Dec '08/Jan '09

Ontario

Leading Canada in exploration

By the staff of the Ontario Ministry of Northern Development and Mines

Core racks at the Rainy River property near Kenora, Ontario

Mineral exploration and development did very well through the first half of 2008 in Ontario at all stages of the mining cycle. The recent decline of most metal prices has negatively impacted exploration and production at some of the base metal mines. However, claim-staking is still at record levels and work continues on most of the larger exploration programs.

Ontario is among the top ten jurisdictions for exploration spending worldwide. Much of this is attributable to the high quality of infrastructure, the diverse and unexplored geology, accessible and reliable geoscience information, a stable regulatory environment and favourable taxation policies, including a permanent five per cent flow-through share program for exploration.

Healthy levels of spending

Ontario is expected to lead all Canadian provinces and territories in exploration expenditures in 2008 with over $600 million in spending, up from $502 million in 2007. Most of the yearly increase is attributable to more spending at the advanced exploration phase as development continues on many of the larger nickel-copper projects and gold mines. Spending by junior companies now accounts for half of exploration expenditures.

Gold remains the primary focus of exploration because of Ontario’s potential for new discoveries and gold prices remaining buoyant throughout the economic turmoil. Exploration for base metals increased dramatically in 2008 as a result of work at nickel-copper development projects in the Sudbury area, such as Xstrata’s Nickel Rim project and Vale Inco’s Totten project.

Ontario reached a record 367,000 active claim units in October 2008, over double the number at the turn of the century. Claim staking was as active in new locales, such as the McFaulds Lake area, as it was in older areas such as the Sudbury mining camp. Thunder Bay led all mining divisions in 2007 with almost 84,000 active claim units, followed by Timmins at 69,000. The Timmins West project in Bristol Township. Shaft sinking is underway to extract a bulk sample. Lake Shore has acquired the mill from the Bell Creek mine (1,500 tonne per day capacity) to process the bulk sample.

Kodiak Exploration Limited uncovered a large gold-bearing vein structure, the Golden Mile, on its Hercules property, northeast of Beardmore. Stripping has traced the zone along a northwest strike for over two kilometres where channel sampling cut 11.6 metres grading 32.96 g/t Au. Key intersections from the current drilling program returned 358.6 g/t Au over 3.6 metres and 20.8 g/t Au over 4.1 metres. More than 50,000 metres of drilling in 2008 extended the zone deeper and northward.

St Andrew Goldfields Ltd., in an effort to re-open the Holloway-Holt complex, completed 2,273 metres of definition drilling and 841 metres of development at the Holloway mine, and 1,082 metres of definition drilling and 1,082 metres of development at the Holt mine in 2007. The mill processed 76,410 tonnes of development ore at a head grade of 3.9 g/t Au, to produce 7,953 ounces of gold.

Northgate Minerals Corporation continues exploring at its Young-Davidson property near Matachewan. Diamond drilling has confirmed a near-continuous gold system of overlapping lenses as well as new mineralization. A recent preliminary assessment estimates average annual production of 158,000 ounces of gold at a net cash cost of $405 per ounce. Northgate projects that the property will be in production in late 2010, with a 12-year mine life.

Apollo Gold Corp. completed 39 surface holes and 22 underground holes totalling 8,700 metres drilled in 2007 at its Black Fox property near Matheson. Apollo has drilled several deep exploration holes, which, as anticipated, hit the Destor-Porcupine vein structure. The assays include hole 07BF457, assaying at 34.01 g/t Au and indicate potential for additional mineralization at depth.

Base metals: Driven largely by activity in the Sudbury area, exploration for base metals rose from $34 million in 2003 to $123 million in 2007.

FNX Mining continues to conduct extensive exploration around their Sudbury area nickel-copper-platinum group metal properties, which include two producing mines. In early 2008, production commenced at the Podolsky mine in the northeastern part of the Sudbury Igneous Complex. All production to date at Podolsky is from the high-grade nickel-copper-platinum group metal-gold lower portions of the 2000 deposit. The planned production rate of 1,200 tonnes per day should be reached by the end of this year.

