The Northern Miner July 20-26, 2015

One of The Largest Silver Discoveries of 2014 TSX.V: GRG www.goldenarrowresources.com

Aston Bay Holdings $3.99 • JULY 20-26, 2015 • VOL. 101, NO. 23 • SINCE 1915

Delves into Storm in Nunavut

Imperial Metals 3

Gets gov’t approval to restart Mount Polley

16

Taranis hopes to take Thor to the Max SITE VISIT

BY LESLEY STOKES

Pages 7-9

Techno logy Me tals

Western Lithium Lithium, eye stra Americas tegic m erger

Stars to re Largo in align for Brazil

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Silver Bear CEO Hill at home in Russia’s Far East LAKE CE

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BY TRISH SAYWELL

REVELSTOKE, B.C. — Taranis Resources (TSXV: TRO; USOTC: TNREF) is eyeing an option to buy 65% of FortyTwo Metals, a subsidiary of Roca Mines, in a move to secure the Max mill facility, 60 km southeast of Revelstoke, B.C. And if it all goes according to plan, Taranis could have its Thor deposit — a precious and base metal resource 16 km by road from the mill — into production within a year-and-a-half after striking the deal.

“Aristotle said it best: ‘The whole is greater than the sum of its parts,’” John Gardiner, president and CEO of Taranis, tells The Northern Miner during a site visit to the properties. “The assets are pretty unviable on their own, but if you put the two together, it actually makes sense.”

Under the deal, Taranis will pay

PHOTO BY LESLEY STOKES

Scott Broughton (left), Roca Mines president and CEO, and John Gardiner, Taranis Resources president and CEO, tour the Max mill facility, 60 km southeast of Revelstoke, British Columbia.

Roca $1.2 million along with 3 million stock warrants at 10¢ per share, exercisable for two years.

Discovery Ventures (TSXV: DVN; US-OTC: DVTMF) — a Canadian junior explorer with a base and precious metal asset, 135 km from the Max mill — will

keep the remaining 35%.

Gardiner says that Discovery entered into an option to acquire the mill, but when they defaulted on the option payments last year, Taranis saw it as a “fortuitous” opportunity to step in.

“We had Roscoe Postle Associ-

ates assess the economics of the deposit alongside the existing cost data for the former Max moly mine,” he says, adding that he can’t discuss the results of the internal study. “But it looked very good, so we started talking with Roca.”

See TARANIS, Page 2

Capstone gets positive Silver Wheaton circles EIA, mulls new plan the wagons against at Santo Domingo CRA offensive

BY TRISH SAYWELL

With iron ore prices down by 31% in the last year, Capstone Mining (TSX: CS) is contemplating a different development plan for its 70%-owned Santo Domingo copper-iron project in Chile.

Along with the announcement July 8 that the company has received approval of the project’s environmental impact assessment (EIA) after more than three years of work with local authorities and communities, Capstone’s president and CEO Darren Pylot said the company would undertake a feasibility study on a phased approach on the project’s copper portion at half the initially planned throughput rate, followed by iron “if and when it makes sense.”

On a conference call, Pylot said that “we are fortunate with the Santo Domingo deposit to have two products — both copper and iron — so the advancement of the project does not solely depend on current or projected iron prices.”

“We will run the study on a re-

TNM July 20 2015 Issue.indd 1

duced throughput of somewhere between 30,000 and 35,000 tonnes per day,” he said. “We wouldn’t initially need any of the magnetite processing facilities, magnetite concentrate pipeline or port for the iron, all of which was included in the feasibility study.”

The updated feasibility study will pick up from an internal analysis of a phased approach the company has undertaken, and should be completed in the first quarter of next year, he said.

Under the July 2014 feasibility study, the company examined the ddevelopment of two open-pit mines using conventional drilling, blasting, loading with diesel hydraulic shovels, and truck haulage; and a copper-iron concentrator designed to process a nominal 60,000 to 65,000 tonnes per day, using semi-autogenous grinding and ball milling, and conventional flotation with seawater, to produce a copper concentrate that would be stockpiled at the port.

See CAPSTONE, Page 15

VANCOUVER — The Canada Revenue Agency (CRA) has taken the first shot in what is likely to become a protracted legal battle with streaming outfit Silver Wheaton (TSX: SLW; NYSE: SLW), and the results could affect the company’s entire business model. In fact, senior vice-president and chief financial officer Gary Brown went so far as to infer the action represents an attack on a tenet of Canadian tax law.

On July 7 Silver Wheaton received a proposal letter from the CRA relating to income earned by its foreign subsidiaries outside of Canada. The crux of the dispute boils down to whether the company’s taxable income should increase by US$567 million for the 2005 to 2010 business years.

Under preliminary estimates, that could put the company on the hook for US$150 million.

“They’re challenging us under the transfer pricing provisions of the Canadian Income Tax Act,

which is very complex,” Brown explained during a conference call. “The CRA is essentially looking to recharacterize the income earned by our foreign subsidiaries to income earned by the Canadian parent company. We strongly disagree with that position. We believe in our business structure, which really operates under a tenet of Canadian tax law. There’s very little associated case law here and no precedent for this that we’re aware of.”

Generally, a company is taxable in Canada on its income earned within the country, while non-Canadian income earned by foreign subsidiaries is not subject to Canadian income tax. The CRA is effectively seeking to tax, within Canada, income earned through the buying and selling of precious metals outside of Canada by foreign subsidiaries from mines located internationally.

Silver Wheaton paid the Canadian governmernt regularly on

Over the course of his career, Graham Hill has worked in some remote and challenging locations.

He helped build the Yatela and Sadiola gold mines in Mali for Anglo American (NASDAQ: AAUKY; LSE: AAL), developed and managed Oxus Resources’ Jerooy and Amantaytau gold and silver mines in Central Asia (in the mountains of the Kyrgyz Republic and the desert-like Kyzylkum Region of the Navoi Oblast in Uzbekistan); and most recently developed the Passendro gold project in the Central African Republic for Axmin (TSXV: ASM; US-OTC: AXMIF).

So when he was invited in November 2014 to join Silver Bear Resources (TSX: SBR) as CEO to oversee the development of the company’s remote Mangazeisky silver property in Russia’s Far East, 400 km north of the capital city of Yakutsk in the Republic of Sakha, Hill jumped at the opportunity.

