ArticleInteresting article for those of you who havent read it.
Largo bets on hunger for Yukon tungsten
PREFEASIBILITY AT NORTHERN DANCER PROJECT UNDER WAY
By Kip Keen
SITE VISIT
TESLIN, YUKON--"If China's hoarding their tungsten, where does Japan go?" Tim Mann, Largo Resources' (LGO-V, LGORF-O) vice-president of engineering, asks a small gatheringof drillers, geotechs and media types over lunch in the cook-shack atLargo's Northern Dancer tungsten- molybdenum project, in the Yukon.
It'san interesting question about the whitish-grey metal crucial to themanufacture of a wide swath of products from cemented carbides tosuperalloys. It's an even more interesting question when you considerthe past and future of tungsten production worldwide.
Ofthe world's top three producers, China makes the vast majority of theplanet's tungsten. In 2006, the country churned out 62,000 tonnes oftungsten (in terms of metal content) compared with Russia's 4,500tonnes and Canada's 2,600 tonnes --of which 1,900 tonnes came from asingle mine: North American Tungsten's (NTC-V, NATUF-O) recently reopened Cantung mine in the Northwest Territories.
"Inthe past, China has been a problem," says Andy Campbell, Largo'svice-president of exploration. "With China's vast and cheap tungstenresources, its ability to flood the market has made it difficult forthe rest of the world to develop its own tungsten mines. "That'schanged," Campbell says.
Despite China'sstill gigantic tungsten engine, its appetite for the brittle metal hasrecently outstripped its tungsten horsepower. Once a net exporter ofthe stuff, it is now a net importer. From 2005 to 2006, its imports oftungsten doubled to 6,300 tonnes.
Which leadsback to Mann's initial question: Where will Japan -- or the rest of theworld for that matter -- go to satiate its tungsten hunger?
Mannbelieves a big part of the answer lies in the Yukon, which the YukonGeological Survey estimates holds about 20% of the world's knowntungsten resources.
As Michael Burke, head ofMineral Services with the Yukon government puts it: "A big chunk of itis here. That's why the Japanese are so interested."
Andwith its Northern Dancer exploration project, one of the largestlow-grade tungsten-moly deposits in the world, Largo hopes to quenchsome of the world's tungsten thirst.
By road,Northern Dancer is 290 km southeast of Whitehorse in low-lyingmountains on the Yukon and B. C. border. The nearest town is Teslin, 65km west, and the nearest paved road is the Alaska Highway, 12 km awayalong a narrow gravel road that winds down a valley and throughincreasingly less stunted fir and spruce. The site itself hovers oneither side of the treeline.
Largo'sexploration camp -- a cook-shack, half a dozen prospector tents withdiesel burning stoves and 20-odd drillers, geologists, geotechnicians,cooks and project overseers -- is not, however, the first to beestablished here.
Although the CanadianGeological Survey noticed tungsten mineralization in the area as earlyas the 1950s, Northern Dancer (then known as Logtung) went unnoticeduntil Cordilleran Engineering, working for the Bath Uranium Group, cameacross it in 1976. Bath quickly passed the claims on to LogjamResources, which in turn, flipped them over to Amax Potash in 1977.
Amaxdid the first substantial work outlining the resource. Over the nextfour years, Amax built a road into it, drilled 51 holes and dug a500-metre decline to extract a bulk sample for metallurgical tests. In1981, Amax went as far as creating a digital model of the deposit andevaluating the costs of developing it.
Itwasn't until 1983, however, after Amax passed the project on to CanamaxResources that Northern Dancer got its first resource estimate. Theresult: a historical resource pegged at 162 million tonnes grading0.13% tungsten and 0.052% moly.
The numberswere good enough to convince Canamax to conduct a prefeasibility study.But, for all its efforts, Canamax found that the low-grade deposit wasuneconomic at the time.
The idea ofdeveloping Northern Dancer collected dust for the next 10 years untilNDU Resources optioned the property in 1993. During the mid-1990s, NDUput in two drill holes and conducted soil sampling, but the companydropped the option with disappointing drill results and the claimssubsequently lapsed.
Strategic Metals (SMD-V,SMDZF-O), then known as Nordac Resources, was the first to notice thatthe claims had lapsed. Strategic quickly restaked the property in 1998and for the next six years, slowly poked away at Northern Dancer,putting in some additional trenching and rehabilitating the roads --setting the stage for Largo.
