Manitoba's Mineral Industry

Exploration and Development Highlights 2012

Base and precious metals by Chris Beaumont-Smith, Minerals Policy and Business Development; specialty/industrial minerals by Jim Bamburak, Manitoba Geological Survey, Manitoba Innovation, Energy and Mines

Current as of October 1, 2012

Base Metals
Precious Metals
Specialty/Industrial Minerals

The present state of Manitoba’s mining sector reflects robust production growth and advanced exploration tempered by declines in grassroots exploration due to challenges associated with difficult equity markets. The sector’s modest recovery in 2011 is being undermined by recent global economic uncertainty and a more challenging investment climate. The resulting weakness in commodity prices coupled with difficulty securing venture capital is forcing many companies to revise their operational plans. Exploration and deposit appraisal expenditures totalled $110.5 million for 2011, a 32 per cent increase from 2010, and were projected to increase again in 2012 to $125.6 million before the mid-year change in the global economic outlook.

In spite of difficulties in grassroots exploration, capital investment in mine development is at an all-time high. This reflects the considerable exploration successes of Manitoba explorers through the past commodity cycle as well as continued strength in precious metals commodity prices.


Base Metals

Base-metal brownfields exploration and development activity remains strong in Manitoba, driven by HudBay Minerals, Inc.’s (Hudbay) significant capital investments in the Flin Flon–Snow Lake greenstone belt and continued strength in copper pricing.

Hudbay continues its historic level of capital investment in their 777 North, Lalor and Reed mine development projects. Hudbay's board of directors previously approved $20 million for the 777 North expansion, $704 million to construct its wholly-owned Lalor project near Snow Lake, and $71 million for the Reed copper project. These projects coincide with closures of the Trout Lake mine in June and the Chisel North mine, which is transitioning to processing Lalor ore.

The company has spent approximately $277 million on the Lalor project to June 30, 2012 and has committed an additional $91.4 million for the project. The completion of the main ventilation shaft allowed initial production to start in August and is enabling Hudbay to hoist up to 1500 tonnes of ore and waste per day. The Lalor ore replaces production from the adjacent Chisel North mine and is being processed at the nearby Snow Lake concentrator until completion of the production shaft and new concentrator expected in late 2014. The installation of a new copper circuit at the Snow Lake concentrator to facilitate processing of Lalor ore is currently underway and commissioning was planned for September 2012. The production shaft is currently sunk to the 300 metre level and is 30% complete relative to its planned depth of 985 metres. All other surface infrastructure is essentially complete and underground development is well advanced. The first full year of production from the production shaft is expected in 2015.

Planning for the new 4500 tonne-per-day concentrator at their Lalor site is progressing on schedule. Basic engineering is nearly complete and HudBay has placed orders for major components required for the mill. Site geotechnical work is complete, and the company is finalizing the final site levelling required for the concentrator footprint.

The Indicated base-metal Lalor resource stands at 13.3 million tonnes grading 8.87% zinc with an Inferred resource of 4.8 million tonnes grading 9.25% zinc.  The Gold Zone Inferred resource is 5.4 million tonnes grading 4.7 grams per tonne gold.  Conceptual estimates indicate the potential for an additional 5.1 to 6.1 million tonnes grading between 4.3 and 5.1 grams per tonne for the Gold Zone and an additional 1.8 to 2.2 million tonnes grading 5.8 to 7.0 grams per tonne gold and 3.2% to 4.0% copper for the Copper-Gold Zone. HudBay anticipates additional gold resources will be delineated with further exploration to be conducted from underground, with the Copper-Gold Zone holding the greatest potential to add significant resources to the project.

During the second quarter of 2012, Hudbay's focus for its 70% owned Reed copper project was preparation of the site for portal development. The project is on schedule as Hudbay commenced the trench excavation in June 2012. Hudbay has also completed the site levelling for the mechanical shop and warehouse office, changehouse and parking lot pads, as well as camp expansions to accommodate the workforce for the development stage of the project. Materials and equipment from the recently closed Trout Lake mine have begun arriving at site, and Hudbay has ordered new mobile equipment and compressors for delivery in the third quarter of 2012. Hudbay has also issued tenders for the mechanical shop and warehouse. The company expects initial production at the Reed copper project by the fourth quarter of 2013 and anticipate ramp-up to full production of approximately 1300 tonnes per day by the first quarter of 2014. The Reed Lake deposit contains a National Instrument (NI) 43-101–compliant Indicated resource estimate of 2.5 million tonnes grading 4.55% copper.

