Other Micon Nickel work for reference
TNB South Project
Bucko Lake Nickel Deposit (Bucko Deposit)
Overview:
Under the terms of its earn-in agreement with Falconbridge, Crowflight can earn up to a 100% interest in a 5.5 square kilometre area contained within Mining Lease (ML) 031 (including the Bucko Deposit Resource Block - the area containing the current resources defined within the Deposit).
The property contained within ML 031 was originally acquired in 1959 by Consolidated Marbenor Mines Limited. In 1962, diamond drilling intersected 1.54% nickel over 6.34 metres in hole M77-B (the discovery hole) and soon thereafter the property was optioned to Falconbridge.
Since 1962 the property has been covered by extensive ground and airborne geophysical surveys and investigated by surface and underground diamond drilling. Between 1962 and 2001, 165 surface diamond drill holes totaling 61,384 metres were completed on the Deposit. In 1971-72 Falconbridge sunk a three-compartment shaft to a depth of 1,170 feet (356.6 metres - the "1000 Level") and developed 3,500 feet (915 metres) of hanging wall drifting at the 1000 Level. A 61-hole underground drilling program consisting of 12,700 metres of drilling on 30 metre spacings was performed. The results of this drilling were used in the calculation of several pre-National Instrument 43-101 mineral resource estimates.
A scoping study (completed at the request of Crowflight by Micon International in late 2004) indicated that on a conceptual basis the development of the then defined Indicated Resources contained within the Deposit could generate a net present value of US$34 million (using a 15% discount rate) and could deliver an internal rate of return of 67% (assuming a life-of-mine US$4.50/lb nickel price). This study is available in the Technical Reports section of the the website, or by viewing public documents filed by Crowflight on www.sedar.com.
Objectives:
Crowflight's primary objective is to finance and develop the Bucko Lake Nickel Deposit to achieve an average annual rate of production of 5,700 tonnes of nickel in concentrate (approximately 12.5 million pounds of contained nickel). Production is planned to commence in the first quarter of 2008.
Agreement Terms:
Crowflight can earn up to a 100% interest in a 5.5 square kilometre area consisting of Mining Lease (ML) 031 (including the Bucko Lake Nickel Deposit Resources Block - the area containing the current resources defined on the Deposit). Under the terms of this agreement, Crowflight can earn an initial 50% interest in ML 031 upon having expended C$7.5 million on activities leading to the completion of a Bankable Feasibility Study on the Bucko Deposit. Crowflight's interest can increase to 100% upon arranging financing and bringing the deposit into Commercial Production. Falconbridge has an earn-back right on 50% of any new deposit contained within ML-031, but outside of the original Bucko Resource Block (a 0.3 square kilometre area in which all of the current Indicated Resources have been identified within the Bucko Deposit), in which a deposit containing in excess of 200,000,000 pounds of nickel resources has been identified, by matching Crowflight's expenditures to the point of having identified such resources.
To be eligible to earn its interest in ML 031, Crowflight must also have funded (or deposited with Falconbridge) minimum exploration commitments in the 190 square kilometre Thompson Nickel Belt South ("TNB South") Project Area of C$10.5 million prior to December 31, 2009 (such expenditure of which will also have earned Crowflight a 25% interest in all TNB South Project Area properties).
As of March 2006, about C$6 million of the C$10.5 million required has been funded by Crowflight. Falconbridge retains a 2.5% NSR royalty on production from ML-031.
Project Update:
Based on the results of the Micon scoping study, Crowflight initiated and funded a diamond drilling program on the property and initiated a full feasibility study. The exploration program began in late 2004 and consisted of (a) line cutting; (b) numerous geophysical surveys, including: surface magnetometer, HLEM (Max-Min), surface pulse electromagnetic, UTEM, and magnetometer/bathymetric surveys; (c) diamond drilling; (d) borehole electromagnetic geophysical surveys (on selected holes); (e) borehole directional survey(s); and (f) drill core sampling/assaying.
Twelve holes and seven wedge cuts off of historical diamond drill holes totaling 7,900 metres were completed during the winter of 2005. These holes were aimed at providing representative sample of ore-like material for metallurgical testing purposes.
