Mining breakthrough in Sudbury

The Sudbury Joint Venture (SJV) is the business to study for any company that wants to be a profitable mineral producer. Partners FNX Mining (75%) and Dynatec (25%) hit the ground running and have done nothing but grow since the first ore was shipped.

Together, FNX and Dynatec are a winning team. FNX acquired five deposits from giant Inco Ltd. in 2002. The deal included the former McCreedy West, Levack, Norman (now named Podolsky), Victoria and Kirkwood mines. FNX brought its exploration expertise to the partnership. Respected contract miner Dynatec, which brought its operating skills to the SJV and gained for itself an ownership position, does the mining. The venture was created in January 2002. Less than two years later it turned a $5-million operating profit in the first quarter of production, and $24 million in its first year of operation.

All the properties optioned from Inco were former nickel-copper-PGE producers. They were known to contain numerous remnants and extensions of ore beyond the limits of earlier development and mining. The SJV identified five near-term production targets and another 12 advanced exploration targets.

Tony Makuch, the vice-president of operations for the joint venture, is excited about the prospects. “We were walking into an old camp with a new approach, and we attracted a young, aggressive workforce.”

To earn 100% interest in the properties, the SJV agreed to spend $30 million on exploration and development by the middle of 2006. Within weeks of creating the joint venture, FNX and Dynatec announced the start of a 122,000-m drilling program as part of the initial $14-million exploration plan for the optioned properties. By December 2003, the SJV exercised the option, and earned 100% ownership of the mineral rights in the five Sudbury properties, approximately two and a half years ahead of schedule. Exploration and development work progressed extremely well right from the start, and this was realized in the fact that commercial production was declared for the McCreedy West in November 2003.

McCreedy West

The McCreedy West property is located 51 miles northwest of Sudbury, near the town of Levack. The deposit was mined from 1970 to 1998, producing 15.8 million tons of ore averaging 1.70% Cu, 1.44% Ni and 1.3 g/t Pt-Pd-Au. It had a 17,000-ft ramp with levels spaced at 150 ft. It was the first property to be put back into production.

The deposit has seven known zones. The 700 (footwall), Upper Main, Inter Main and East Main contact deposits were selected as the targets for Phase I mining. They contained measured and indicated resources totalling 1.74 million tons and 376,000 tons in the inferred category. The property also hosts the 950 (footwall) deposit and two exploration targets, the PM (“Precious Metals”) deposit and Boundary zone.

The Upper Main and 700 deposits were chosen for the first ore production in May 2003. While redevelopment was proceeding, mine services were installed and a 400-by-400-ft ore containment pad built. A primary and secondary crushing system and a sampling tower were installed. The first ore was shipped to Inco’s Clarabelle mill in May 2003 and the McCreedy West mine was declared to be again in commercial production on Nov. 1, 2004. The initial cut-and-fill mining rate of 750 tons/day has increased to the planned rate of 1,000 tons/day, which will be maintained for at least five years.

The SJV partners have chosen to develop the PM and 950 deposits for Phase II mining. The PM deposit is particularly rich. Assays of a 4,063-ton sample from an exploration ramp being dug into the PM deposit returned 1.4% Cu, 0.4% Ni and 6.8 g/t Pt-Pd-Au. Six other bulk samples graded up to 1.4% Cu, 0.3% Ni and 11.7 g/t Pt-Pd-Au. The exploration ramp is designed to cut across the strike of the PM deposit into selected mineralized areas identified by previous diamond drilling. Further bulk sampling is planned before mining starts in the second quarter of 2005.

Levack

The former Levack mine is located east of and adjacent to the McCreedy West mine. It, too, is known to have remnants and extensions of previously-mined areas and three unmined deposits. During its productive life from 1937 to 1997 Levack produced 60.4 million tons grading 1.31% Cu, 2.00% Ni and 1.7 g/t Pt-Pd-Au. It was developed using the No.2 shaft from surface to the 3600 level.

Two mineralized zones, the 1300 and 1900, are of interest at Levack. Diamond drilling indicated that they lie within the same structure, may be connected and are both open in all directions. In September 2003, the SJV reported a measured and indicated resource of 5.1 million tons at 1.87% Ni and 0.94% Cu; an additional 1.0 million-ton inferred resource grading 1.97% Ni and 0.86% Cu was estimated remaining at Levack.