HudBay also partnered with Halo Resources Ltd. on the Lost Lake joint-venture project in the Sherridon area. HudBay continues to explore the deposit and has started pre-feasibility engineering work. 

Weakness in nickel prices is having a significant negative effect on production in the province. Vale’s Thompson operations are undergoing a revision of all aspects of the operations including potential capital investments as they transition to a mining and milling facility with the impending closure of the smelter and refinery in 2015.
Low nickel prices have resulted in CaNickel Mining Ltd. (previously Crowflight Minerals Inc.) temporarily suspending mining operations at the Bucko Lake mine in Wabowden. The mine was placed on care and maintenance in June, but exploration activities continue on their large portfolio of properties in the region. CaNickel has successfully increased the Proven and Probable reserves at Bucko to 3.71 million tonnes of 1.45% and company is also having considerable exploration success on the nearby M11A deposit.

Uncertainty in equity markets and weak nickel prices are also presenting challenges to Victory Nickel Inc. Having received an Environment Act licence in 2011, authorizing the construction and operation of the Minago project north of Grand Rapids, Victory has been unsuccessful in securing financing for the initial stages of development for the $600 million nickel and frac sand mine.

The difficulties presented by weak base-metal commodity prices are not preventing a number of junior explorers from conducting aggressive base-metal exploration programs.

Rockcliff Resources Inc. continues to post impressive drill results at their Tower VMS property north of Grand Rapids. The joint-venture project with partner Pure Nickel has outline two zones of copper-gold mineralization within rocks of the Thompson Nickel Belt. Initial drilling targeted the T1 zone and returned intercepts grading up to 6.1% copper over 4.9 metres. A deep-penetrating electromagnetic (DPEM) geophysical survey outlined a large down-plunge continuation of the T1 zone and identified two other untested anomalies (T2 and T3). The first follow-up drillhole testing the T2 anomaly returned 2.77% copper over 4.0 metres. The relationship between the two mineralized zones is not yet well understood, although the T1 zone is characterized by mineral textures consistent with remobilization and a lack of associated hostrock alteration, whereas the T2 zone is hosted within a well developed alteration envelope. Diamond-drill testing of the T1 and T2 zones is planned for the winter drill season.

Rockcliff was also successful testing geophysical anomalies at the past-producing Dickstone mine west of Snow Lake. Initial diamond-drilling testing potential deep mineralization returned 2.7% copper over 2.5 metres and follow-up downhole geophysics suggest the mineralization is associated with a large untested anomaly below the existing mine workings.

Low nickel prices did not prevent Mustang Minerals Corp. from completing a feasibility study of the Makwa deposit near Lac du Bonnet and exploration work at the nearby Mayville property. The Makwa deposit comprises a NI 43-101-compliant resource of 9.855 million tonnes in the Probable category containing 0.541% nickel, 0.113% copper and 0.433 grams per tonne platinum group metals (PGM). The company purchased the Bouchard Herbert mill near Rouyn-Noranda, Quebec which will be relocated to the Makwa site. The associated reduction in capital costs are being incorporated in the feasibility study expected to be completed in 2012.

The Mayville deposit contains a NI 43-101 Indicated resource of 9.227 million tonnes containing 0.61% copper, 0.23% nickel and 0.174 grams per tonne palladium.  Mustang believes the Mayville deposit has the potential to host a significant PGM resource.

Other nickel exploration projects include Prophecy Resources Corp. and Corazon Mining Ltd. exploring past-producing nickel mines originally operated by Sherritt Gordon Mines in Lynn Lake. Employing advanced exploration techniques and technology, the companies have been successful discovering new mineralization and expanding the remaining resources at the Lynn Lake and El mines.

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Precious Metals

Precious metals exploration and development activities continue to gain momentum, driven by the continued strength in gold and silver commodity prices and improving long-term price outlooks. Gold remains the focus, with a considerable increase in exploration and deposit appraisal expenditures, both in the re-evaluation of past-producing gold deposits and increasing greenfield and brownfield exploration.

The re-evaluation of past-producers started in the Rice Lake greenstone belt with San Gold Corporation’s purchase of the Rice Lake mine in Bissett from Harmony Gold Inc. San Gold brought the mine back to producer status in 2007 and continues to improve their operational performance. This trend now applies to all past-producing regions of the province.