“I felt the role fit my experience perfectly,” he says in a telephone interview from his new base in Moscow. “One of the challenges is to be able to perform this role in a remote location with challenging See SILVER BEAR, Page 3 PM40069240 – PAP Registration #09263

See SILVER WHEATON, Page 14

2015-07-15 6:49 PM

2 JULY 20-26, 2015 THE NORTHERN MINER

Taranis eyes Max mill TARANIS, From Page 1

Because most of Taranis’ shareholders are directors or ex-directors of the company, Gardiner says he doesn’t expect Taranis will release any economic studies before buying FortyTwo. But he calls the deal “a bargain,” considering it cost Roca $80 million to build the facility, which also includes a tailings dam, assay lab, office buildings and a 40-person camp. When it began operating in 2007, the mill sustained 500 tonnes per day from the Max molybdenite deposit.

Roca was making the mill amendable to operate at 1,500 tonnes per day when it was hit hard by crumbling moly prices, and placed on care and maintenance in November 2011. The firm was delisted from the TSX Venture exchange in 2013.

“The Max facility is fully amenable to process material from the Thor deposit,” Gardiner says. “In this particular case, the old saying that ‘a mine isn’t found, it’s made,’ is really true. We make things work with what we have.”

Taranis is considering a seasonal, 1,500-tonne-per-day openpit operation for at least five years

REGULAR DEPARTMENTS

Taranis Resources’ Thor project ALBERTA

BRITISH COLUMBIA

Edmonton

•★

Revelstoke

Vancouver

COMPANY INDEX

Careers............................. 15 Editorial.............................. 4 Mining Jobs...................... 10 Metal Prices...................... 11 Professional Directory.... 13-14 Stock Tables................... 6,11

Abitibi Royalties ............... 12 Anglo American.................. 1 Antofagasta........................ 3 Aston Bay Holdings............ 3 Axmin................................. 1 Barrick Gold...................... 14 Capstone Mining................ 1 Commander Resources....... 3 Discovery Ventures............. 1 Glencore........................ 8,14 Goldcorp.......................... 14 Hudbay Minerals.............. 12 Imperial Metals................. 16 Ivanhoe Mines.................... 3

Largo Resources................. 7 Lithium Americas................ 7 Metanor Resources........... 12 Molycorp............................ 7 NioCorp Developments...... 7 Oreninc.............................. 3 Primero Mining................. 14 Rio Tinto............................. 5 Silver Bear Resources.......... 1 Silver Wheaton................... 1 Taranis Resources............... 1 Tasman Metals................... 9 Vale.................................. 14 Western Lithium................. 7

Calgary

Thor project

before it transitions to an underground operation. Gardiner says that once the company strikes a deal with Roca, it could have the operation going in just a year and a half.

But he says the timeline is still conservative, despite having to pay off FortyTwo’s $200-million debt load to creditors, line up a small-mines permit and go after $17 million in capital expenditures.

“Permits are the critical piece of the timeline,” he admits. “But the Thor deposit lies entirely on Crown Grant mineral claims that were issued in the late 1800s, and these only

help accelerate the process.”

To cover costs, Gardiner says the company will pursue debt financing, and he expects to pay off the loan “in the first year of production.” He adds that FortyTwo also holds an attractive $50 million in accumulated tax pools that will help shelter production revenue in the coming years.

The Thor deposit has been intermittently explored and modestly mined as a vein-hosted, polymetallic deposit from the turn of the 19th century to the mid-1980s.

But when Gardiner first walked the ground in 2006, he recognized it as a deformed volcanogenic massive sulphide (VMS) deposit that could be traced along a single horizon in the stratigraphy for at least 2 km.

“If it was just a vein we wouldn’t be interested, because we knew it’d have limited size,” he says. “And when we saw it as a VMS, we knew it was worth something. All it took was the right pair of eyes.”

The low-hanging fruit at Thor would attract any aspiring miner: the deposit forms a reddened, gossanous crust along the flank of the mountain. Chiseled into its face are the adits and channels from Thor’s predecessors, and broken, massive sulphides with quartz are piled on top of everything but the road.

The exposures made the maiden resource drill-out easy in 2007, when Taranis lined up its first drill hole.

The work established a resource within an array of five, tabularshaped deposits along a sedimentary contact between carbonaceous shales and overlying greywackes.

Indicated resources include 640,000 tonnes at 0.88 gram gold per tonne, 187 grams silver, 0.1% copper,

STORIES WE’RE WORKING ON. . .

Since 1915

Our August 10 issue will include a feature section covering mining and exploration activity on Canada’s East Coast.

2.5% lead and 3.5% zinc, and inferred resources add up to 424,000 tonnes of 0.98 gram gold, 176 grams silver, 0.1% copper, 2.3% lead and 3.2% zinc.

Sixty-two percent of the resource is open-pittable.

But the outcrop that headlines conversation is the spine of milky white quartz at the top of the interpreted anticline that Gardiner claims is teeming with gold.

The structurally controlled de-

‘All the pieces are here, so all we have left to do is glue them together.’

— John Gardiner, president and CEO, Taranis Resources Gardiner points out that resource drilling occurred on a small piece of a much larger whole. Between the shuffled deposits is the gold- and silver-enriched Scab zone that isn’t part of the current resource. The target is a 1- to 4-metre thick zone of massive sulphide that similarly flanks the side of the mountain across a 300-by200-metre area.

But despite the easy pickings on surface, Gardiner says there’s big underground potential as well.

“Because the old timers thought it was a vein, they didn’t look on the other side of the anticline,” he says, explaining how the rocks that form the dip slope in the east fold over and plunge beneath the mountain in the west.

“We found some heavily mineralized float along a 200-metre geophysical anomaly, and trenching in 2014 revealed some highgrade gold and silver mineralization, so we know the deposit continues.”

posit, called SIF, is another notch in Taranis’ legacy of discoveries on the property. Panel sampling in 2014 returned 30.6 grams gold over 17.6 metres, and outlined highgrade gold mineralization over at least 30 metres of strike length.

“Historically the main emphasis at Thor was the silver, but we are finding a lot more gold and this really kick-starts the economics, and pays back the capex costs quickly,” he adds, chipping away at the outcrop and handing over a visible gold sample within a vug of quartz.

Taranis and Roca could reach an agreement by the end of August.

“Roca did a super job at building this,” he says, adding that it is a “top notch” facility. “All the pieces are here, so all we have left to do is glue them together.”

Taranis has traded within a 52week window of 3¢ to 15¢, and closed at 4¢ at press time. The company has 45.8 million shares outstanding for a $1.83-million market capitalization.

PHOTO BY LESLEY STOKES

At the Max moly mill facility near Revelstoke, B.C., from left: John Gardiner, Taranis Resources president and CEO; Thomas Gardiner, logistics and operations manager; Vanessa Freberg, site caretaker; and Scott Broughton, Roca Mines president and CEO.