Largo goes north
Atthe time Largo was half a world away, working in warmer climes, anddeveloping its first project, the Macuchi polymetallic copper-goldproject in Ecuador. Campbell says the company didn't have its sights onthe Yukon at all.
Instead, while OreResources optioned Largo's Macuchi project, the company shifted itsfocus from Ecuador to Brazil, where Largo picked up the Maracas projectwith the highest known grade of vanadium in the world at 17.3 millionmeasured and indicated tonnes grading 1.44% V2O5. Largo has sincetargeted Maracas for 2009 production.
As for Macuchi, it was passed back to Largo when Ore Resources was acquired by Teck Cominco (TCK. B-T, TCK-N). Given the political situation in Ecuador, whichCampbell calls "a challenge," Macuchi has been shunted to the backburner -- a situation both Mann and Campbell are happy with. They wouldrather focus their efforts in politically stable countries like Canadaand Brazil.
Although Largo didn't have rootsin the Yukon, its chairman, Stan Bharti, had heard of the 15-sq.-kmNorthern Dancer project through a colleague.
The Largo team liked what they saw and optioned the property from Strategic Metals in 2006.
Thedeal has two stages. For the initial 70% interest, Largo has issuedStrategic Metals 4 million shares and must spend $5 million onexploration and development. Largo can pick up the remaining interestfor an additional $5 million dollars or the equivalent value in stock,and has also agreed to a 1% net smelter return royalty.
As for the first $5 million, Mann says, "We're already there."
Largois now into its third season of drilling with two of KluaneInternational Drilling's rigs on the go. With 17 holes and 4,000 metresin 2006, and 26 holes and 8,500 metres in 2007, Largo has defined anindicated resource of 141 million tonnes grading 0.1% tungsten and0.026% moly with an additional 253 million inferred tonnes grading 0.1%tungsten and 0.022% moly. With this year's infill drilling, Largo isfurther refining its geological model and hopes to upgrade the resourceto measured.
Not that our group can see much evidence of that drilling on our tour of the property.
Thenight before our visit, eight inches of sticky mid-June snow masked thesite in a blanket of white, turning the dirt road from the cook-shackup to the drill rigs into a treacherous mud Slurpee. At the bottom ofthe steep slope up to one of Largo's thundering drills, even the torqueand treads of a GMC Yukon's V-8 can't cut it. The trucks give out andthe group walks -- or slides -- to see Kluane's drills churning outcore.
The first thing you notice aboutKluane's drills is their size -- smaller than your average rig anddesigned by Kluane to be fully disassembled and packed in and out ofremote projects by a crew of 20. Though they're perfect for isolatedprojects in Canada's North, they were in fact designed for the thick,Ecuadorian jungle.
Indeed, a large portion ofthe drilling crew is Ecuadorian. Lucky for them, given the turmoil overmineral exploration and development in their native country, theexplosion of exploration in Canada's North has led to a shortage ofskilled workers. To meet the high demand for drillers, last year Kluanebegan bringing in Ecuadorians trained on their South American projects.
AlthoughLargo is paying a premium for Kluane's drill crews, Mann says it'sworth it. With dozens of exploration projects competing for the sameequipment and personnel, Mann says it's critical to have a reliabledrill company. Otherwise, if you try and organize your own drill team,"Two weeks later, they send you an email saying they can't come."
Workingon 12-hour shifts around the clock, Largo is getting about 50 metres ashift from two drill rigs, with a third on the way.
The geology
Backat the core shack, geotechs brush snow off core for everyone to seeveins bearing the three minerals of interest: scheelite,molybdoscheelite and molybdenite.
"We'resurrounded by porphyry intrusions," Burke explains. "This is the lastgasp. Intrusions have come up into the sedimentary rock and createdwhat we call these skarns --full of veins too."
Threeintrusions date to the early Jurassic and Cretaceous periods, the mostrecent of which is the key to Northern Dancer. The oldest intrusion onthe northern wing of the property is about 186 million years old andleft behind two dioritic stocks and associated satellite dykes. Thisintrusion is about 1 to 2 km wide and 4 km long.
Thenext intrusion occurred during the mid-Cretaceous about 110 millionyears ago and left behind monzogranitic stock and associated pegmaticdykes and sills over a 2.5 by 1.5-km area.
