Dec '06/Jan '07


Manitoba exploration and development highlights

By Dave Prouse, resident geologist, Manitoba Geological Survey

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 $48.8 million, up from the preliminary estimate of $43.4 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 (to become CVRD-Inco) reported a significant boost to its capital spending budget, which includes a $45 million investment in a new deposit, the 1-D Lower orebody, at the north end of its existing 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 structure 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.

Crowflight Minerals has a number of projects under option from Xstrata Nickel in the Thompson Nickel Belt. The most advanced is the past-producing Bucko Lake deposit at Wabowden, where Crowflight has completed an independent NI 43-101 resource estimate showing indicated resources of 1.82 million tonnes of 2.10% nickel. Crowflight has been conducting additional drilling to increase the indicated resource figure, and is also undertaking work designed to move the project to the bankable feasibility stage. The company has acquired a used hoist and headframe as well as a used concentrator. The construction of the foundation for the headframe commenced in October.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 three kilometres northeast of Bucko, the discovery hole intersected 15.5 metres of 0.97% nickel, while a second hole returned 30.2 metres of 1.02% nickel. Both drillhole intercepts contained shorter intervals of higher grade material. The other new discovery, termed the Apex zone, is located approximately three kilometres north of Bucko. The initial hole intersected 11.4 metres grading 0.91% nickel, including 4.1 metres of 1.11% nickel.

Independent Nickel Corp. completed a successful 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 resource calculation completed in 2005 concluded the property contains measured and indicated resources of 5.8 million tonnes of 0.85% nickel and 0.39% copper. In 2007, the company plans 20,000 metres of drilling on 15 target areas, in addition to obtaining the necessary permitting for mine dewatering and rehabilitation.

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 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.

Drilling at Mustang’s Mayville property, 35 kilometres 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 kilometre 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 boosted exploration spending to $10 million per year for 2005 through to 2007.The company has been focusing 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 deposits in the Snow Lake area that have been the subject of additional drilling and are returning some positive results. Recently negotiated option agreements with junior explorers Murgor Resources and Halo Resources on some prospective HudBay properties will stimulate base metal exploration in the Flin Flon–Snow Lake belt in the coming years.

Precious Metals

In August, San Gold Corporation poured their first gold bars at the rejuvenated Rice Lake mine in Bissett in southeastern Manitoba.The mine and 1,100-tonneper- day mill, purchased from Harmony Gold in 2004, commenced commercial production in April.The Rice Lake mine contains total measured and indicated reserves of 1.15 million tonnes of 8.9 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 257,000 tonnes of 7.5 g/t gold and will supply additional feed to the Rice Lake mill. There are two other gold zones (San Gold #2 and #3) along strike of the San Gold #1 deposit that could supply future mill feed.

In addition, San Gold discovered the Cartwright zone, located one kilometre west of the mill property, which is returning grades and thicknesses similar to the Rice Lake mine.The company has been conducting an aggressive surface and underground drill campaign with positive results. The results were significant enough for San Gold to conduct a feasibility study to determine the viability of developing the Cartwright/Gabrielle and San Gold #3 zones, in order to rapidly increase production levels to the current mill capacity of 1,100 tonnes per day or beyond. Positive results are also being obtained at the 29 level (4,400 ft) of the Rice Lake mine, where face sampling of drift and raise development resulted in an average diluted grade of 35.6 g/t gold over 91.5 metres, significantly higher than originally anticipated.

Rolling Rock Resources acquired the Monument Bay gold project in northeastern Manitoba from partners Bema Gold and Wolfden Resources. 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. Rolling Rock conducted a 26-hole summer drill program with the objective of improving the geological model and increasing the resource estimate. The program was highlighted by the discovery of the new Burn Lake zone where drilling returned an intersection of 10.5 metres of 4.7 g/t gold.

The company has mobilized a second drill rig to the property and plans to commence a 10,000-metre drill program in January to conduct infill and down plunge drilling of the main A, B and C zones of the Monument Bay deposit, as well as further evaluation of the Burn Lake zone.

In October, Garson Resources and Piper Capital entered an agreement with Kinross Gold and High River Gold Mines to acquire 100 per cent interest in the New Britannia gold mine and mill located near Snow Lake. The operation was placed on care and maintenance in early 2005 and 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 7,500 hectares 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.

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