San Gold’s Rice Lake mine provides a sound model for the redevelopment of a past-producing gold mine. San Gold has taken an uneconomic mine with existing infrastructure, but a limited reserve base, and transformed the operation into a profitable gold producer with significantly improved economics due to aggressive exploration and resultant reserve-base expansion.

San Gold’s improved operational performance is the result of the exploration success at its Rice Lake and Hinge mines in Bissett.  The development of high-grade, near-surface deposits has allowed San Gold to achieve record production in successive quarters, which has lead to a corresponding increase in operational profit. San Gold has reported record operating margins resulting from a significant decrease in operating expenses in successive quarters and is currently in the midst of a multiyear program to increase production.  San Gold produced 85,000 ounces of gold in 2011 and is on pace to produce 100,000 ounces of gold in 2012.

The Rice Lake belt remains Manitoba’s pre-eminent gold exploration camp, where efforts are dominated by junior explorers. Although financing remains problematic, a number of exploration companies are active in the region. This includes Bison Gold Resources Inc. on their past-producing Central Manitoba property southeast of Bissett, Wildcat Exploration Ltd, Strikepont Gold, and Harvest Gold.

The re-evaluation of past-producing gold mines in the Trans-Hudson Orogen has gained significant momentum in recent years. This region’s large number of past-producing mines and their largely intact infrastructure represent attractive targets for junior gold explorers.

The most advanced project in the region is Auriga Gold Corp.’s Maverick gold project south of Sherridon. The cornerstone of the project, the past-producing Puffy Lake underground mine, comprises largely intact surface infrastructure and a NI 43-101–compliant optimized in-pit and underground Indicated resource totalling 174,000 ounces gold and Inferred resource totalling 558,000 ounces. Auriga plans to initiate gold production through a series of shallow open pits and transition to underground mining. This will limit the start-up capital requirement and allow Auriga to redevelop the underground mine from cash flow. Auriga is currently refurbishing the surface infrastructure in anticipation of initial production early in 2013. The Puffy Lake mine produced 28,000 ounces of gold in 1988 and 1989.

In the Snow Lake area, QMX Gold (formerly Alexis Minerals Corp) continues to advance the re-opening of the former New Britannia mine. QMX has secured a significant portion of the required capital to re-open the renamed Snow Lake mine. A December 2009 feasibility study forecast production of 80,000 to 90,000 ounces of gold per year for a minimum of six years. QMX has conducted an aggressive exploration program since the feasibility study to add additional reserves to the mine with the goal of increasing the mine life and project economics .The New Britannia mine produced 858,000 ounces of gold between 1995 and 2005 and 760,000 ounces of gold between 1949 and 1958 as the Nor Acme mine.

The re-evaluation of past-producing gold mines includes a number of mines in the Lynn Lake greenstone belt in the northern Trans-Hudson Orogen. Carlisle Goldfields Limited continues to evaluate a number of deposits that will conceptually feed a regional mill. The centrepiece is the MacLellan Gold mine that contains a NI 43-101–compliant open pit and underground Measured and Indicated resource estimate of 1,035,200 ounces of gold and 9,344,000 ounces of silver. Carlisle holds a significant land position in the Lynn Lake greenstone belt and exploration drilling at the BT mine, which operated between 1994 and 1996, the Farley Lake mine, which operated between 1997 and 2000, the Lasthope deposit, and a number of other deposits along strike from the past-producers are expected to return sufficient resources to proceed to a feasibility study.

The evaluation of other past-producing gold mines in the Trans-Hudson Orogen includes Satori Resources’ Tartan mine east of Flin Flon and Callinex Mines’ Gossan Hill project near Cranberry Portage, which hosts the past-producing Gurney mine.

Gold exploration activity is not limited to past-producing deposits located in established greenstone belts, but also includes a number of advanced and grassroots exploration projects located in more frontier regions of the province. The highest profile project is Mega Precious Metals Inc.’s Monument Bay gold project near Red Sucker Lake in northeastern Manitoba.

