Dec '09/Jan '10

Saskatchewan

A world leader weathers a storm

By the staff of the Saskatchewan Ministry of Energy and Resources

An underground view of Mosaic’s Esterhazy potash mine

Saskatchewan is the world’s leading producer of potash and uranium, accounting for about one-third of the global production of potash and just over a fifth of primary world uranium production in 2008.

In 2009, mineral exploration spending in Saskatchewan will be an estimated $293 million, a decrease from the all-time record level of $474 million achieved in 2008.

As of August 31, 2009, about 7.42 million hectares of active mineral dispositions were issued. There were also 192 active potash dispositions, totalling about 4.84 million hectares, and 6,440 active coal dispositions, totalling about 4.06 million hectares.

Gold, coal, silica sand, kaolin, sodium sulphate, potassium sulphate and sodium chloride were also mined, pushing 2008 mineral sales up to $9.7 billion, placing Saskatchewan first among Canada’s provinces.

Uranium

Expenditures on uranium exploration, which is focused within and adjacent to the Athabasca Basin of northern Saskatchewan, are forecast to be about $124 million this year. The Athabasca Basin, which contains the largest, high-grade uranium deposits in the world, is being explored by some two dozen companies, acting either independently or in joint venture programs.

Of the three uranium deposits currently slated for development, the Cigar Lake and Midwest deposits are the most advanced. Cigar Lake, owned by joint venture partners Cameco, AREVA, Idemitsu Uranium Exploration Canada and TEPCO Resources, contains reserves of 226.3 million pounds of U3O8 at an average ore grade of 20.67% U3O8. Construction at Cigar Lake, which began in January 2005, was hampered by water inflow incidents in 2006 and 2008. Production, which is likely to miss the 2011 target date, will ramp up to 18 million pounds of U3O8 per year within three years of commencement.

AREVA and its partners have decided to delay development at the Midwest project until market conditions improve. Meanwhile, the environmental assessment process and engineering planning are underway. Once production commences, ore will be mined and milled at the nearby McClean Lake mill.

Mining of the Caribou deposits on the McClean Lake lease has been delayed after a review of the project’s economics at current uranium prices. Permitting for the project is continuing and AREVA is also continuing to develop bore mining technology for use at McClean Lake.

Among the other noteworthy ore bodies is the Millennium deposit which is the subject of a feasibility study for underground mining that is scheduled to be completed in 2009. Also of note is the UEX-owned Hidden Bay project, which includes the Horseshoe, West Bear and Raven deposits. The project’s NI 43-101-compliant resource estimates were recently expanded by UEX.

Gold

In 2009, gold exploration expenditures are estimated to total $2.6 million, compared to actual expenditures of $8.9 million in 2008. The majority of recent gold exploration activity has occurred in the La Ronge and Glennie domains.

Claude Resources has maintained a significant gold exploration and production program, Glennie Domain, particularly in the vicinity of its actively producing Seabee Mine, which produced 45,466 ounces of gold in 2008. In the first two quarters of 2009, the mine yielded 18,348 ounces, compared to the 19,954 ounces produced by the second quarter of 2008. Claude Resources ascribed this fall to disruptions caused by planned maintenance work. The company expects to produce up to 48,000 ounces in 2009.

In August 2009, GLR Resources sold its Goldfield assets to a wholly owned subsidiary of Linear Gold Corporation. Linear Gold, upon taking over the project, is updating the engineering documents prior to project development and operation.

Golden Band Resources continues to advance its LaRonge gold project. The 750-square kilometre exploration area contains several known deposits, including four former producing mines, numerous known prospects and the Jolu central mill, which is currently being refurbished. Golden Band has also received approval for the LaRonge gold project from Saskatchewan’s environment ministry and has signed a surface lease agreement with the Government of Saskatchewan.

Base metals

Saskatchewan saw no base metal production in 2008. Province-wide spending on base metals exploration is expected to reach $1.69 million this year.

In 2008, Strongbow Exploration discovered a new volcanogenic massive sulphide deposit, the Zang Zone, at the McKenzie Lake project. The deposit lies in the sub-Phanerozoic extension of the Flin Flon Domain.

Strongbow Exploration is currently exploring for magmatic nickel sulphide deposits along a 240-kilometre strike length of the Southern Snowbird Tectonic Zone. During the 2009 summer field program, the company discovered a number of new nickel-copper sulphide showings in the Snowbird project area. Samples are currently being assayed to help in the selection of high-priority targets for a ground geophysical survey and drill testing in 2010.