A preliminary
resource model based on available historical and more recent exploration date was completed in mid 2005. During this process, opportunities to expand the mineral resources within the deposit were identified which could be addressed by additional diamond drilling from surface and a summer 2005 surface in-fill drill program was undertaken for these purposes.
The summer 2005 program was to consist of a series of 11 surface holes designed to evaluate areas containing potentially greater thicknesses of higher grade nickel mineralization below the 1000 Level of the mine (about 300 metres below surface) to a depth of about 450 metres. Under this program a total of 4,769 meters in nine holes were completed. Total expenditures for these activities were approximately C$600,000. One of the more significant intersections from this program is illustrated in the attached core sample image.
Note to Figure 1: Blue circles on image represent the pierce points on the longitudinal section of 2005 Summer drill holes. The area shaded in green is the Indicated Resources from the historical drill data base. The area shaded in red represents the area of additional Indicated Resources that was the product of the summer 2005 drill program.
Results from the drilling can be reviewed by following the attached links: July 26, 2005, September 20, 2005, October 13, 2005, and November 9, 2005, or by visiting the website www.sedar.com.
The combined drilling results of the 2005 winter and summer programs were incorporated into the current resource estimate prepared by P&E Mining Consultants Inc. in a report dated December 2005. The resource estimate used conventional statistical analysis and grade interpolation via Gemcom modeling to create blocks within interpreted three-dimensional solid domains that were coded with Ni and Cu grades, bulk density estimates and then classified into either Indicated or Inferred Resource categories.
The results of the updated resource estimate using various cut-off grades are presented below. Detailed results of this study can be reviewed by following this link 2005 Feasibility Resource Estimate Study, or by visiting the website www.sedar.com.
Resource Estimate at 1.1% to 1.9% Nickel Cut-Off Grades (P & E 2005)
Feasibility Study:
The results of the updated resourcecalculation were entered into an economic model incorporating current estimates for projected capital and operating costs on a fully costed basis, expected recoveries, off-take terms, metal prices, exchange rates, etc. for inclusion in the feasibility study document.
The feasibility study analysed a base case scenario in which the Indicated Resources of the Deposit at a 1.5% nickel cut-off grade were accessed and hoisted to surface via the rehabilitated three-compartment shaft that exists to the 1000 Level and emploed contract mining using conventional underground mining methods with a surface concentrator facility processed 1,000 tonnes per day of nickel ore to produce a saleable nickel concentrate grading 17% nickel.
Results of this study were released on December 16, 2005 and illustrated the project's ability to deliver a 23.9% rate of return and a net present value (at a 10% discount rate) of $22.6 million at an average life-of-mine nickel price of US$5.00 per pound. At a US$6.00 per pound nickel price (during 2005 the nickel price averaged US$6.70 per pound) the rate of return increases to 41.6% and the net present value increases to $53.1 million (all currencies, unless otherwise stated are in Canadian dollars). Results from this study can be reviewed in greater detail by following the provided links: 2005 Bankable Feasibility Study, or by visiting the website www.sedar.com.
Future Activities:
Upon completion of the feasibility study, several areas of opportunity were identified to enhance the economics of the Deposit. These include:
(a) expanding the resources and reserves permitting a longer mine life or possible expansion of throughput;
(b) reducing operating and capital costs; and
(c) enhancing project revenues.
With regard to expanding resources and reserves, Crowflight will commence a follow-up surface diamond drill program to the summer 2005 surface program wherein the Company was successful in adding an additional 300,000 tonnes of Indicated Resources grading 2.1% nickel (refer to press release dated November 9, 2005), or approximately 14 million pounds of additional contained nickel. The objective of the follow-up program to be conducted from February 2006 to June 2006 is to add from 500,000 tonnes of additional Indicated Resources to as much as 1,000,000 additional tonnes down to the 2000 Level (approximately 600 metres below surface). See figure 2 below.
Figure 2
Longitudinal Section of Bucko Deposit - Areas of Potential Expanded Indicated Resources
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Plans to de-water and rehabilitate the existing underground workings at the Deposit in the second half of 2006 will enable the start-up of underground development and drilling. This access will enable the follow-up of additional underground exploration targets, not accessible from surface drilling, and the commencement of reserve delineation drilling for mine stope layout purposes.