NovaCopper files new technical report
From left to right, John Horner, Waska Awalin and Eric Douglas, with Harold Johnson on the ladder, take a break from work at the NovaCopper site in the Ambler mining district in Northwest Alaska. The copper prospect development is a joint-venture between NovaCopper and NANA Regional Corp. All four of the workers pictured are also NANA shareholders.
NovaCopper filed a milestone technical report on the company’s Ambler mining district copper exploration projects with Canadian financial regulatory agencies Feb. 11.
The filing was a NI 43-101 Technical Report, which is a report filed by Canada-based companies when projects reach a certain level of development. An earlier report, the NI 43-101 Preliminary Economic Assessment, was filed March 9, 2012, for a mine at the Arctic deposit, one of two prospects NovaCopper is exploring in a partnership with NANA Regional Corp., the Kotzebue-based Alaska Native regional corporation.
NovaCopper and NANA consolidated landholdings in the Upper Kobuk River and Ambler mining district areas in 2011, creating a large exploration area with two prospects in the advanced exploration phase, the Arctic, which was being explored by NovaCopper, and the Bornite deposit, previously explored by Kennecott and now owned by NANA.
The Bornite and Arctic deposits have been known for years but it has taken a steady program of drilling and geologic mapping, plus the discovery of a new, previously-unknown high grade ore zone at Bornite, to bring the projects to the stage where mine developments at both locations are being seriously considered.
Exploration at Bornite has a long history. Kennecott began exploration in the late 1950s and the Ruby Creek deposit was discovered by in 1962. Kennecott built a 1,075 foot underground shaft in 1964 to test for potential high-grade resources, but the shaft flooded in 1966 and was not reopened. Kennecott’s attention then shifted to the Arctic deposit and focused work there for several years.
In 1986 Kenncott conveyed the Ruby Creek prospect lands to NANA, which also owned lands near the site. Meanwhile, NovaGold Resources (later NovaCopper) acquired the Arctic deposit and mineral rights to adjacent lands from Kennecott and began its exploration there in 2005.
NovaCopper was spun off NovaGold as a separate corporation in 2012.
On a related development, the State of Alaska is now doing preliminary planning on an industrial access road to the area from the Dalton Highway, the state highway that connects the North Slope with the Interior Alaska highway system. This is part of Gov. Sean Parnell’s strategic “roads to resources” program.
Details of how the road would be developed, and paid for, are still being worked out, but what is contemplated is a “public-private” partnership modeled on the state’s participation in the Red Dog Mine road and port, both built in the late 1980s. Those were financed by the Alaska Industrial Development and Export Authority, the state development corporation. AIDEA was repaid by tolls on mineral ores moved over the road and through the port.
A similar agreement is being discussed between AIDEA and NovaCopper.
The NI 43-101 Technical Report contains the latest resource estimates for the combined Arctic and Bornite deposits, with an estimated 3.3 billion pounds of ore that is dominated by copper and that that are “measured and indicated,” meaning they have been identified by drilling with holes spaced at close intervals, and an additional 1.6 billion pounds of “inferred” resource, meaning that the ore resource is modeled based on drill holes that are more widely-spaced.
The average grade of the ore at Arctic is 7 percent-plus “copper equivalent,” meaning the value of the combined metals is represented in terms of the copper, the dominant metal. Besides copper, the deposit includes gold, silver and lead.
The preliminary economic assessment for a mine at Arctic calls for a 4,000 tons-per-day underground mine with an annual production of 67,000 pounds of copper and 80,000 pounds of zinc and other metals. Mine development costs were estimated at $262 million in the 2012 economic assessment.
Bornite, a separate deposit about 25 miles from Arctic, was previously reported to have 179 million pounds of copper in 6.8 billion pounds of ore, at an average grade of 1.19 percent copper, in its Ruby Creek zone, the previously-identified prospect. However, the new “South Reef” zone identified at Bornite has added potentially high-grade resources.
At South Reef, the technical report now estimates 43.1 million tons at an average grade of 2.54 percent copper, and two drill holes cited by NovaCopper in September showed higher potential. One drill test intercepted 178 meters of mineralization at 4.01 percent copper, with a 34.7 meter segment of this grading at 12 percent copper. A second drill test intercepted 111 meters of mineralization at 2.64 percent copper, and including a segment of 11.8 meters grading at 7.5 percent copper.
According to the technical report the whole Bornite project, combining South Reef and Ruby Creek zone resources, is now estimated to contain 179 million pounds of copper, or 6.8 million tons grading 1.19 percent copper, in the measured-and-indicated category and 3.3 billion pounds of copper, with 90.8 million tons grading 1.64 percent copper, in the inferred category.
In its planning, NovaCopper is using an estimate of a one percent “cutoff” grade for underground mining, meaning ore with that quantity of metal is considered the minimum that is economical to extract in an underground mining scenario, according to the technical report.
NovaCopper CEO Rick Van Nieuwenhuyse is very bullish about the Ambler region.
“It is one of the richest and most-prospective known copper-dominant districts located in one of the safest geopolitical jurisdictions in the world,” he has said in statements published by NovaCopper.
NovaCopper’s has formed a partnership with NANA that “provides a framework for the exploration and potential development of the Ambler Mining District in cooperation with the local communities,” he said.
“Our vision is to develop the Ambler mining district into a premier North American copper producer. Our objective is to develop 10 billion pounds of copper in the district.”
The agreement with NANA provides for the regional corporation to receive a royalty based on net “smelter” returns (a form of net profits participation) but with an option for NANA to be an equity partner, up to 25 percent ownership, if one or more mines are developed. Alternatively, NANA could opt for a 15 percent net proceeds royalty if a mine is established.
NovaCopper and NANA included a provision to promote employment of NANA shareholders though hiring and contracting practices, and a scholarship fund to promote education for young people, all of which are similar to NANA’s agreement with Teck on operation of the large Red Dog lead-zinc mine, where NANA is the landowner.
Van Nieuwenhuyse feels the joint-venture with NANA is a strategic partnership. The lack of a “buy-in” by local people has been one of the biggest previous obstacles to mining development in the region.
NANA’s positive experience with the Red Dog Mine, which began production in 1989 at a location in the De Long Mountains north of Kotzenue, has shifted opinions in the region toward economic development.
Also, attitudes toward a road into the area in upper Kobuk River communities, which is part of the NANA region, have changed. Previously the communities opposed road access from the east because it could potentially open the area to more sports hunting and fishing and put pressure on local wildlife resources needed for subsistence.
However, the communities now also recognize some benefits of a road in lowering the cost of shipping in fuel, for example. Neither NANA or the communities have taken a position on a road from the east, and NANA is working with the state Department of Transportation and Public Facilities, which is doing planning for the road, in a series of community meetings.
Road access is critically important for mine development, however. The current schedule is for an environmental impact statement for the road to be complete and federal and state permits issued in 2015.