TNM July 20 2015 Issue.indd 2

2015-07-15 6:49 PM

THE NORTHERN MINER JULY 20-26, 2015 3

Aston CEO outlines potential at Storm copper project

Silver Bear

BY SALMA TARIKH

SILVER BEAR RESOURCES

Workers outside a dormitory at Silver Bear Resources’ Mangazeisky silver property in Russia’s Far East, 400 km north of Yakutsk.

SILVER BEAR, From Page 1

but not impossible to overcome logistics, and that makes the whole thing really exciting for me, and it’s the sort of job I really wanted.”

Access to the site is limited to a seasonal winter road from January to April, while it’s accessible by plane or helicopter during the rest of the year.

resource, which Hill expects to complete before year-end, with production starting in the second half of 2016. “It’s a challenging call, but it’s a call we’re all standing behind,” Hill says of the production target date.

Hill notes that the company is already building some of the required infrastructure. At the end of

‘It’s one of the highest-grade silver deposits in the world … it’s a phenomenal deposit.’

— Graham Hill, CEO, Silver Bear Resources Silver Bear acquired 100% of the project in October 2004 and has outlined resource estimates on three open-pit targets (Vertikalny Central and Vertikalny Northwest; Nizhny Endybal; and Mangazeisky North and South). Hill says a lot of these, and other targets, would be open-pit mines initially, some of which would later extend underground, and all of them would be served by a central processing facility. The deposits are all within a 6 km radius.

The project’s total indicated resource stands at 800,000 tonnes grading 909 grams silver per tonne for 23.4 million contained oz. silver, and inferred resources total 2.3 million tonnes grading 457 grams silver per tonne for 33.1 million contained oz. silver.

“It’s a fantastic resource with an incredibly high grade and fantastic long-term potential,” Hill says of the 570 sq. km exploration licence and its 20 known silver anomalies.

“It’s one of the highest-grade silver deposits in the world. I’m not familiar with anything that has grades that are quite comparable to ours. It’s a phenomenal deposit.”

So far Silver Bear has concentrated on the Vertikalny Central and Northwest zones, and completed a preliminary economic assessment based on the two zones.

(Silver Bear was granted a 20-year mining licence for the Vertikalny deposit in September 2013.)

The PEA outlined a 19-year mine life, US$39-million capital expenditure, 63% post-tax internal rate of return and a US$129.9-million net present value at a 5% discount rate. In the first five years, the study says the average head grade would be 911 grams silver per tonne, with production at 2.6 million oz. per year.

The company is working on a feasibility study based on the entire

TNM July 20 2015 Issue.indd 3

July, Silver Bear will have put the finishing touches on an 80-man dormitory and a heated workshop and warehouse. “They are all substantial buildings, and all of it was built on technologies that have evolved locally and in permafrost areas of the world, and they were all built in a short period of time,” he says. “When I started, none of this work was planned, and the fact that we’ve achieved so much in such a short period of time is a testament to the real ability of the people we have in Yakutsk.”

Throughout the rest of 2015, the company will also lay down some of the foundation for the processing plant, with the help of a Russian design institute.

Silver Bear says there is a lot of exploration upside along a 35 km mineralized trend on the property.

“It’s a thrilling location with great potential,” he says. “We’re very happy with the progress we’re making in terms of developing other resources. We have a whole 35 km mineralized corridor and another interesting area south of our licence area where there is potential gold and silver, and that’s exciting for us. We have other areas where we still have to do further exploration.”

As far as working in Russia is concerned, Hill says “it’s a regulated system, and one that works.”

Russia’s Far East also offers significant tax incentives, which include zero corporate tax for the first five years of production, and no silver royalty payments for the first two years.

Two of the company’s largest shareholders are Russian privately held investment management firms, Inflection Capital Partners, with a 25.6% stake, and Aterra Capital, with a 25.2% stake. Aterra is owned by Russian businessman Alexey Mordashov.

Despite an uphill battle in raising funds, Aston Bay Holdings’ (TSXV: BAY) founder and CEO Benjamin Cox remains upbeat on the copper potential at the junior’s Aston Bay property in Somerset Island, Nunavut.

The recently expanded 2,600 sq. km land package, previously known as the Storm property, contains the Storm copper project and the Seal zinc-silver project.

Cox — a former mining analyst at New York-based D.E. Shaw Group, and the founder of research and consulting firm Oreninc — believes that copper is one of the metals that the world will run out of. “It’s not extremely scarce, but it is economically very scarce at current prices,” he said in a June interview. Cox claims mining companies have spent $40 billion globally in the past decade exploring for copper, with little luck in finding “big discoveries.”

“When I left D.E. Shaw [in 2010], I wanted to find a high-quality copper asset,” Cox says, adding that the asset had to grade over 1% copper and be outside of Africa.

While on the lookout he was managing Oreninc, which tracks global resource projects and placed him in front of many mining executives. One of those executives was Commander Resources’ (TSXV: CMD; US-OTC: CMDRF) president and CEO Eric Norton.

“One day [in 2011] I was in [Norton’s] office, and he had this big, massive rock on his desk,” Cox recalls. “I looked at that rock and said: ‘I didn’t know you guys were in the Congo.’ And he was like, ‘No, that is not from the Congo. That is from Canada.’”

Surprised by the ore quality at the Storm copper project, Cox pursued an option agreement on the Aston Bay property, closing a deal in November 2011. The companies have amended that contract several times, with the latest revision in April 2015 giving Aston two more years to complete its initial 51% earn-in.

Aston now has until the end of 2018 to spend $3.5 million in exploration costs on the property. That amount is broken out into annual spending requirements, including $750,000 each in 2015 and 2016, and $1 million each in 2017 and 2018.

Aston also kept the right to earn up to a 70% interest in the property, as well as its buyout option.

Storm is intriguing because it’s a sediment-hosted copper deposit.

These deposits often exist in African copper belts, and are largescale and high-grade.

Bruce Counts, a geological engineer and Aston’s chief operating officer, says it’s hard to find an exact analog for Storm, but that it is similar to Ivanhoe Mines’ (TSX: IVN) Kamoa copper project in the Democratic Republic of the Congo.

Storm is “fairly high grade,” and has size potential, he says. “When you’re talking about sed-hosted copper, you’re talking about basinscale fluid systems that capture the copper and, if the conditions are right, potential for the deposition of very large bodies of highgrade mineralization.”

Teck Cominco, which started exploring the Seal zinc project in 1994, identified the Storm prospect during a 1996 regional mapping and sampling campaign.

