 890 tonnes of 7.5 g/t gold and will supply additional feed to the Rice Lake mill. There are two other gold zones along strike of the San Gold #1 deposit that could supply future mill feed. In the spring, San Gold discovered the Cartwright zone located 1 km west of the mill property which is returning grades and thicknesses similar to the Rice Lake mine.

A new comprehensive NI 43-101 compliant Rice Lake project report completed in December increased San Gold’s total Measured and Indicated Resources to 403 000 ounces gold and total Inferred Resources to over 1.02 million ounces gold. The report, prepared by A.C.A. Howe International, included over 400 000 ounces of Inferred Resources in the new Cartwright deposit discovered in April. The report also concluded that when additional resources identified in the Cartwright and San Gold #2 and #3 zones are developed over the next two years, it will bring the mill to full capacity of 1100 tonnes per day by the end of 2008.

Wildcat Exploration Ltd. completed a short 4-hole drill program at their Poundmaker property near Bissett before terminating the program early due to mild winter weather conditions. Drilling returned low gold values from new showings at the Gold Creek shear zone and the Liberty showing. A mobile metal ion (MMI) geochemical survey completed in the spring at Poundmaker outlined a significant gold-silver anomaly that appears to be associated with the Gold Creek shear zone. Wildcat also completed geophysical and geochemical surveys along with mapping at the Rio zone within the largely underexplored Poundmaker property.

At Wildcat’s Jeep property, summer fieldwork outlined a new nickel-copper-gold-PGE–bearing sulphide mineralized zone near the former Jeep gold mine. A drill program commenced in late October to define the size and grade of the poorly exposed sulphide zone and to test the continuity of gold mineralization at depth at the Jeep mine. Although most assays were still pending, results from the initial 6 holes indicated the sulphide mineralization consists of two distinct zones of disseminated to massive sulphide with the zones being up to 70 m thick. An assay from an intersection of a quartz vein on strike with the Jeep underground workings returned 109.5 g/t gold. The company was planning to accelerate and expand the drill program in early 2007.

Harvest Gold Corporation completed line cutting and an induced polarization (IP) survey at the Red Hill zone on the Lesavage North property near Bissett. The zone was discovered during the course of mapping, geochemical sampling and a 5-hole drill program completed in the fall of 2005. Follow-up work in 2006 outlined an 800 m geophysical anomaly which correlates with an anomalous gold surface geochemical anomaly. A 6-hole summer drill program was conducted to test strong IP anomalies identified at depth at Red Hill as well as extensions along strike and newly identified anomalies in the area. Results from the second phase of drilling included only anomalous gold values. However, a second separate mineralized zone was identified at the base of one of the recent drill holes.

Harvest Gold acquired an option to earn a 100% interest in the Rock Ridge gold property in the Bird River area near Lac du Bonnet. The property was subsequently optioned to Grandview Gold Inc. who may earn a 70% undivided interest in the property. A 1500 m drill program testing surface gold showings was expected to be completed in late December with results due in early 2007. Previous prospecting and sampling returned values of 140.6 and 53.1 g/t gold.

Monument Bay gold project near Red Sucker Lake.Rolling Rock Resources Corporation acquired the Monument Bay gold project in northeastern Manitoba from partners Bema Gold Corporation and Wolfden Resources Inc. Since 1999, drilling by Wolfden and Bema had considerably expanded the gold resource outlined by previous operators. An NI 43-101 compliant technical report prepared on behalf of Rolling Rock determined the Monument Bay property contains an Inferred Mineral Resource of 3.38 million tonnes at an average grade of 6.46 g/t gold using a 3 g/t cutoff grade. A 26-hole summer drill program to improve the geological model and increase the resource estimate was highlighted by the discovery of the Burn Lake zone where drilling intersected 10.5 m of 4.7g/t gold. A 10 000 m winter drill program is planned which will include infill and down-plunge drilling of the Monument Bay main zones and additional drilling at the new Burn Lake zone.