Butit is the third that matters the most to Largo. Just a bit younger thanthe mid-Cretaceous intrusion, the third intrusion created a felsicporphyry dyke complex, the main host to the tungsten-molymineralization, found in a strongly fractured vein set.
It'sthis vein set that has been the focus of Largo's drilling campaign."Therearetwofoci," Mann explains. "There is mainly tungsten in thesouthwest and moly in the northeast."
Whiletungsten-bearing scheelite has been the focus of the project, FarshidGhazanfari, a geological technical co-ordinator, says that moly isn'tmerely a credit at Northern Dancer. "It is not just a byproduct," hesays, noting the higher grades encountered in the northeast.
Still,tungsten is driving Northern Dancer. In a dark, windowless room set upin the core shack, Ghazanfari scans an ultraviolet (UV) light across alength of core. The scheelite glows intensely, an iridescent white-blue-- a quality that Largo plans to put to good use.
The plan
Largois currently in the throes of a prefeasibility study looking at thedevelopment of an open-pit mine with dry-stack tailings.
"We're looking to get the higher-grade tungsten into the mill as fast as possible," Mann says.
Largowould mill concentrate on-site, getting tungsten down to about 80%purity with conventional flotation, and then truck it to the port ofSkagway, Alaska, about 315 km southwest.
Asfor infrastructure, although the site is not all that remote incomparison with many other projects in the North, "power is always anissue," Mann says. Since extending the grid would be too expensive,Largo's design is currently based on diesel-generated electricity, withnatural gas potentially playing a role. But if energy prices remainhigh, the company will consider renewables.
"Maybe wind, maybe a small hydro plant," he says.
Theother burning question right now is mill size and how to keepinfrastructure as small as possible. That's where the glowing qualityof scheelite comes in.
Largo has been workingwith a company called Terra Vision to design an optical sorting systemfor heavy media separation. Preconcentrated ore means less tailings,and less, higher-grade throughput means a smaller -- and cheaper --mill design.
Terra Vision tried a number ofdifferent sorting schemes including hand-picking, UV and X-ray andfound that UV was best. Mann expects Largo will be able to reject 50%of what would otherwise be null feed. "Obviously," he says, "thisoptical sorting is a technical breakthrough."
Withit, they can look at mining 40,000 tonnes a day, rejecting that 50%,and milling 20,000 tonnes. He also says they may look at a 10,000-tonne-per-day option. It's all part of getting "the most bang for yourbuck," Mann says. He and Campbell hope to have operations started by2013.
Here we go again?
Between1962 and 1986, the Cantung mine did quite well, taking advantage of hottungsten prices in the latter half of the 1970s. In fact, it put Canadaon the map as a supplier of 8% of the world's tungsten. But when theChinese flooded the market during the 1980s, Cantung couldn't surviveand the mine closed up shop for the next decade and a half.
Forthat reason, some might reasonably wonder at the chances for survivalof Northern Dancer, among other tungsten plays in the Yukon. Couldhistory repeat itself? Could the Chinese flood the market again?
Althoughanything is possible, in its latest assessment of tungsten productionworldwide, the United States Geological Survey (USGS) rhymed off alitany of tungsten commandments the Chinese government has recentlymade. These help explain Largo's optimism for what some analysts arecalling the "new tungsten market."
"China'sgovernment restricted the amounts of tungsten that could be producedand exported, increased the resource tax on tungsten mining, bannedforeign investment in Chinese mines, banned tolling of tungstenconcentrate, introduced regulations to limit the building or expansionof tungsten processing plants, continued to shift the balance of exportquotas towards value-added downstream tungsten materials and products,and imposed export duties on most tungsten materials."
Andperhaps most importantly to those eyeing the development of tungstenresources outside China, the USGS predicts that: "To conserve itsresources and meet increasing domestic demand, the Chinese government(is) expected to continue to limit tungsten production and exports andto increase imports of tungsten."
That's what Largo is depending on. Back in the Northern Dancer cook-shack, Campbell sums up his feelings.
"We really see the price of tungsten continuing to rise. Really."
LargoResources' geological technical co-ordinator Farshid Ghazanfari trudgesup the mountainside at the Northern Dancer project, in the Yukon, aftera mid-June snowfall.
The Northern Miner, Volume 94 Number 24, Aug 4 - 10, 2008