From 1997 to 2001, Teck drilled

9,550 metres in 72 holes on the Storm project, delineating four copper zones — 2200N, 2750N, 3500N and 4100N. Highlights from the 2750 zone include 110 metres grading 2.5% copper from surface, and 56 metres of 3.1% copper from 12.2 metres deep. The best hole from the 2200N zone returned 49 metres of 1.8% copper starting from surface.

(The results reflect core lengths and not the true widths.)

Aston is compiling and interpreting the historic results from the other two zones and will release the data once completed. It

that appealing. If someone puts a chocolate éclair in front of you and says, ‘Do you want it?’ The answer is that of course you want it.”

Also increasing Storm’s appeal is a 1999 historical ground survey from Teck that Aston retrieved this May, which “improves the prospectivity of the kilometrescale target, with a coincident gravity over the southern third of the SE Anomaly.”

While the anomaly remains untested, Cox believes the average 1.8% copper grade seen in Storm’s existing zones could exist at depth at the SE Anomaly.

Aston Bay Holdings (TSXV:BAY)

$0.16

$0.14

$0.12

Apr 2015

May 2015

points out that the historic drilling was shallow, averaging 100 metres deep. The junior now intends to expand the zones along strike and depth, as well as test several targets.

The main target is the large SE Anomaly, 220 metres below surface. The anomaly is egg-shaped and spans 4 by 1.5 km . Commander Resources identified that anomaly, among others, in its 2011 versatile time domain electromagnetic survey. (The company acquired the property in 2008 after Teck let its claims lapse.)

Aston, which investigated the SE Anomaly in a three-week jointexploration program last December with Antofagasta (LSE: ANTO), found higher levels of copper in the rocks and soils that lie above the SE Anomaly. The junior explains the anomaly’s “apparent location along the structural system that hosts mineralization indentified in previous drilling” helps enhance the prospectivity.

Antofagasta ended the jointventure agreement with Aston this January due to weaker copper prices and budget constraints, Cox says. But the setback has not deterred the junior from moving forward with the Storm project, which has a more than 110 km prospective strike length.

Given the project’s magnitude, Cox admits it’s not a traditional project for a junior. “It’s a project that I picked up because it was just

Jun 2015

Jul 2015

For the rest of the year, Aston intends to put in a small camp on site and start a larger gravity survey, while conducting more prospecting and soil sampling. It intends to start drilling in 2016, if it has enough funds lined up.

Aston is closing the first tranche of an up to US$1.5-million nonbrokered private placement that it announced in May. The proceeds should help Aston meet its 2015 spending obligations, and keep it afloat.

If all goes well, Cox says Storm has enough long-term potential to become a “brilliant companymaker.”

Aston recently traded at 14¢, within a 52-week trading range of 8¢ to 24¢. It has a $4.2-million market capitalization.

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JULY 20-26, 2015

THE NORTHERN MINER

EDITORIAL

EDITOR-IN-CHIEF:

JOHN CUMMING, MSc (Geol) jcumming@northernminer.com

ANTHONY VACCARO, CFA, MBA

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C O M M E N TA RY

What’s the best way to value mineral exploration properties?

No silver bullet for cybercrime

BY TRISH SAYWELL

At the end of June, Detour Gold reported that its IT systems had been subject to an “illegal breach” that resulted in confidential information being “accessed and disclosed by hackers.” The stolen information included personal information of the company’s current and former employees, as well as of individuals to whom Detour had made a formal offer of employment. The gold producer said external and internal IT experts were assessing the risks of further illegal access to its systems, and investigating the source of the breach.

The disturbing news follows a report last December from Germany’s Federal Office for Information Security, which detailed how hackers had infiltrated an unnamed German steel mill and made it impossible for the company to shut down a blast furnace at the facility, causing massive damage.

According to Wired magazine, which translated the report into English, “the attackers infiltrated the corporate network using a spear-phishing attack — sending targeted email that appears to come from a trusted source in order to trick the recipient into opening a malicious attachment or visiting a malicious website where malware is downloaded to their computer. Once the attackers got a foothold on one system they were able to explore the company’s networks, eventually compromising a ‘multitude’ of systems, including industrial components on the production network.”

In Ernst & Young’s latest annual report analyzing and ranking the top-10 strategic business risks facing companies in the mining and metals sector, cybersecurity took the ninth spot, moving up from its eleventh-place finish the year before. The survey — based on discussions with global mining and metals companies — found that 65% had experienced an increase in cyberthreats over the past 12 months. Despite the increased threat, however, only 47% of respondents said they planned to enhance their organization’s total information security budget in the next 12 months, and 42% did not have a threat intelligence program in place.

Iain Thompson, who was not involved in the survey but works in Ernst & Young’s mining advisory practice in Vancouver, tells The Northern Miner that the place to start is to understand the risk. “If you haven’t identified it as a risk, there’s issue one,” he says. “What I would advocate to our clients in the space is to make sure they incorporate this into their risk program.”

Thompson believes cybercrime is becoming more common because a lot of mining companies are taking closed networks and integrating those networks with corporate systems to address certain challenges around productivity. “They’re putting more information technology into mine sites to better manage their production, but as they start to do that it introduces additional potential risks, and they have to make sure they have the right systems in place to address those risks,” he says.

Thompson points out that a lot of cyberthreats have gone underreported for various reasons and that the typically highvalue transactions in the mining industry provide opportunities for social, economic and political gain. Risks to companies are varied, but can include damage to a corporation’s reputation, dangers to health and safety, and access to undisclosed information — such as merger and acquisition plans — that can be used to manipulate markets, or result in trading advantages.

Matthew Hart, a veteran observer of the mining scene and author of Gold: The Race for the World’s Most Seductive Metal, says the damage to the German steel mill last year could have helped a competitor, and argues that “there are going to be more points of entry [for hackers], as the mining industry becomes more automated.

“There are just more ways they can hack you,” he explains in a telephone interview from New York, adding that he doesn’t believe the mining industry is prepared. “You can’t deny cybercrime is one of the biggest threats to business and to our financial security in general, and I just don’t think the mining sector is as attuned to this threat as are many other industries.”

Hart’s views are echoed by Sarah Bloom Raskin, Deputy Secretary of the U.S. Department of Treasury, who urged financial and public institutions during a speech in March to recognize the risk of cyberattacks “as perhaps the most pressing operational risk of our time.”

According to PwC, cybersecurity incidents surged 48% year-onyear in 2014. PwC surveyed 9,700 respondents worldwide and found that the average loss from a cybersecurity incident last year was $2.7 million, up 34% over 2013, and that there was a 92% increase in companies reporting a loss of $20 million or more.