Rolling Rock also signed an option agreement to earn an initial 51% interest from New Dimension Resources Ltd. in the Domain gold project located near Oxford House in central-eastern Manitoba. Rolling Rock completed a 10-hole drill program on a 30 m wide silicified zone containing variable sulphides and visible gold. The mineralization correlates along strike with the previously discovered A zone where drilling by preceding companies returned significant gold values including 5.4 g/t over 4.1 m and 12.6 g/t over 1.32 m. The recent drill program intersected values of 2.57 m of 7.18 g/t and 2.55 m of 4.04 g/t gold.

Gossan Resources Limited completed an IP and magnetic survey over a gold-copper MMI geochemical anomaly called the Bear zone at their Sharpe Lake gold property. The 24 152 ha property covers 40 km of the western strike-extension of a major deformation zone, the Stull Wunnummin Fault Zone, which transects the Rolling Rock–Monument Bay gold property. The Bear zone displays pervasive sericite-ankerite-quartz alteration containing anomalous gold values up to 1.4 g/t gold and has a minimum recognized strike length of 6 km.

Kaminak Gold Corporation entered an agreement to acquire a 100% interest (from a numbered Manitoba company) in a 5000 ha property located between two of Gossan Resources’ three Sharpe Lake exploration licences. Kaminak conducted a summer geochemical sampling and mapping program designed to outline priority gold targets along the same deformation zone that is encompassed by the neighbouring Gossan and Rolling Rock properties.

In October, Garson Resources Ltd. and Piper Capital Inc. entered an agreement with Kinross Gold Corporation and High River Gold Mines Ltd. to acquire 100% interest in the New Britannia gold mine and mill at Snow Lake. The operation was placed on care and maintenance in early 2005. At that time, the mine contained a Measured and Indicated Resource of 2.2 million tonnes of 5.11 g/t gold. The property consists of 7500 ha of claims and leases containing numerous gold showings and two past-producing gold zones, the No. 3 and Birch. The No. 3 zone, which contains 220 000 tonnes of 7.10 g/t gold, has potential for increasing resources and will be the focus of an initial drill program immediately upon closing of the transaction.

Also in the Snow Lake area, Black Pearl Minerals Consolidated Inc. completed a 2300 m drill program at the Wekusko Lake gold property. Drilling was distributed between delineation of the known mineralization at the Gold Dust and McCafferty zones and testing of geophysical and geochemical anomalies. Highlights from the drill program included an intersection of 22.9 g/t gold across 4.6 m at the Gold Dust zone and 8.3 g/t gold over 1.65 m at the McCafferty zone. Black Pearl has applied for the necessary permits to construct an access road into the Wekusko property in order to extract a 10 000 tonne bulk sample from the Gold Dust zone. The company expects to begin the bulk sampling program in late March 2007.

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The search for diamonds in Manitoba continued in the Hudson Bay Lowland and Seal River areas west of Churchill. De Beers Canada Inc. completed a high-resolution airborne magnetic survey on a 20 000 km² land package at Seal River and reduced their exploration licenses to cover the anomalous areas.

Land acquisition by a number of competitors followed the De Beers activity. Stornoway Diamond Corporation entered the province with 12 targeted exploration licenses south of Churchill and conducted a 9-hole drill program on a number of targets. All of the anomalies were explained and no kimberlite was intersected. Peregrine Diamonds Ltd. applied for several exploration licenses south of Churchill but have not announced their exploration plans. Western Warrior Resources acquired exploration licenses south of the Nunavut border augmenting their Eppler Lake property west of Churchill. They followed up their Eppler Lake high-resolution airborne survey with an 1850 m drill program. While no kimberlite was discovered, a number of anomalous gold and base metal analyses were returned.