The SJV has begun a nine-month, $8-million rehabilitation program of the No.2 shaft and headframe. The work should be completed in the third quarter of this year. A feasibility study has been launched, based on a 1,500-ton/day ore production rate. The mining method of choice will be cut-and-fill except where the orebody dips steeply and a sublevel longhole method should be suitable.

Podolsky

The Podolsky property is approximately 20 miles north-northeast of Sudbury. It contains the former Whistle open pit, which operated from 1988 to 1991 and again from 1994 to 1997, producing 5.7 million tons grading 1% Ni and 0.3% Cu. The Podolsky property was renamed in September 2004 in honour of Terry Podolsky, a distinguished Inco geologist from 1954 until his retirement in 1990.

FNX and Dynatec are investigating the area for its copper potential. One hole drilled in the Podolsky 2000 deposit returned 114 ft grading 13.8% Cu, 1.0% Ni and 8.1 g/t Pt-Pd-Au. The SJV is testing areas on surface at the North deposit, the South zone and 2,000 ft vertically below the Whistle pit, all of which were first identified by Inco. Everywhere drills bite into the earth, the partners have found good grades of mineralization.

In May 2004, the SJV approved spending $30 million for an advanced underground exploration program at the Podolsky 2000 deposit, including a 17-ft-diameter, 2,500-ft shaft, starting in March 2005. Ramping and drifting in the 2000 deposit to extract a bulk sample is also in the plans. The budget also includes underground diamond drilling. This work forms part of the feasibility study now being prepared for completion in 2006.

Exploration and development programs at both the Podolsky and Levack properties are of great importance to the SJV. It is anticipated that the Levack mine will be in production late in 2005, achieving target production levels by mid-2006. Potential production from the Podolsky mine is scheduled for 2007.

Victoria

The Victoria mine property is located 20 miles southwest of Sudbury. It operated from 1900 to 1923 and again from 1973 to 1978.

The property produced 1.5 million tons of ore averaging 2.26% Cu, 1.57% Ni plus PGEs. There is a capped, three-compartment shaft from surface to 2,950 ft and underground workings that will need dewatering.

The potential of the Victoria property lies in the Powerline zone. This zone was identified in 2002 following an AeroTEM helicopter-borne survey. Drilling at Powerline tested the low-grade, stringer sulphide mineralization from surface to 100 ft. Below that level, drilling discovered high-grade, massive to semi-massive sulphide mineralization. The best core assayed 6.7% Cu, 1.3% Ni and 13.3 g/t Pt-Pd-Au over 42 ft.

Kirkwood

The old Kirkwood mine, about 10 miles from the city of Sudbury, yielded 2.25 million tons of ore averaging 1.0% Cu and 0.90% Ni during its lifetime. Like Victoria, its underground workings and 2,100-ft shaft are flooded. Thus far, work at Kirkwood has included a compilation of previous mining and geological data. Environmental baseline studies have begun as part of t
he permitting requirements for further drilling and exploration. The potential exploration targets at the Kirkwood property lie below 3,000 ft and, compared with the shallower targets on the other Sudbury properties, are of lower priority at this time.

What lies ahead

The Sudbury Joint Venture has $11.4 million in its 2005 exploration budget. Over half of that amount will be used to drill the footwall between the Levack and McCreedy West mines and for the Cu-Pt-Pd-Au footwall and nickel contact deposits at the Podolsky property. The remaining 47% of the money will go toward increasing and upgrading the McCreedy West and Levack resources and reserves.

In late February 2005, the SJV announced the discovery of a new footwall zone at a vertical depth of 3,900 ft behind the Levack mine. The surface drill hole intersected two massive sulphide veins associated with a very strong off-hole UTEM downhole anomaly. The first vein was 10.2 ft thick and graded 26.2% Cu, 3.0% Ni and 13.1 g/t Pt-Pd-Au, while the second vein, encountered 27.5 ft below the first vein, was 16.4 ft wide and averaged 26.2% Cu, 3.7% Ni and 14 g/t Pt-Pd-Au. Drilling more holes into this area will be a priority for the partners in 2005.

With the McCreedy West mine on track and operating profitably, the PM deposit, Levack and Podolsky waiting in the wings and two more properties with tremendous potential, FNX and Dynatec are creating a reputation as smart mine owners. The partners have the ability to find what larger mining companies have overlooked, to develop it with minimal cash outlay and to turn a profit immediately.

The last word belongs to Makuch, who says: “Our legacy is not behind us but ahead of us.”

---