Send your Letters-to-the-Editor and op-ed submissions to the Editor-in-Chief at: tnm@northernminer.com or 38 Lesmill Road, Unit 2, Toronto, ON M3B 2T5.

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TNM July 20 2015 Issue.indd 4

ALISHA HIYATE, BA ahiyate@northernminer.com

SENIOR STAFF WRITER:

EDITORIAL: TOP STORY OF WEEK 28

GROUP PUBLISHER/ PUBLISHER:

EDITOR, SPECIAL PROJECTS:

warranted future expenditures for Sensible valuation of mineral propthe purposes of the appraised erties has become more critical value method.” through the current low phase of Whichever approach is adthe market cycle. Valuation of minopted, the report must make it eral properties at the exploration clear whether, and to what extent, stage is an area where both valuafuture costs have contributed to tors and users of valuations need to the valuation. understand the challenges and unOne of the main market apcertainties involved. Sorting the proaches is comparable transacwheat from the chaff can be chalBY PAT R. lenging for non-technical readers of STEPHENSON, P.GEO. tions (sometimes known as the SPECIAL TO THE “real estate” method). This method such valuation reports. However, NORTHERN MINER can provide very useful data on these readers can look for certain which to base a valuation if a reaaspects in the reports to satisfy themselves as to the quality of the work and sonable number of truly comparable transthe confidence they can have in the assigned actions can be found.

Unfortunately, this is often not the case, values.

The valuator, as defined in the CIMVal and professional judgments have to be made Standards and Guidelines for Valuation of on the basis of a few (if any) truly compaMineral Properties (which can be found at rable transactions, and a larger number of www.cim.org, and are being updated) must only partly comparable transactions. If a have the appropriate qualifications and ex- reasonable database of values can be comploration experience relevant to the prop- piled, then derivative methods such as valueerty being valued, so that the requirements per-unit area of the property, value per unit of the relevant national reporting standard of contained metal in mineral resources or (e.g., CIMVal standards and guidelines in mineral reserves can be applied.

Market valuation approaches may involve Canada, the VALMIN code in Australia and the SAMVAL code in South Africa) can be analyzing the terms of an exploration option satisfied. His or her certificate, attesting to or joint-venture agreement in order to conthese qualifications and experience, should vert them into the equivalent of a cash transbe included in the report. Except in limited action at the time of the deal. This is based circumstances, which must be explained, the on the rationale that, in being prepared to valuator should be independent and under- incur expenditure to earn an interest in (or farm-in to) an exploration property, the purtake a site visit to the property.

Values should be derived using more than chaser is placing a monetary value on the one valuation method whenever possible. vendor’s interest at the time that the deal is The method applied depends on the nature made. That value is referred to as the of the valuation, the development status of “deemed expenditure” and it usually reprethe mineral property, and the extent and re- sents the full value of the property at the time of the deal. liability of available information.

The method applied depends on the nature of the valuation, the development status of the mineral property, and the extent and reliability of available information.

There are three generally accepted valuation approaches in the mining industry: income approach, which is based on expected benefits, usually in the form of discounted cash flow; cost approach, based on the principle of contribution to value through past exploration expenditures; and market approach, based on actual or comparable transactions.

Income approaches are applied to laterstage mineral resource/reserve and development properties (and are therefore not discussed further in this article), with cost or market approaches for exploration and early stage mineral resource properties. Any resources or reserves relied upon should comply with, or be reconciled with, the relevant national reporting standard, in Canada’s case, with the CIM Definition Standards on Mineral Resources and Reserves, which are referenced by National Instrument 43101.

With respect to the cost approach, there are different philosophies on the use of expenditure that is planned or committed, but not spent at the time of the valuation. One view (to which the author subscribes) is such that planned expenditures should not be included, while another view is that it is reasonable to include warranted future costs.

Appendix 3G: Valuation Standards and Guidelines for Mineral Properties of the TSX Venture Exchange Disclosure Obligations for Mining Companies states that “the exchange does not generally accept the inclusion of

There are generally four components to a joint venture or farm-in agreement: Cash — This is usually relatively easy to convert to present value. However, if the transaction involves time payment deals or payments dependent on future events, such as a decision to mine, the relevant cash amounts need to be discounted for time and probability of the future event occurring.

Shares — These should be converted to cash using the share price at the time of the deal and treated like cash payments for future amounts. Conversion can be more complex if the shares are in an unlisted company.

Exploration expenditures — Annual exploration commitments are usually part of option/ farm-in/joint-venture agreements, with those after the first year optional along with the cash and share commitments. These also need to be discounted for time and for the probability that they will be incurred.

Conditional payments — For example, royalties, feasibility study, sole funding, etc. These require adjustment for time, the probability of the project going ahead and, in the case of royalties, the likely parameters on which the royalty could be based. The author’s experience is that the influence of conditional payments on value is usually small because of time/probability discounts, and because such payments are generally only a small part of the deal.

Given the subjectivity of the valuation methods used for exploration properties, it See COMMENTARY, Page 5

2015-07-15 6:49 PM

THE NORTHERN MINER JULY 20-26, 2015 5

OP-ED

MATTERS OF GENERAL INTEREST

Rio Tinto cuts emissions, boosts production at Kitimat VANCOUVER — Mining giant Rio Tinto (NYSE: RIO; LSE: RIO) has produced the first aluminum cast from its 60-year-old Kitimat smelter in B.C. since its extensive, US$4.8-billion upgrade.

In a press release, Rio Tinto’s aluminum CEO, Alfredo Barrios, said the upgrade “transformed its performance,” and moved it from the fourth quartile to the first decile of the industry cost curve.

The modernization project, which rolled US$1.5 billion over budget last year, will double production capacity to 420,000 tonnes per year.

Across its global operations, the mining titan produced 3.4 million tonnes of aluminum in 2014, down slightly from 3.5 million tonnes pro-

Commentary

duced the year before. In contrast, underlying earnings for the metal more than doubled to US$1.3 billion in 2014 from US$557 million.

Rio Tinto atrributes the gains to higher prices for aluminum, and reported increased efficiency and productivity of operations.

As an example, the new Kitimat smelter requires 36% less power from its wholly owned hydro electric plant, and will cut emissions of hydrocarbons, gaseous fluorides and greenhouse gases by an average 49%.

Despite the smelter’s muchneeded “green” upgrade, the facility still raises air-quality concerns for local activists in nearby Kitimat — a community originally carved out of the wilderness and built to accommodate the operation’s workforce.

