Manitoba's Mineral Industry
Exploration and Development Highlights 2016
By Manitoba Geological Survey staff, Manitoba Mineral Resources
Current as of September 23, 2016
Base Metals
Precious Metals
Uranium
Potash
Introduction
Mineral exploration and development activity in Manitoba is showing signs of renewed life as modest improvements in base metal and gold prices are bringing exploration financing back into the province. This is most notable for precious metal exploration and development projects, and largely accounts for the modest increase in mineral exploration spending intentions for Manitoba in 2016.
From a mineral production perspective, low commodity prices have resulted in a significant decline in the total value of minerals produced in Manitoba in 2015 and 2016. This reflects the combination of low prices affecting the revenue realized by producing companies and the affect of low commodity prices on the viability of some operations.
Mineral exploration and mining in Manitoba appear to be at a crossroads. On the one hand, base metal producers are weathering a challenging operating environment at the same time as they face impending operational changes. On the other hand, precious metals are showing a resurgence with the re-opening of past producing gold mines and the anticipated development of new mining projects in frontier regions. Accordingly, the outlook remains mixed with a hint of cautious optimism.
Base Metals
The base metal mining industry, the backbone of Manitoba’s once-thriving mining sector, is bracing for a period of significant transition with producers facing major changes in their production profiles. Chief amongst these are changes to the operations of Hudbay Minerals Inc. in Flin Flon and Vale Canada in Thompson as they face declining reserves and regulatory changes.
Hudbay is bracing for major change in its Manitoba Business Unit as two of the mines supporting the Flin Flon metallurgical complex reach the end of their respective mine lives. Hudbay announced in late 2015 that exploration efforts to discover additional base metal resources around their flagship 777 mine in Flin Flon were unsuccessful. Accordingly, Hudbay estimates that current mine reserves will be exhausted in 2020, resulting in the permanent closure of the 777 mine.
Hudbay also announced that it anticipates the depletion of reserves at their Reed mine, located 80 km south of Snow Lake, in late 2018. The Reed mine is a joint venture with Royal Nickel Corporation, who acquired a 30% share of the mine through the acquisition of VMS Ventures in early 2016.
The two mine closures will result in a significant loss of mill feed for the Flin Flon concentrator and zinc concentrate feedstock to the Flin Flon zinc hydrometallurgical facility. This will leave only the Lalor mine in Snow Lake providing zinc concentrate to the zinc plant, which according to Hudbay is insufficient to keep the zinc plant operating. As a result, the future of the Flin Flon metallurgical complex is in doubt due to the closure of the 777 and Reed mines, with the strong likelihood that the metallurgical complex will be placed on care and maintenance until additional feedstock is secured.
On a more positive note, Hudbay continues exploration of copper and gold zones at the Lalor mine and anticipates additional gold resources will be delineated with further exploration conducted from underground, accessed from the recently commissioned 1025 m level exploration drift. To facilitate the potential development of the deep gold and copper-gold zones at Lalor, Hudbay purchased the 2000 tonne per day (tpd) New Britannia gold mine and mill in 2015 and is proceeding with engineering studies to investigate the feasibility of refurbishing the New Britannia mill to process Lalor gold ore. If successful, the New Britannia mill would provide an alternative to the construction of a new concentrator at the Lalor mine.
The modest recovery in zinc prices has buoyed exploration for VMS deposits, particularly in the highly prospective Flin Flon–Snow Lake greenstone belt. The most active junior explorer in the region is Callinex Mines Inc., the largest mineral disposition holder in the Flin Flon–Snow Lake belt after Hudbay. Callinex is focusing their exploration efforts on their large Pine Bay property east of Flin Flon, which includes the Baker Patton complex, the largest felsic volcanic centre in the Flin Flon greenstone belt. The property includes a number of VMS deposits and approximately 10 km of favourable volcanic stratigraphy. Callinex is currently focusing on the northern Pine Bay and southern Sourdough portions of the 6000 km2 property, in the area of historic VMS deposits.
Exploration drilling to test geophysical anomalies near the historic Pine Bay deposit resulted in the discovery of a lower VMS horizon located 450 m east of the historic deposit. The discovery hole returned 3.3% copper over 3.2 m. Follow up drilling returned wide intercepts of massive and semi-massive sulphide mineralization hosted by a parallel horizon of favourable VMS stratigraphy below the Pine Bay deposit, which was not tested by previous exploration drilling.
