Dec '06/Jan '07


The prominence of Saskatchewan’s mining sector continues to grow

By Phil Reeves, executive director, Saskatchewan Mining Association

This past year was another of unprecedented growth for Saskatchewan’s mining sector - a year that saw the industry set a number of new records. This growth is a result of the strong market performance for both potash and uranium and record levels of exploration activity, primarily for uranium and diamonds.

This past year saw mining edge ahead of agriculture as the second largest industrial sector in the province (the oil and gas sector is still strongly ensconced in first place). Saskatchewan also became the third largest mining jurisdiction in Canada, accounting for 15.5 per cent of the total value of Canadian mineral production. The total value of mineral sales increased by 20 per cent to $3.6 billion breaking the record set last year.

We often refer to exploration as being the R&D of the mining sector, and it is certainly a good barometer of the health of the industry. Based on current activity, our industry is very healthy for the moment. Exploration expenditures in 2005 were $150 million, a fivefold increase over levels in 2003 and more than double the level for 2004.The forecast for exploration expenditures in 2006 is $250 million and is expected to continue next year.

Record levels of staking activity in the Athabasca Basin for uranium properties, which started in 2004, continue to drive increased exploration activity.Over 90 per cent of the basin is currently under mineral disposition and expenditures this year will be well over $100 million. It is estimated that there are approximately 50 companies actively engaged in projects in the basin.With the spot price for uranium reaching record levels and a renewed global interest in nuclear power as a clean source of energy, this new level of activity should be sustainable for some time. The spot price increased by 65 per cent from the beginning to the end of the year in 2005 and it has almost doubled this year. Annual global consumption of uranium continues to exceed annual mine production by about 70 per cent.

With this renewed interest in uranium, we are seeing a lot of greenfield exploration activity with much of the work being joint venture programs led by junior mining companies, many of them new players in the uranium sector. New deposits or showings currently being worked on include the Anne,Colette, and SHE on the west side. In the north, work continues at Riou Lake and some new showings discovered along Black Lake, and in the southern part of the basin, work continues on the Moore Lake joint venture. Also, a number of the historic properties such as Hidden Bay, Raven, and Horseshoe are being revisited. A number of the junior companies are still in the early phases of exploration undertaking airborne geophysical surveys, geochemistry, and surface prospecting.

Saskatchewan continues to supply about one-third of the global supply of uranium with production from McArthur River (the world’s largest high-grade uranium deposit), McClean Lake, and Rabbit Lake. The non-entry raise-bore mining method being employed at McArthur River is working well. Little progress has been made on the company’s application to the Canadian Nuclear Safety Commission to have its production limit increased. Expansion of the mill at McClean Lake is progressing well and additional small open pits are being brought into production. AREVA Resources Canada announced its plan to bring the Midwest Lake project into production as a large open pit and has started the permitting process.The Rabbit Lake facility is now the longest running uranium mining- milling facility in the province, and a successful onsite exploration program has managed to identify new reserves in excess of annual mine production for the past few years. Final construction at the Cigar Lake project received a major setback when a rock fall in a new development heading triggered a major water inflow that flooded the mine. The decommissioning work at Cluff Lake is virtually completed and the project will move into the monitoring phase.

Diamonds are the second most sought after mineral commodity in Saskatchewan with much of the activity being focused in the Fort à la Corne District. A number of structural changes took place this year that resulted in ownership changes in the major projects. Shore Gold, the sole owner of the Star Kimberlite,merged with Kensington Resources making Kensington Resources Ltd a wholly owned subsidiary of Shore Gold. Later in the year, Shore Gold obtained the remaining interest in the Fort à la Corne Joint Venture from De Beers and Cameco (and UEM) consolidating it in Kensington Resources, at which time Newmont Mines increased its equity interest.