They’re concerned the 56% increase in sulphur dioxide emis-

sions from 26 to 42 tonnes per day — because of increased production — will bring health issues for residents. But the company says an independent study has shown the impact would have “limited effects on human health and the surrounding environment.”

The town of 10,000 people is in the midst of an industrial boom, propped up by a number of proposed liquefied natural gas (LNG) pipelines and Royal Dutch Shell’s $25 billion to $40 billion LNG export facility project, which received conditional approvals from the B.C. government last month.

According to a statement from the Kitimat Economic Development Association, the community is “ready for another mega project,” and the start-up of Rio Tinto’s smelter “sets the stage for local businesses to take advantage of the opportunities coming to the area.”

Rio Tinto’s Kitimat aluminum smelter in British Columbia.

RIO TINTO

COMMENTARY, From Page 4

is not usually sensible to produce values more detailed than the nearest $100,000 for significant projects, or than the nearest $10,000 for lesser projects. The final valuation is an experience-based judgment based on weighting of the individual values. It should always be expressed as a range in order to reflect the uncertainty and subjectivity of the exercise.

Valuators must ensure that they exercise their independence and do not succumb to client pressure to produce a desired result. The client often has a vested interest in whether a valuation is on the high side, as, for example, in a takeover defence, or the low side, as, for example, in an assessment of tax liability. Valuators must remain true to their professional obligations and ethics, and resist any such pressure.

The valuation report should be clear, transparent and logically presented, and explain why and by whom the valuation was requested.

It should explain why certain methods were used and others were not, and any limitations on their applicability. It must contain all the material information necessary to allow both experts and non-experts to understand how the valuation was derived, including a description of the key risks, assumptions, limitations and uncertainties. It should compare the result with previous valuations of the property.

Finally and most importantly, the valuation must be consistent with values likely to be assigned in real life. A key test is: Would you pay $X for the property if it was your money?

— Pat R. Stephenson, P.Geo., is a director and principal geologist at AMC Mining Consultants (Canada) Ltd. in Vancouver. He specializes in mineral resource and reserve auditing and reporting, due diligence reviews, independent technical reports, expert witness activities and mineral asset valuations.

AMC Consultants is a leading independent mining consultancy providing services exclusively to the minerals sector. It has offices in Canada (Vancouver and Toronto), Australia, the U.K. and Singapore.

AMC works with clients to plan new mines or improve the operations of existing mines, with a focus on achieving optimum output and return. Please visit www.amcconsultants.com.au for more information.

TNM July 20 2015 Issue.indd 5

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2015-07-15 6:49 PM

6 JULY 20-26, 2015 THE NORTHERN MINER

MARKET NEWS TORONTO STOCK EXCHANGE Canada’s benchmark index tumbled 1.9% to 14,411.07 after a weak jobs report, the continuing debt crisis in Greece and a slump in China’s stock market. The S&P/TSX Capped Diversified Metals & Mining Index fell 5.5% to 630.99, and the S&P/TSX Global Gold Index lost 3.5% to finish at 146.56. The spot gold price retreated US$5.50 to US$1,162.80 per oz.

First Quantum Minerals was one of the top value gainers, climbing 39¢ per share to $15.41, on 10 million shares traded. Salman Partners analyst Raymond Goldie has a “toppick” rating on the stock, with a $25.80 target in 12 months. Goldie says that the miner’s shares are the “most liquid and relatively pure copper equities available on the North American market,” with copper accounting for 85% of the company’s revenues. Moody’s Investors Service warns that First Quantum could use the proceeds from its recent $1.4-billion equity raise to fund capital investment instead of repaying its debt, which would weaken its credit metrics. It says that Zambia’s general elections in 2016 could also affect the company’s B1 rating. The company’s flagship operations are in Zambia.

Canarc Resource shares fell 41% to 5¢, after announcing that it would acquire Marlin Gold Mining’s subsidiary Oro Silver Re-

J U LY 2 0 -26

sources to get its hands on the El Compas gold-silver project in Zacatecas, Mexico.

Following a definitive agreement, Canarc will give Marlin 19 million shares, plus 55 troy oz. gold (or the U.S. dollar equivalent) each year for three years. The agreement depends on Canarc raising $750,000 in equity. The junior has until September to complete its due diligence on Oro. Silver Standard Resources rose 22¢ to $7.67 per share, since increasing its full-year 2015 production guidance after secondquarter production results. Silver Standard’s Marigold gold mine in Nevada produced 48,700 oz. gold and its Pirquitas silver-zinc mine in northern Argentina delivered 2.4 million oz. silver — both slightly below the earlier quarter’s output. But the

TSX most active issues

Barrick Gold First Quantum Teck Res B Lundin Mng B2Gold Fortune Mnrls Capstone Mng Silver Wheaton Lake Shore Gld Yamana Gold

VOLUME WEEK (000s) HIGH LOW CLOSE CHANGE

ABX 12818 13.92 12.87 12.87 - 0.52 FM 10087 15.83 14.47 15.41 + 0.39 TCKB 6696 12.30 11.37 11.37 - 0.89 LUN 5967 5.05 4.72 4.95 + 0.11 BTO 4940 1.90 1.84 1.89 + 0.06 FT 4419 0.04 0.03 0.03 + 0.01 CS 4069 1.23 1.13 1.15 - 0.02 SLW 3939 20.15 19.24 19.43 - 0.19 LSG 3939 1.24 1.19 1.20 - 0.01 YRI 3876 3.79 3.56 3.61 - 0.06

royalty agreement with the company for a US$345-million penalty. Under the new stream, Royal Gold will pay US$525 million upfront to buy the first 900,000 oz. gold produced from Teck’s Carmen de Andacollo mine in Chile, and half of the production afterwards. Upon each monthly delivery, Royal Gold will pay 15% of the monthly average gold price. The agreement will increase Teck’s cash position by US$162 million.

company is pleased with the assets’ first-half performance, and boosted Marigold’s gold guidance this year by 19% to 205,000 oz. gold, and Pirquitas’ annual silver forecast by 5% to 10.5 million oz., while keeping the zinc estimate at 12 million lb.