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CanAlaska Uranium Ltd. conducted a surface sampling program on their North East Wollaston project which is partially incorporated within exploration licences in the northwest corner of the province. The sampling program was conducted based on results from lake sediment sampling and prospecting programs carried out in 2005. Assay results have revealed multiple areas returning 0.5 to 11.1% U3O8 and some samples returned high molybdenum values. The uranium mineralization is associated with granitic and altered sedimentary rocks and many of the target zones bear similar signatures to basement-style mineralization within the Athabasca Basin. A winter drill program is planned for 2007.

Specialty/Industrial Minerals

In 2005, Agrium Inc., a leading global producer of agricultural nutrients acquired a five-year, 45 000 ha exploration permit to explore for potash in the St. Lazare area. The company has conducted preliminary seismic surveys in their permit area and is reviewing their data. If exploration results are successful, Agrium has the option to convert the exploration permit to a potash mineral lease within the five-year term to facilitate mining.

BHP Billiton, the largest diversified mining company in the world, will study the feasibility of mining a large potash deposit in the Russell-Binscarth area. The deposit was owned by the Province of Manitoba (49 per cent) and Potamine Corporation of Canada (51 per cent) as joint partners in the Manitoba Potash Corporation (MPC). MPC was created in 1986 to hold the assets of the Russell-Binscarth potash project. In November, BHP bought out Potamine’s share in MPC and will be submitting a $15 million exploration and feasibility plan to the provincial government within the next two years.

Sodium chlorate for the pulp and paper industry continued to be produced by Nexen Inc. at their Brandon plant, the world’s largest at 263 000 tonnes per year. Nexen, the world’s largest producer of sodium chlorate, presently purchases salt for its Brandon plant from Saskatchewan potash producers. In 2006, Nexen announced that a further $50 million expansion will increase the annual production capacity of the plant by 12% to 296 tonnes per year by 2008.

A new $14.5 million peat moss packaging plant, located at Richer, was officially opened by Premiere Horticulture Ltd. on November 13, 2006. The Province provided a $3 million loan to rebuild and relocate the plant, formerly at Giroux, which was destroyed in a fire in September 2005. The plant will eventually employ about 57 people. At the time of the opening, the new plant was about 70% completed.

In May 2006, Gossan Resources Limited completed a 27-hole drill program within a 445 ha area on its property north of Inwood, The drilling of the 12 m thick dolomite, below little or no overburden, indicated inferred resources of over 132 million tonnes grading 21.32% MgO, including almost 35 million tonnes of measured resources averaging 21.18% MgO. Gossan feels that the measured resources could support an 80 000 tonne per year magnesium metal production facility, assuming a positive feasibility study. The metal might be used to produce magnesium-aluminum alloy and as a structural metal in the auto industry, in die casting.

Gossan Resources initiated a drill program in November 2006 on its high-purity silica sand property, on the east shore of the south basin of Lake Winnipeg. The drilling will test the silica sand potential of a 2300 m long ridge that varies in width from 100 to 250 m. Analysis of a composite of 19 silica sand samples from a 2004 drilling program returned a silica content of 94.2% (without sizing or treatment).

Nuinsco Resources Limited will carry out a drill program in 2007 to test the silica sand potential on its Minago nickel deposit property south of Thompson. An estimated 3.0 million tonnes of fracturing or hydraulic “frac” sand forms 25% of the 10 m thick Winnipeg Formation basal sandstone that is part of the cap rock above the nickel orebody. The caprock would have to be stripped to develop an open-pit mine. Nuinsco would like to sell the frac sand to the oil and gas industry, where it is pumped under high pressure into wells drilled previously in oil- or gas-bearing rock, to enlarge or scour out openings or to create new fractures.

In 2006, Lehigh Cement Ltd. completed a drilling program to evaluate the gypsum potential of its quarry permits near Harcus, on the west shore of Lake Manitoba. Gypsum is used in cement manufacturing.

Tantalum Mining Corporation of Canada Ltd. continued exploration for tantalum- and cesium-bearing pegmatites in the Bernic Lake area in southeastern Manitoba.

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