Drilling at the southern Sourdough project area, adjacent to Hudbay’s past-producing Centennial Mine, will test borehole pulse electromagnetic anomalies outlined by previous operators. Testing of the anomalies will be accomplished by deepening drillholes drilled by Placer Dome in 1992.
Elsewhere in the Flin Flon–Snow Lake belt, Rockcliff Copper Corporation is advancing the Talbot property north of Grand Rapids, which was optioned from Hudbay in 2014. The Talbot deposit is hosted by the southern extension of the Snow Lake greenstone belt, which is covered on this area by a thin veneer of Phanerozoic rocks. Drilling in 2015 allowed Rockcliff to generate a NI 43-101 compliant resources estimate for the Talbot deposit, expanding the inferred resource to 2.2 million tonnes grading 2.8% copper, 2.2% zinc and 2.4 grams per tonne (gpt) gold. A 5000 m drill program was started in September 2016 to expand the resources and to test high-priority geophysical anomalies in the north and central portions of the property.
Other activity involving VMS properties is the acquisition of the Manitoba assets of Murgor Resources Inc. by Alexandria Minerals Corporation. This transaction includes two former Hudbay properties acquired by Murgor in 2006 through option agreements. The Hudvam deposit is located northeast of Flin Flon and the Wim deposit is located north of Snow Lake. Both properties host significant copper-zinc-gold resources and have numerous untested geophysical anomalies outlined by Murgor. Importantly, this gives Alexandria a foothold in a very productive VMS belt.
The cautious optimism and interest in VMS exploration is not shared by Manitoba’s other significant base metal – nickel, and the world-class Thompson nickel belt that is responsible for Manitoba’s nickel production. Vale Canada is Manitoba’s major nickel producer, with integrated mining, milling and smelting operations located in Thompson. Changes to federal air quality regulations have resulted in a decision by Vale to close the Thompson smelter. Accordingly, Vale is making preparations for the transition from operating an integrated metallurgical complex to a mining and milling operation in advance of the scheduled closure of the Thompson nickel smelter and refinery at the end of 2018. In advance of the transition, Vale recently announced that it has approved the construction of an $82 million concentrate load-out facility. Another change to the Thompson operations is the decision to reduce the smelter to a single furnace, resulting in reduction of the workforce by approximately 100 persons.
Notwithstanding poor nickel markets and the impending change to their Thompson operations, Vale is proceeding with feasibility studies on the Thompson Footwall Deep project. The Footwall Deep project contains 11 million tonnes of nickel sulphide mineralization forming a deep, north plunging continuation of the Thompson deposit. The feasibility-level assessment of the Thompson Deep project was initiated in 2014 and continues with engineering, technical, environmental, financial and operational assessments. Vale announced the deferral of capital spending on the Footwall Deep project for 2016, but is confident that this will not affect the project development timeline. If successfully developed, the Footwall Deep project will result in a new mine that will sustain the Thompson operation for up to 15 years.
Persistent low nickel prices have not deterred interest in nickel exploration elsewhere in Manitoba as demonstrated by several brownfields projects. The recent entry of Wolfden Resources Corporation into the Island Lake and Snow Lake regions brings a well-financed junior explorer with a reputation for success to Manitoba. Wolfden acquired through claim staking two nickel properties, previously held by Vale Canada, that host significant nickel resources. The Rice Island deposit at Wekusko Lake (east of Snow Lake) is currently the focus of a diamond drill program, and Wolfden intends to follow-up their recent airborne geophysical survey of their Nickel Island property in the Island Lake area with a diamond drill program before the end of 2016.
This positive sentiment is also displayed by Corazon Mining Limited’s assessment of the past-producing Lynn Lake nickel mine which is proceeding toward the finalization of a NI 43-101 compliant preliminary economic assessment. Corazon is evaluating the Lynn Lake and El nickel mines originally operated by Sherritt Gordon Mines. Using advanced exploration techniques and technology, the company has discovered new mineralization and expanded the residual resources at the Lynn Lake mine.