Advanced exploration projects include: the McIlvenna Bay (Foran Mining and Copper Reef mines) and Fon deposits (Murgor Resources) in the western Flin Flon Domain; and the polymetallic Brabant Lake deposit (Manicouagan Minerals) in the Kisseynew Domain.

Diamonds

In 2009, diamond exploration spending is forecast to be about $13.8 million, down from actual expenditures of $73.2 million in 2008. Most of this year’s spending is targeted at two advanced exploration projects underway in the Fort à la Corne forest, 60 kilometres east of Prince Albert.

A pre-feasibility report recommended that Shore Gold advance its Star Kimberlite to the feasibility stage. Shore is also involved, along with Newmont Mining, in the Fort à la Corne Joint Venture. The venture’s mineral disposition holdings include 63 drill-confirmed kimberlite bodies, some of which are volumetrically among the largest in the world. During the second quarter of 2009, Shore announced diamond results from large-diameter drilling on the Orion South, Orion North and Taurus kimberlite clusters. Currently, a resource estimate calculation is underway for the Orion South portion of the Orion kimberlite cluster.

Industrial minerals

Expenditure on industrial mineral exploration is expected to exceed $150 million in 2009. While most of this expenditure will be focused on potash and coal, there will also be some exploration for silica sand, kaolin and rare earth elements.

Potash: Since the early 1970s, Saskatchewan’s potash mining industry remains relatively unchanged, with eight conventional and two solution mines operated by the Potash Corporation of Saskatchewan, the Mosaic Company, and Agrium Inc. In 2008, the $7.3 billion of potash sales from Saskatchewan’s ten mines accounted for a third of global production and represented about 75 per cent of the province’s total mineral sales. Potash exploration remains strong, with several companies undertaking new seismic surveys and drilling programs, while others continue to work on more advanced-stage projects.

Athabasca Potash released a new NI 43-101-compliant mineral resource estimate for its Burr project that outlined indicated resources of 241.2 million tonnes of 23.3% K2O, and inferred resources of 183.1 million tonnes with a grade of 23.2% K2O. The company has identified a preferred shaft and mine site location and is currently seeking investment or partnership opportunities.

An updated NI 43-101 technical report outlined measured resources of 29 million tonnes grading at 25.8% KCl and indicated resources of 222 million tonnes grading at 26.3% KCl, at Potash One’s Legacy solution mining project. The company is now moving the project into the feasibility stage.

Completing four initial exploration wells at its Milestone property, approximately 30 kilometres southeast of Regina, Western Potash confirmed the presence of all three potash members in each of the wells. The company also has budgeted an extra $8.5 million for further exploration.

On the production front, current potash producers Agrium and PotashCorp are investigating the feasibility of developing new potash mines, while Vale intends to continue work on a solution mining project, 20 kilometres southeast of Regina. Vale has acquired all of the potash exploration permits held by the Rio Tinto subsidiary, Kennecott Canada Exploration.

In August 2009, the province’s three major potash producers released quarterly results indicating that production volumes and revenues were down significantly due to a drop in product demand and protracted negotiations with key offshore buyers. Despite the effect of this drop on 2009 production estimates, all three producers are optimistic about the future and plan to invest approximately $9.6 billion in capacity expansion.

Meta-kaolin: Whitemud Resources re-opened its meta-kaolin plant in the spring of 2009. Upgrades made to the plant during the scheduled winter shutdown are expected to significantly enhance its productivity and reliability. The company continues to make inroads into the recession-hit cement industry. Its meta-kaolin is being used in the construction of notable large-scale institutional projects, such as the Taylor Family Digital Library and the Energy Environment Experiential Learning building at the University of Calgary.

Other industrial minerals: Great Western Minerals Group has signed a non-binding letter of intent with Toyota Tsusho, whereby the companies will examine the merits of jointly exploring and developing the former’s Douglas River and Benjamin River projects. The projects are of particular interest to Toyota Tsusho because their mineralization appears to be significantly enriched in the high-value, heavy rare earth elements. These elements are critical to the manufacture of high-temperature magnets used in hybrid vehicles. Great Western is also optimistic about the rare earth elements potential of its Hoidas Lake property that has NI 43-101 measured resources of 123,000 tonnes grading at 2.466 wt% TREE (weight per cent total rare earth elements), and indicated resources of 430,000 tonnes grading 2.305 wt% TREE.

In 2008, Goldsource Mines discovered coal while drilling for kimberlite on its Border property claim block in east-central Saskatchewan. The company has since drilled 115 holes and delineated 15 discrete coal deposits, some up to 100 metres thick, in six sub-basins. Analytical tests are underway to determine the coal’s thermal value, sulphur content, and other properties. Initial results indicate the coal is typically sub-bituminous.

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