The Monument Bay project includes the Twin Lakes gold deposit within a large regional exploration property. Mega continues with an aggressive infill and exploration drill program at Twin Lakes and outlined an open pit and underground NI 43-101–compliant Measured and Indicated resource of 1,046,010 ounces of gold grading 2.5 grams per tonne and an Inferred resource of 1,726,674 ounces of gold at 3.78 grams per tonne. Regional exploration on the 371 hectare Monument Bay property is generating additional resources, which Mega anticipates will support a mining operation producing in the order of 200,000 ounces of gold a year. The project is scheduled to go to feasibility study in 2014.

The success of the Monument Bay project points to the favourable geology of the Archean northern Superior Province southeast of Thompson. This has attracted a number of junior gold explorers, including Gossan Resources Limited, Alto Ventures Ltd., Callinex Mines, Canada Bay Resources and QMC Quantum Minerals Corp. This under-explored accretionary terrane represents the western strike-extension of proven gold-producing geology in Ontario and is viewed by explorers as having the potential to host a number of gold deposits forming a regional camp.

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Specialty/Industrial Minerals

In March 2012, Westcore Energy Ltd. reported that it had completed 20 additional vertical holes on its 2012 drilling program at its wholly owned Black Diamond and FNR JV Cretaceous Swan River Formation coal properties, located south of The Pas. A total of 2175 m of delineation and exploratory drilling was done on five previous known deposits and on two new geophysical targets, respectively. A NI 43-101 resource report on the results of the delineation drilling was anticipated to be completed in the second quarter of 2012.

In early 2012, Saturn Minerals Inc. completed a Fugro airborne gravity survey at its Overflowing property south of The Pas, and immediately to the east of the Westcore Energy properties described above. Seven additional vertical holes were drilled early in 2012, of which 3 intersected the Saturn coal seam in the company’s Karolina Coal Basin. The company’s third new coal discovery (Thunder Discovery) was drilled in one hole along its 8 km long north-south “Overflowing” geophysical trend. The trend connects several strong anomalies, two of which are the Thunder and Karolina discoveries lying 2 kilometres apart. The Thunder Discovery comprises three thick (3.1–8.6 m) and three thin (1.7–3.0 m) coal seams between the15.0–45.05 m depths in the discovery hole, which was stopped at the 50 m depth due to technical difficulties. Samples were shipped to Loring Laboratories in Calgary for proximate coal analysis, sulphur content and calorific value. The results from the tests showed that the shallow Upper Thunder Coal Seam, situated 15.3–24.3 m below surface, is likely one of the best ranking coals discovered in western Manitoba to date, with significantly low sulphur values, relatively low ash content and moderate to high calorific values.

In April 2010, Gossan Resources Limited announced completion of Phase II of its Inwood Magnesium project, which comprised three phases of bench-scale testing of high-purity Silurian Fisher Branch Formation dolomite, utilizing the Gossan-Zuliani (high-efficiency magnesium) process. Watts, Griffis and McOuat Limited independently calculated a NI 43-101–compliant Measured resource based on the results from a 2006 drill program and 25 holes previously drilled on the 80 hectare property (from surface to a depth of 12–15 m) to be 28 819 000 tonnes averaging 21.15% MgO and 30.91% CaO. The tests confirmed that the Gossan-Zuliani Process produces magnesium metal, under atmospheric conditions, at exceptionally high raw material efficiencies. In April 2012, the company announced that the magnesium produced by the process has been shown (in an independent study conducted by Process Research ORTECH) to substantially reduce midsize car emissions by almost 7% over a car’s life expectancy (200 000 km). Planned Phase III will involve large-scale batch and process testing; and Phase IV will require pilot plant-testing to demonstrate commercial viability.

In September 2009, Victory Nickel Inc. announced it had drilled a (NI 43-101–compliant) Indicated resource of 15 million tonnes of Ordovician Winnipeg Formation silica sand (containing 84% marketable frac sand) above its Minago Nose nickel deposit, located south of Thompson. The sand, which forms part of the overburden, must be removed before the nickel can be open-pit mined. In September 2011, Victory Nickel received an Environmental Act licence for the Minago mine; and the development (including a frac sand component) was approved by its board of directors. In June 2012, Victory Nickel Inc. announced the creation of a subsidiary, Victory Silica Ltd., to oversee production and sales of up to 1.14 million tonnes per year of premium frac sand. Minago frac sand lab analysis of its potential 20/40 sand product indicates that it has a sphericity of 0.72; roundness of 0.78; acid solubility of 0.92%; silt test (turbidity) of 24 Formazine Turbidity Units (ftu); and crush resistance of 11.5%.

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