Dec '09/Jan '10

Manitoba

Prospecting on the Prairies

By D. Prouse

Conducting a bore hole pulse EM survey at Rockcliff Resources’ Rail property near Snow Lake

Like most sectors of the global economy, Manitoba’s mining industry fell victim to the economic downturn of the later half of 2008. After unprecedented expenditures of $141.5 million (preliminary estimates) on exploration and deposit appraisals in 2008, expenditures for 2009 are predicted to drop by nearly 50 per cent to approximately $77.4 million. The plunge in base-metal prices and demand, and a prolonged stock market slump made it very difficult for junior explorers to raise working capital. As a result, many juniors deferred work commitments and braced themselves for the downturn, hoping to hang onto their properties until conditions improved.

Manitoba’s mineral industry makes a significant contribution to the provincial economy. In 2008, the value of mineral production totalled $2.5 billion for metallic and industrial minerals and petroleum. The industry accounted for approximately six per cent of provincial GDP and 10 per cent of exports. The industry invested $575.5 million in capital expenditures in 2008 and employed an annual average of 5,200 workers.

Manitoba’s newest mine, Crowflight Minerals’ Bucko Lake nickel project at Wabowden, has bolstered northern development by providing jobs for about 120 people, including local residents who received mill processing and underground mine training. All 20 graduates from the two courses were employed by Crowflight Minerals and its contract mining company.

Base metals

HudBay Minerals continued to receive positive drilling results at its Lalor deposit near Snow Lake. With encouraging results, the drilling budget for 2009 was nearly doubled in the second quarter to $13.0 million. In January, HudBay announced the discovery at Lalor of a new and separate (from the solid sulphide lenses) gold zone, which returned significant results, including 36.85 metres of 13.83 g/t gold and 134.9 g/t silver. In September, the company encountered what is believed to be another new zone of copper-gold-rich mineralization, where drilling intersected 13.35 g/t gold and 5.33% copper over a 34.54-metre interval that is lower in the stratigraphy than previously announced zones. This discovery significantly enhances Lalor’s economic potential.

A NI 43-101 report from September 2008 concluded Lalor has indicated resources of 3.4 million tonnes of 8.82% zinc and 0.71% copper. The 2007 Lalor discovery received the 2009 Prospectors and Developers Association of Canada Bill Dennis Award for the most significant Canadian mineral discovery. HudBay also continued drilling in the vicinity of present and past-producing mines in the Flin Flon and Snow Lake area.

Rockcliff Resources conducted a 13-hole drill program at the Reed Lake, Eel and Jackfish properties southwest of Snow Lake. Drilling at Jackfish intersected significant copper-nickel values including 1.83% nickel and 0.23% copper across 0.93 metres. Summer work consisted of ground proofing of untested versatile time-domain electromagnetic (VTEM) anomalies and geological mapping at volcanogenic massive-sulphide deposits at the Lon, Rail and Reed Lake properties.

A four-hole drill program conducted by VMS Ventures at its Puella Bay property southeast of Snow Lake helped identify a large alteration zone that the company believes may host mineralization. A ground geophysical survey was later conducted to hopefully define deep-seated conductors at its margins. Geological mapping and sampling programs were undertaken at the Puella Bay, Sails Lake and Morton Lake properties in the Snow Lake area.

Crowflight Minerals commenced production at the Bucko Lake Mine near Wabowden in the fourth quarter of 2008. The first nickel concentrate was shipped to the refinery in February 2009. The company has been dealing with various mining and milling issues to bring the operation to full-scale production at 1,000 tonnes per day (tpd). Positive results from surface and underground drilling programs have increased proven and probable reserves to 3.71 million tonnes of 1.45% nickel, a 22 per cent increase in contained nickel from the 2007 feasibility study report. The company announced in July 2009 that a new high-grade zone had been discovered that is accessible from the 152-metre mining level. Drilling from the access ramp returned encouraging results including 8.2 metres of 5.24% nickel and 12 metres of 3.56% nickel. Crowflight also has at least four other satellite nickel deposits in the Wabowden area within trucking distance of the mill.