Unfortunately, persistent low nickel prices have contributed to the continued suspension of mining operations at CaNickel Mining Limited’s Bucko Lake mine near Wabowden. Production was suspended and the mine was placed on care and maintenance in June 2012. CaNickel successfully increased the Proven and Probable reserves at Bucko to 3.71 million tonnes of 1.45% nickel. The company had considerable exploration success on the nearby M11A and Bowden Lake deposits and continues to explore its large portfolio of properties in the Thompson nickel belt. Current activities involve geophysical surveys in the Setting Lake and Moak Lake areas in advance of follow-up diamond drill testing.
Another casualty of low nickel prices is Victory Nickel Inc., which has deferred development of their Minago nickel and frac-sand mine. Victory received an Environment Act licence in 2011 authorizing the construction and operation of the Minago project north of Grand Rapids. However, Victory hasn't been successful in securing financing for the initial development stages of the nearly $600 million mine.
In southeastern Manitoba, Mustang Minerals Corp. has discontinued exploration on its Makwa and Mayville deposits near Lac du Bonnet. Mustang released the results of a Preliminary Economic Assessment (PEA) outlining the co-development of the Makwa and Mayville deposits with processing infrastructure located at the Mayville site, 43 km from Makwa. The PEA estimates capital costs at $209 million and a pre-tax Internal Rate of Return of 17 per cent. Total Makwa and Mayville Indicated resources are estimated at 33.8 million tonnes grading 0.27% nickel, 0.33% copper, 0.6 gpt platinum and 0.19 gpt palladium. Mustang has given no timeline for the resumption of exploration activities.
Precious Metals
Precious metals exploration and development activities in Manitoba were overshadowed by last year’s bankruptcy of San Gold Corporation, Manitoba’s only primary gold producer, which ultimately led to a series of transactions that resulted in Klondex Mines Ltd. acquiring San Gold’s assets and putting the Bissett mine back into production.
San Gold declared bankruptcy in June of 2015 and the assets of the corporation were assumed by the major secured creditor. Klondex Mines announced that it had acquired the assets of San Gold in January of 2016 with the intention of bringing the re-named True North Mine back into production. Klondex, with their experience of operating narrow, high-grade gold mines in Nevada, took the approach that with better grade control the True North mine could become a profitable long-life operation. In addition, the company recognized the considerable exploration potential that exists within the large land package that formed a component of the assets. Initial work at True North involved infill underground drilling and a revised resource estimate, which informed the development of a new mine plan. Pre-production development followed in advance of a positive production decision on September 12, 2016.
Once full commercial production is achieved, Klondex anticipates gold production ranging between 45,000 and 65,000 ounces per year based on daily production rates of 600 to 1000 tpd. The current mineral reserve estimate stands at 139,000 tonnes grading 8.26 gpt in the proven category and 180,000 tonnes grading 8.40 gpt in the probable category. Total measured and indicated resources are 2.53 million tonnes grading 7.27 gpt. Gold production from the mine will be augmented by gold recovered from the reprocessing of tailings generated by San Gold. The tailings reprocessing started in June as part of the pre-production development work and test mining, and is proving to generate high-margin incremental gold.
The rapid appreciation in the price of gold during the first half of 2016 was welcomed by both gold producers and explorers and has resulted in renewed interest in gold exploration in Manitoba. In this respect, the acquisitions of two advanced exploration projects by established, Canadian-based gold producers proved timely.
Alamos Gold Inc. completed the acquisition of junior gold explorer Carlisle Goldfields Ltd. late in 2015, consolidating the gold resources and land position that Carlisle had defined over the past 10 years in the Lynn Lake greenstone belt. The acquisition gives Alamos 100% ownership of the Farley and MacLellan past-producing mines that are currently the focus of advanced exploration directed towards a feasibility study. The transaction is the culmination of a complex series of ownership changes that saw Carlisle enter into a joint venture with AuRico Gold Corp. on the Farley and MacLellan properties, while retaining control of the balance of their large property package. AuRico subsequently merged with Alamos with Alamos retaining the Lynn Lake properties. This was followed by the acquisition of Carlisle by Alamos. Remarkably, all the transactions were completed in a period of 18 months. Alamos subsequently announced the commissioning of feasibility studies in September 2016 with an anticipated completion in 2017.