The Star Kimberlite is the most advanced project, having elected to sink a test shaft to collect a large bulk sample. To date 7,740 carats have been recovered from 47,573 tonnes.The sample has a high portion of white diamonds and a good size distribution, indicating a high potential for yielding large stones. With 240 million tonnes of kimberlite identified, preliminary calculations suggest a resource value of $5.7 billion. In addition to continued bulk sampling the company is also grid drilling the deposit. The company is currently having a NI 43-101-compliant resource evaluation prepared and is forecasting that production will start in 2011.

The Fort à la Corne Joint Venture covers 64 drilltested kimberlite bodies and has been collecting bulk samples on a number of these kimberlites. Work to date includes a mixture of core holes and large-diameter bulk samples from which 336 carats have been recovered, including a 10.3 carat fancy light yellow stone. Current work is focusing on the Orion Belt, a continuous zone of kimberlites over seven kilometres in length. Forest Gate Resources has also been evaluating targets in the vicinity of the Fort à la Corne Joint Venture. Great Western Diamond Corp. has started an active exploration program on the Candle Lake Project.

While not of the same magnitude as the uranium and diamond exploration activity, there is a wide variety of other exploration activity taking place. Strong gold prices continued to act as a catalyst for increased exploration activity in this sector. The Seabee mine continues to be the province’s only gold producer, and an expansion project in the mill has doubled its capacity to 1,100 tonnes per day. Claude Resources continues to pursue active exploration projects, both onsite and on the adjacent Porky Lake and Santoy Lake properties.Golden Band Resources continues an aggressive exploration program in the La Ronge belt aimed at reactivating the Jolu mill. They have a 73,500-hectare land package that includes seven known gold deposits, four former producing mines, and some new showings. Westcan Goldfields Inc. continued work on the Fork Lake and the Joyjay Gold deposits, and Marsuparia on the Greywacke and Dickens Lake properties. Further north, GLR Resources continues to work on the Box mine property and adjacent claims that they recently aquired.

Activity in the base metal sector is still sluggish with most of the exploration taking place in the greater Flin Flon area. HudBay Minerals is renewing an active exploration program in the area and is encouraging other players to get involved in the base metal play.

The other bright spot in the north is Great Western Minerals Group’s Hoidas Lake rare-earth elements project. Demand for these unique high-tech minerals is growing, so this project has tremendous development potential. Other projects in the North include the Pinehouse Limestone Project and the Deep Bay Graphite Deposit.

In southern Saskatchewan, potash is still “king” accounting for three-quarters of the total value of mineral sales. Saskatchewan continues to provide one-third of the world’s potash and has one of the world’s largest resource bases. The biggest change in this sector is that for the first time in almost 50 years, there have been companies applying for new potash exploration permits. Seventeen new permits have been issued and there are still a number of applications pending. While much of this activity was initiated by junior companies, BHP Billiton has optioned the Jansen Lake Project (previously explored by Kerr-McGee in the mid-sixties) and has indicated they are evaluating the feasability of developing a new potash mine.

Coal continues to be our third largest mineral commodity and it is used almost entirely for power generation. A small amount is exported to Ontario for power generation, and one of the mines produces char that goes to Kingsford to manufacture barbeque briquettes. Our power utility is currently evaluating a project to fast track the construction of a clean coal (zero emission) power plant.

Down in southwest Saskatchewan, Whitemud Resources recently had a sod-turning ceremony on their Wood Mountain kaolin project. Kaolin is traditionally used as a filler and as a coating compound for high-grade papers, and several attempts to develop this deposit for the paper industry met with failure.Whitemud Resources took a new look at this deposit and is going to convert the kaolin into meta-kaolin, which is used as a substitute for Portland cement by the concrete industry. Construction of a $50 million plant is underway and it should be fully operational by the second half of 2007, producing 200,000 tonnes annually. The unique modular design of the facility will facilitate expansion and the company hopes to increase its annual productive capacity to one million tonnes in the next decade.

Saskatchewan’s mining industry is currently firing on all cylinders and we see a bright future of continued growth in the mining sector. Mining will continue to be one of the key contributors to the provincial economy, confirming that mining is good for Saskatchewan.

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