Companhia Vale do Rio Doce, owners of Vale Inco, will spend an estimated $11 billion worldwide in 2008, making it the largest annual investment program ever undertaken by any mining company in the world. Sudbury area projects are playing an important role, as $68 million will be spent by Vale Inco next year on the Totten and other projects. The company also increased their spending on exploration and strategic studies in the Sudbury area during 2008.

Xstrata Nickel recently announced its intention to close two mines in the Sudbury area and spend US$455 million over the next two years to develop the new Fraser Morgan mine site. A 2.5-kilometre underground ramp will link the existing Fraser mine with the new Fraser Morgan mine. By the end of 2008, production at Fraser Morgan is expected to be 620,000 tonnes of ore annually. The Nickel Rim project is also an important part of the future, with an inferred resource of 13.4 million tonnes of ore of mostly nickel, copper, platinum and palladium. The $850 million project should begin annual production of 1.25 million tonnes of ore in 2010.

Canadian Arrow Mines Ltd. initiated an aggressive exploration program on the Kenbridge nickel project in the Kenora area. Recent drilling has increased the measured and indicated resource by 87 per cent, to 97.7 million pounds of contained nickel. In preparation for mining, environmental and engineering studies have been initiated and consultations are underway. Anticipating underground operations, Canadian Arrow has purchased a headframe and hoisting equipment.

At the Double Eagle project near McFaulds Lake, Noront Resources Inc. reported a diamond-drill intersection of 5.9% Ni, 3.1% Cu, 2.87 g/t Pt, 9.78 g/t Pd, 0.61 g/t Au and 8.5 g/t Ag over a drill core length of 68.3 metres. Massive sulphide mineralization is hosted by coarse-grained peridotite. The project is located about 500 kilometres northwest of Timmins. News of the discovery prompted staking of hundreds of new claims by many junior mining companies who are conducting airborne geophysical surveys and diamond-drilling programs in the area.

Tribute Minerals Inc. is working towards obtaining an advanced exploration permit to perform underground bulk sampling and definition drilling on its Arrow Zone polymetallic deposit at the Confederation Lake property in the Red Lake area. NI 43-101-compliant estimated resources are 2.07 million tonnes of 5.92% Zn, 0.75% Cu, 0.58 g/t Au and 21.1 g/t Ag. Appreciable indium and gallium grades of the deposit may enhance the project’s overall economics.

Richview Resources Inc. conducted a summer work program on its Thierry mine copper-nickel-platinum group metal property, west of Pickle Lake. Drilling confirmed the presence of the main Thierry orebody below 3,000 feet and encountered the richest and most significant intercept to date. The mine site has been refurbished and new buildings have been constructed.

Other metals: Marathon PGM Corporation completed their 2008 drill program at the Marathon platinum group element copper project, ten kilometres north of Marathon. A definitive feasibility study, currently underway, is scheduled for completion by the end of 2008. The current measured, indicated and inferred resources estimate is 3.41 million ounces of platinum group elements and gold, 5.39 million ounces of silver and 595 million pounds of copper. The project has a projected annual production rate of over 200,000 ounces of platinum group metals and gold with a 14-year mine life.

Pele Mountain Resources will continue drilling on their Eco Ridge uranium project in the Elliot Lake area. However, lower uranium prices have forced the postponement of the prefeasibility study and permitting. The Eco Ridge property contains NI 43-101-compliant resources of 6.4 million pounds of indicated resource and a 36.1 million pound inferred resource. An earlier study indicated that a $195 million mine could produce 826,000 pounds of U3O8 per year over an 18-year mine life at a cost of US$55.51 per pound.

Looking forward

Ontario is committed to sustaining global confidence in its well-earned reputation as a leading jurisdiction for exploration and is working to address challenges. The Ontario Geological Survey provides extensive and objective information on Ontario’s geology and its world-class mineral resources. Mapping and data collection programs are being undertaken throughout the province to support the further expansion of an already thriving resources industry.

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