Similarly, the Yamana Gold Inc. acquisition of Mega Precious Metals Inc. in 2015 placed the Monument Bay project southeast of Thompson into the stable of an emerging mining and development company with considerable resources and a portfolio of Canadian and international development projects. The project includes the Twin Lakes gold deposit within a large exploration property. Yamana plans to continue with an aggressive infill and exploration drill program at Twin Lakes, which started with a 7,850 m drill program last winter. Land-based summer drilling will be followed by additional winter drilling, bringing Yamana’s planned exploration expenditures in 2016 to $6.0 million.
A significant component of Yamana’s exploration program is the sampling and analysis of drill core generated by previous project operators. An important and somewhat unique aspect of the Twin Lakes deposit is the association between gold and tungsten throughout the deposit. The close association led Mega to include tungsten in the resource estimate, significantly increasing the value proposition of the project. Continued drilling by Yamana upgraded the resource estimate, which now contains an Indicated Mineral Resource of 1.787 million ounces of gold contained in 36.58 million tonnes at a grade of 1.52 gpt gold, and an Inferred Mineral Resource of 1.781 million ounces of gold contained in 41.97 million tonnes at an average grade of 1.32 gpt gold.
Renewed interest in gold in the northern Superior Province in Manitoba led Puma Exploration Inc. to significantly increase its property position in the Little Stull Lake area, adjacent to Yamana’s Monument Bay project. Puma’s property contains the Little Stull Lake deposit that has a historical resource in excess of 250,000 ounces of gold grading 10 gpt. In July 2016, Puma signed a non-binding letter of intent with Black Widow Resources Inc., whereby Black Widow can acquire 100% interest in the project.
The appreciation in the price of gold is facilitating efforts of Minnova Corp. to finance and execute their plans to reopen the past-producing Puffy Lake mine near Sherridon. The company plans to complete a 10,000 m infill drill program to upgrade the mineral resource estimate in advance of work directed towards re-opening the mine.
Minnova released a Preliminary Economic Assessment for the Maverick project in 2011 that outlined robust economics and a plan to resume production of 48,000 ounces of gold per year over an 11 year mine life at a cash cost of $798 per ounce. The low capital cost of $18 million and relatively short 18 month payback period further demonstrate the feasibility of the Maverick project. Current project resources support the processing of 2.5 million tonnes at a grade of 6.53 gpt for a total 483,000 ounces of gold over the life of the mine. Minnova anticipates that project technical reports will be updated following the completion of this winter’s drill program.
Elsewhere in Manitoba a number of companies are renewing gold exploration projects: Copper Reef Mining Corporation plans exploration work at their North Star property southwest of Snow Lake; Rockcliff Copper Corporation announced the acquisition of the historic Laguna gold mine; and Satori Resources Inc. announced this summer that it had successfully raised the capital that would allow it to revive its Tartan mine project east of Flin Flon.Uranium
Uranium exploration activity has been rekindled in northwest Manitoba. The region hosts the northeast extension of the Wollaston Domain, which hosts a number of significant, basement-hosted uranium deposits in neighbouring Saskatchewan. CanAlaska Uranium Ltd., Northern Uranium Corp. and East Resources Inc. currently hold dispositions covering the known extent of the Wollaston Domain in northwest Manitoba. Exploration by Northern Uranium on their Northwest Manitoba project has returned very encouraging results, and on the strength of these results, Northern Uranium has exercised its right to acquire an increased interest in the project from CanAlaska Uranium. Drilling by Northern Uranium outlined a large area of intense alteration associated with uranium mineralization, but has yet to intercept significant uranium mineralization.
Potash
Manitoba’s consolidation of the conventionally mineable potash resources in southwestern Manitoba has renewed interest in potash. The Manitoba Potash Corp. (MPC) controls the Russell-McAuley area of southwestern Manitoba, the largest land holdings with sufficient thickness and grade to sustain potentially economic underground potash mining. In September 2015 MPC, assisted and advised by Micon International Ltd. and Manitoba Mineral Resources, received Expressions of Interest to acquire MPC and its assets in the Russell-McAuley area. The evaluation of the Expressions of Interest is on-going in advance of the selection of a single proponent.
