News

Duluth News Tribune
February 15, 2010

Duluth Metals entered a joint partnership last month with international mining company Antofagasta to help develop the 3,000-acre Nokomis mining project south of Ely.

Nokomis is considered to have the potential to be among the world’s largest nickel and copper reserves, and Antofagasta of Chile will initially contribute $130 million for a 40 percent interest in the project.

That amount will be spent on environmental engineering and permitting over the next three years, said Duluth Metals President and CEO Henry Sandri.

The partnership includes an option for Antofagasta to contribute up to $227 million and increase its holding to 65 percent.

“It gives more flexibility to the agreement so, in a roundabout way, essentially it’s a quarter of a billion dollars of money that can go into the advancement of the Nokomis deposit,” said Sandri from his Oakdale, Minn., office.

Sandri said the Nokomis mine has shown promising results in test drilling on 60 percent of the 3,000 acres in the last few years. Duluth Metals planned to add a third exploratory drilling rig last week.

“We have hit on 155 of 155 holes drilled,” Sandri said. “We have not missed yet.”

Sandri said under the current projection, Nokomis includes more than 900 million short tons of mineralized material.

“The other 40 percent is theoretically open for an extension of the same material,” Sandri said. “You can do the math on it. The potential to go above a billion tons is there.”

Duluth Metals’ base case calls for 20,000 tons to be mined per day, a rate that would take more than 100 years for the deposit to be exhausted, Sandri said. Another scoping study puts similar rates of return on 40,000 tons mined per day.

“We are nowhere near optimization rates on this project from a planning perspective at this point in time,” Sandri said. “That is one of the things that gave Antofagasta — as well as ourselves, of course — terms of the upside potential of this deposit. If it’s very good at 20,000 tons per day and improves at 40,000 tons, what happens when you come in and start to really beat the numbers and really working on them to lower your capital costs and keep your production high. None of that optimization has taken place.”

Upcoming work includes larger scale density tests of the material mined in the last two years to see whether it has the same concentration of copper and nickel as the smaller batch tests. Up to 30 tons will be ground up and processed, Sandri said.

Marty Vadis of the Lands and Minerals division of the Minnesota Department of Natural Resources said Duluth Metals has been drilling on a number of locations in the Duluth Complex, an area of rock that stretches from near the Canadian border south to Duluth.

“The only activity that they have conducted so far is mineral exploration and the most advanced part of their exploration has been drilling,” Vadis said. “They have complied with the laws that we have here in the state with mineral exploration, and they have fulfilled all of their requirements and obligations in their drilling.”