Teck Resources gave back 89¢ per share to end at $11.37 on heavy volumes. The diversified miner entered a long-term gold stream with Royal Gold, while ending a 2010

TSX greatest percentage change

Champion Iron Moneta Porcpn Fortune Mnrls Armistice Res Wallbridge Mng Golden Mnls Taseko Mines Harte Gold Eastmain Res Corvus Gold Canarc Res Migao Silver Bear Rs Alamos Gold Thompson Creek Paladin Energy Namibia Rare E Energizer Res U3O8 Corp Geologix Ex

TSX greatest value change

VOLUME WEEK (000s) HIGH LOW CLOSE CHANGE

CIA ME FT AZ WM AUM TKO HRT ER KOR CCM MGO SBR AGI TCM PDN NRE EGZ UWE GIX

216 165 4419 39 109 15 1304 289 571 78 551 175 650 2821 633 1915 17 847 127 83

0.16 0.08 0.04 0.38 0.04 0.50 0.71 0.06 0.49 0.71 0.08 0.82 0.07 7.32 0.95 0.22 0.14 0.11 0.04 0.04

0.11 0.07 0.03 0.33 0.04 0.46 0.58 0.05 0.42 0.64 0.05 0.70 0.06 6.02 0.80 0.20 0.14 0.09 0.03 0.03

0.15 0.08 0.03 0.38 0.04 0.49 0.70 0.06 0.47 0.70 0.05 0.70 0.06 6.13 0.80 0.20 0.14 0.09 0.03 0.03

+ 31.8 + 23.0 + 20.0 + 15.1 + 14.2 + 13.9 + 11.1 + 10.0 + 9.3 + 7.6 - 41.1 - 20.4 - 20.0 - 16.7 - 15.7 - 15.2 - 15.1 - 14.2 - 14.2 - 14.2

WEEK

VOLUME CLOSE CHANGE

Labdr I-Ore Ro First Quantum Silver Std Res Horizns G Bear Royal Cdn Mint Lundin Mng New Gold Sprott Ph Silv Goldcorp Taseko Mines Agrium Potash Cp Sask Alamos Gold Teck Res B Russell Metals Franco-Nevada Altius Mnrls Dominion Diam Cameco Corp Barrick Gold

LIF FM SSO HGD MNT LUN NGD PHSU G TKO AGU POT AGI TCKB RUS FNV ALS DDC CCO ABX

TSX VENTURE EXCHANGE The S&P/TSX Venture Composite Index had a six-month low during the trading sessions, dropping 4.4%, or 29.60 points, before finishing at 640.98 points. Investors monitored the Greek debt crisis and Chinese stock market, while commodity prices struggled and the International Monetary Fund lowered its growth rate for the Canadian economy to just 1.5%, adding downward pressure.

August contracts for gold bullion dropped 1.3%, or US$15.39, before closing at US$1,157.90 per oz. September contracts for copper lost 2.2%, or US5.7¢, en route to a US$2.54 per lb. close. August contracts for West Texas Intermediate crude oil traded relatively flat, and closed at US$52.74 per barrel.

Pacific Booker Minerals topped the value-lost column, after revealing potential permit delays at its Morrison copper-gold project, 65 km northwest of Smithers, B.C. The company plummeted $2.83, before closing at $2.35 per share.

On July 8 Pacific Booker Minerals reported that the B.C. government would further assess Morrison. Pacific Booker has three years to provide more information required by the government. The company

TNM July 20 2015 Issue.indd 6

+ 0.45 + 0.39 + 0.22 + 0.19 + 0.11 + 0.11 + 0.09 + 0.08 + 0.08 + 0.07 - 4.68 - 1.41 - 1.23 - 0.89 - 0.83 - 0.79 - 0.64 - 0.63 - 0.61 - 0.52

J U LY 2 0 -26

has been trying to permit the project since its mine plan was rejected by authories in 2012.

Barkerville Gold Mines has resurfaced on the stock list after being rescued from certain doom by gold speculator Eric Sprott. The company gained 6¢ on 213,400 shares traded, before closing at 27¢ per share.

On July 8 Barkerville reported that Sprott would convert an aggregate $19.5 million in debt — representing the entire principal debt and interest due and owing under a credit agreement — by issuing 75 million shares priced at 26¢ per share. Since the debt settlement Sprott has controlled 42% of the company’s outstanding stock.

TSX-V most active issues

Malbex Res Abcourt Mines Noka Res Phoenix Gold True Gold Mng Latin Am Mnls Skeena Res Mineral Mtn Rs Alexandria Mnl Cornerstone Ca

VOLUME WEEK (000s) HIGH LOW CLOSE CHANGE

MBG ABI NX PXA TGM LAT SKE MMV AZX CGP

4167 3527 2072 1831 1773 1484 1429 1427 1384 1363

0.06 0.04 0.06 0.01 0.23 0.02 0.07 0.04 0.04 0.03

0.05 0.03 0.04 0.01 0.21 0.01 0.06 0.04 0.04 0.02

0.05 + 0.03 - 0.05 + 0.01 0.21 - 0.02 0.07 + 0.04 - 0.04 0.03

0.01 0.01 0.01 0.00 0.02 0.00 0.01 0.01 0.00 0.00

Barkerville recently announced the start of a first-phase drill program at the Bonanza Ledge–BC Vein areas its Barkerville Mountain project.

Lithium outfit Bacanora Minerals fell 23¢ on 356,000 shares traded before finishing at $1.30 per share. On July 8 the company released an update on its Sonora Lithium project in Mexico. Bacanora is undertaking

a prefeasibility study on a plant designed to deliver up to 50,000 tonnes per year of lithium carbonate.

The company started a 4,000-metre drill program on the the Fleur and El Sauz concessions testing the continuity of higher-grade, near-surface mineralization.

Bacanora anticipates it will release the study by March 2016.

TSX-V greatest percentage change

Pac Potash Ultra Lithium Nevada Expl Bandera Gold Xtierra Manado Gold Nebu Res Diamond Fields Kiska Metals West Af Iron O Castillian Res Q-Gold Res Pac Booker Min Trio Gold Corp Santa Fe Metls Golden Goliath MacDonald Mns Xmet Barker Mnrls Centurion Mnls

TSX-V greatest value change

VOLUME WEEK (000s) HIGH LOW CLOSE CHANGE

PP ULI NGE BGL XAG MDO NBU DFI KSK WAI CT QGR BKM TGK SFM GNG BMK XME BML CTN

10 25 91 56 41 225 68 17 263 47 33 35 83 23 14 308 348 1261 46 184

0.01 0.01 0.01 0.01 0.01 0.05 0.03 0.03 0.03 0.04 0.08 0.02 5.67 0.01 0.01 0.01 0.01 0.01 0.01 0.03

0.01 0.01 0.01 0.01 0.01 0.05 0.03 0.03 0.02 0.03 0.04 0.02 2.30 0.01 0.01 0.01 0.01 0.01 0.01 0.02

