Since resuming mining a year ago from the West pit at its Shakespeare nickel-copper-PGM mine, which was closed in 2008 due to weak metal prices, Ursa Major Minerals (UMJ-T) has regained its momentum.
The Shakespeare mine, 70 km west of Sudbury, produced a corporate profit in the third quarter of fiscal 2010 of $500,000 and president and chief executive Richard Sutcliffe expects similar results for the fourth quarter.
Cash flow is being channeled into exploration at Shakespeare as well as into other exploration projects in the province, and the company is looking to grow through accretive transactions and M&A.
"We engaged Raymond James in January to look at opportunities on that front and we've been looking in particular in the nickel space," Sutcliffe says, noting that about 50% of Ursa Major's current revenue stream is from nickel. "We are advancing that strategy and I think there will be some news out in the next few weeks."
In the meantime the junior has dusted off a 2008 feasibility study that gave the thumbs up to mining the East pit at Shakespeare and building a 4,500 tonne per day mill. The 2008 feasibility study defined a 9.7 million tonne reserve in the East pit, which is open down plunge to the northeast, and has been doing exploration work there for the last couple of months. The proposed $100 million mill is fully permitted.
In addition to working on a 7,000-metre drill program and a new resource estimate for Shakespeare East, Sutcliffe says the company is looking at the potential of an underground extension to the pit as well and is planning to do a PEA. "We've had some prior success there with some interesting nickel-copper-PGM grades and we're anticipating being able to add resources down plunge from the pit," he adds.
Highlights from previous drilling at the planned Shakespeare East pit include hole U3-112, which returned 3 metres of 0.87% nickel, 0.29% copper, 0.06% cobalt, and 0.72 grams precious metals per tonne and 11 metres of 0.48% nickel, 0.59% copper, 0.03% cobalt and 1.39 grams precious metals per tonne. Hole U3-113 cut 13 metres of 0.46% nickel, 0.57% copper, 0.03% cobalt and 1.31 grams precious metals.
The strike length of mineralization at Shakespeare is currently defined at more than 1.4 kilometres and includes the producing West pit, the fully permitted Shakespeare East deposit, and the down plunge resources extending east from the Shakespeare East deposit.
Sutcliffe anticipates some mining from the East pit later this year but notes that real development will occur only after the company has the money in place to build a mill.
"Financing for the mill is a challenge for us with our current market capitalization," he concedes. "It's one of the reasons we've engaged Raymond James to give us some strategic advice to increase the size of the company, build our exposure, and assist us with getting to a position that we can accomplish a significant financing for the mill build-out."
In the meantime Ursa Major continues to run its profitable direct shipping operation from its West pit and has a custom milling agreement with Xstrata's (XTA-L, XSRAF-) Strathcona mill. The direct shipping operation is normally running at a rate of 1,000 tonnes per day.
In the fourth quarter ended Jan. 31 2011, Ursa Major delivered 64,947 tonnes of ore to the Strathcona mill at an average grade of 0.34% nickel, 0.40% copper, 0.02% cobalt, 0.36 grams platinum per tonne, 0.39 grams palladium per tonne, 0.19 gram gold per tonne and 2.25 grams silver.
Revenues from metal sales for the fiscal year ending Jan. 31 2012 are forecast to be about $18.2 million. Total contained nickel and copper ore are expected to be 1.6 million pounds and 1.8 million pounds respectively.
"We've got a vision of producing 10,000 tonnes of nickel a year, which is ten times our current production, and we think this is an achievable vision for the company," he says.
"We've demonstrated profitable production from a low-grade surface deposit and direct shipping operation and one of the things that really makes it work is the polymetalic nature of the deposit with its nickel, copper, platinum and PGM all significant contributors to our revenues."
Sutcliffe adds that he believes commodity prices in general share a robust outlook and the fact that Shakespeare has PGMs in addition to nickel and copper is "the icing on the cake."
As for his view on nickel prices, Sutcliffe is fairly upbeat. "We're pretty happy with US$12 per lb. nickel," he says. "It's well off its 2007 peaks, which touched US$25 per lb., but at the same token it's well above some of its longer term averages."
In addition to Shakespeare, Ursa Major has a pipeline of interesting exploration targets including a grassroots project, about 70 km north of Thunder Bay. The collection of properties, together called the Fox Mountain project, are near Magma Metals' (MMW-T) platinum-palladium discovery at Current Lake and Sutcliffe says Ursa's properties are in the same geological environment with the same structures and host rocks.
Ursa Major is also busy exploring the Nickel Offsets property, 40 km west of Sudbury. The company is earning a 70% interest in the property, which includes the past-producing Nickel Offsets mine, which reportedly produced 4.56 million pounds of nickel and 3.32 million pounds of copper between 1943 and 1957.
In February the company announced that drilling and borehole geophysics had provided additional high-grade massive sulphide targets below the 1550 foot level of the past-producing mine workings. Since optioning the property in 2008 from United Reef (URP-V), Ursa Major has drilled 4,389 metres in 12 holes.
Historical underground exploration and mining development at Nickel Offset mine included 1,599 fee of shaft sinking, about 10,000 feet of drifting and 3,980 fee of raising on nine levels at the No. 1 mine, and 1,056 feet of shaft sinking, about 6,000 feet of drifting and 410 feet of raising on five levels in the No. 2 mine.
At presstime in Toronto Ursa Major was trading at 15¢ per share and over the last year has traded in a range of 7¢-24.5¢ per share. The junior has about 78.96 million shares outstanding.
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