International Samuel Exploration Corp. and Canasia Industries completed an eight-hole drill program at their Reed Lake property. Drilling identified a stockwork feeder system containing sulphides and magnetite, but no economic grades were retuned in assays. A second phase of exploration is planned.

Marathon PGM Corporation conducted winter drilling at the Ore Fault and Page zones on their Bird River property in southeastern Manitoba. The company was testing new geophysical targets adjacent to resources already defined by Marathon. The drill program, designed to increase current resources, returned encouraging results including 2.8 metres of 2.66% nickel, 2.10% copper, 15.85 g/t silver and 2.03 g/t platinum group metals (PGM) plus gold at Page. At Ore Fault, a sulphide intersection assayed 2.23% zinc, 0.74% copper and 50.47 g/t silver. The Bird River project is a joint venture with Gossan Resources.

Mustang Minerals conducted drilling at its Maskwa nickel deposit to increase the existing resource and to identify new nickel-copper-PGM resources. Drilling returned a 42.5-metre section grading 0.32% nickel and 0.05% copper. Work on the ongoing feasibility study continued with resampling and relogging of historical drill holes to update the resource model as well as metallurgical testing.

Precious metals

Aggressive exploration by San Gold Corp. at and around the Rice Lake Mine continued to return impressive results. In early 2008, San Gold announced the discovery of the high-grade Hinge Zone lenses. Since then, drilling has encountered a 2.3-metre intersection of 207 g/t gold announced in April 2009. A decline from surface accessed the Hinge Zone lenses in April. A bulk sample of approximately 10,600 tonnes with a stope mining grade of 21.7?g/t was extracted and processed, with total operating costs coming in at US$158 per ounce of gold. The Hinge Mine has the potential to contribute significantly to San Gold’s Rice Lake operation.

At the Rice Lake Mine, recent results from ongoing definition and exploration drilling at depth are also yielding some high-grade gold numbers from a new extension of the “98” vein and new discoveries above the 26th level. For example, hole 28-09-15 from an extension of the “98” vein intersected 5.9 metres of 43.8 g/t gold, including a one-metre section of 129.8 g/t gold.

A preliminary economic assessment of Rolling Rock Resources’ Monument Bay gold project in northeastern Manitoba concluded that a 1,000 tpd underground mine would cost $140 million and have an estimated 11-year mine life. Using a 5.00 g/t cutoff, the inferred resource currently stands at 2.3 million tonnes grading 9.85 g/t. The viability of the project depends on the long-term gold price. Using a US$750 per ounce gold price, the project would have an internal rate of return of 8.14% and an undiscounted net present value of $45 million.

Wildcat Exploration conducted a mapping and sampling program at its Jeep property east of Bissett. The work resulted in the discovery of three new high-grade gold occurrences, one of which returned an assay of 35.39 g/t gold. In late July, the company commenced a program of overburden stripping to further evaluate the new occurrences.

Garson Gold released results from the preliminary assessment on the No. 3 Zone at the company’s New Britannia property in Snow Lake. The study assessed the economics of mining the zone and reactivating the 2,150 tpd New Britannia mill. This was based on mining and processing of approximately 149,000 ounces of gold from 753,000 tonnes grading 6.14 g/t gold. The study concluded project preproduction capital expenditures of CDN$22.33 million and an average operating cost of US$362.38 per ounce of gold. At a mining rate of approximately 900 tpd, the mine would have a three-year operating life at present reserve levels. However, the No. 3 Zone is open for expansion at depth.

Copper Reef Mining Corp. conducted drilling at the Gold Rock property west of Snow Lake. The Gold Rock Zone lies on strike on the same shear zone hosting the North Star gold deposit. Drilling from Gold Rock has been returning some high-grade values including 3.2 metres of 104.4 g/t and 1.6 metres of 81.73 g/t gold. Recent drill results have extended the strike length of the Gold Rock vein to 345 metres.

Callinan Mines intersected a narrow, gold-bearing quartz zone at their Berry Creek property located south of Snow Lake. The three-hole drill program returned a 0.47-metre intersection of 15.40 g/t gold over a larger width of 6.49 metres of 1.26 g/t. Callinan was planning to follow up this success with a mobile metal ion sampling survey and trenching program.

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