0.01 0.01 0.01 0.01 0.01 0.05 0.03 0.03 0.03 0.04 0.04 0.02 2.35 0.01 0.01 0.01 0.01 0.01 0.01 0.02

+ 100.0 + 100.0 + 100.0 + 100.0 + 100.0 + 100.0 + 66.6 + 66.6 + 66.6 + 60.0 - 71.4 - 55.5 - 54.6 - 50.0 - 50.0 - 50.0 - 50.0 - 50.0 - 50.0 - 40.0

WEEK

VOLUME CLOSE CHANGE

Reservoir Mnls Barkerville Go Zimtu Capital Great Atlantic West High Yld Golden Dawn Ml Eurasian Minls Marlin Gold Copper Fox Mtl Lara Expl Pac Booker Min Bacanora Mnls Titanium Corp Kennady Diam Castillian Res Bellhaven Cp&G Ascot Res Bear Creek Mng Tasman Metals Golden Hope

RMC BGM ZC GR WHY GOM EMX MLN CUU LRA BKM BCN TIC KDI CT BHV AOT BCM TSM GNH

U.S. M ARKETS The Greek crisis and the Chinese stock market crash monopolized headlines, while the U.S. trade deficit widened to US$42 billion in May from US$40.9 billion in April. U.S. market indexes were relatively flat, with the Dow Jones Industrial Average edging up 0.2% to 17,760.41, and the S&P 500 Index slipping 0.01% to 2,076.62. The Philadelphia Gold & Silver Index dropped 5.8% to 59.01.

Randgold Resources climbed US26¢ to US$64.41 per share. Despite a small decrease in production on planned lower grades to 279,531 oz. gold during the first quarter from 287,048 oz. in the fourth quarter of 2014, total cash costs per oz. fell to US$708 per oz., from US$712 per oz. First-quarter profit slipped to US$51.3 million from US$54.4 million in the previous quarter due to increased spending on exploration and higher corporate costs, as well as an adverse exchange rate. Operational net cash rose from US$69.3 million to US$101.7 million, and the cash flow, combined with decreasing capital expenditure after the first phase of construction at Kibali, boosted cash-on-hand by 71% to US$141.2 million.

961022 13.91 10087063 15.41 591945 7.67 742656 13.05 65553 15.79 5967048 4.95 2881231 3.34 24075 6.07 3430632 21.18 1303620 0.70 530158 129.00 3440621 36.49 2820608 6.13 6696297 11.37 481773 21.75 872389 58.50 291644 14.06 657115 16.57 2990509 17.04 12818164 12.87

28450 213361 232881 62200 10000 380500 10520 11500 402056 58050 82872 355967 26680 77759 33100 10770 66400 186656 22200 39364

4.44 0.27 0.31 0.14 0.34 0.12 0.61 0.51 0.20 0.27 2.35 1.30 1.31 5.05 0.04 0.30 1.67 0.90 0.50 0.50

+ + + + + + + + + + - - - - - - - - - -

0.12 0.06 0.05 0.04 0.04 0.04 0.03 0.03 0.03 0.03 2.83 0.23 0.15 0.10 0.10 0.10 0.07 0.07 0.06 0.05

J U LY 2 0 -26 Strong second-quarter production results at Taseko’s 75%-owned Gibraltar mine in B.C. sent the company’s shares up 13.1% to US55¢ — the highest percentage gain of the week. Gibraltar produced 39.8 million lb. copper and 479,000 lb. molybdenum for 40% and 18% first-quarter increases. The company said the higher production owed to improved copper grades, better design mill throughput, higher copper recoveries and flat mine-site spending. Gibraltar is the second-largest open-pit copper-moly mine in Canada.

Depressed iron ore prices rattled the

U.S. most active issues

VOLUME WEEK (000s) HIGH LOW CLOSE CHANGE

Alcoa* AA 134956 11.13 10.39 10.59 - 0.51 Peabody Enrgy* BTU 75313 1.84 1.52 1.53 - 0.34 Barrick Gold* ABX 55366 11.00 10.12 10.15 - 0.42 Freeport McMo* FCX 37667 17.34 16.35 16.78 - 0.47 Arch Coal* ACI 19630 0.39 0.31 0.31 - 0.04 Alpha Nat Res* ANR 16991 0.31 0.20 0.24 - 0.05 Cliffs Nat Rs* CLF 16368 3.40 3.13 3.27 - 0.26 BHP Billi-BHP* BHP 16223 39.69 37.06 38.40 - 2.89 Goldcorp* GG 14193 17.12 16.56 16.67 + 0.07 Teck Res B* TCK 14166 9.66 8.93 8.95 - 0.72

shares of BHP Billiton and Rio Tinto.

Benchmark 62% iron fines fell to US$44.10 per tonne, an all-time low, before recovering to US$50 per tonne. Shares of BHP Billiton fell US$2.89 to US$38.40, while Rio Tinto’s dropped US$1.19 to US$38.53. Rio Tinto is

preparing the first metal shipments from its Kitimat aluminim smelter in B.C., after modernizing the facility to boost production capacity by 48%, and make it one of the lowestcost smelters in the world. The smelter’s annual production rate is 420,000 tonnes.

U.S. greatest percentage change

Taseko Mines* US Energy* Tanz Roy Exp* Northern Dyn* Golden Mnls* Gold Resource* Avino Silver* Alexco Res* Yanzhou Coal* Silver Std Re* Pac Booker Mn* Mines Managem* Atlatsa Res* Peabody Enrgy* Alpha Nat Res* Natural Rs Pt* Thompson Crk* Coeur Mng* Arch Coal* Uranium Res*

U.S. greatest value change

VOLUME WEEK (000s) HIGH LOW CLOSE CHANGE

TGB USEG TRX NAK AUMN GORO ASM AXU YZC SSRI PBM MGN ATL BTU ANR NRP TC CDE ACI URRE

948 164 687 170 101 970 92 169 604 3030 23 157 440 75313 16991 167 488 8396 19630 283

0.57 0.64 0.38 0.36 0.39 2.56 1.08 0.33 6.37 6.30 3.94 0.49 0.10 1.84 0.31 3.55 0.75 5.71 0.39 0.96

0.45 0.45 0.35 0.33 0.34 2.39 1.00 0.31 5.38 5.70 1.85 0.30 0.06 1.52 0.20 3.02 0.63 5.06 0.31 0.85

0.55 0.53 0.38 0.36 0.37 2.48 1.06 0.33 6.31 6.02 1.86 0.38 0.08 1.53 0.24 3.04 0.64 5.06 0.31 0.87

+ + + + + + + + + + - - - - - - - - - -

13.1 10.4 7.9 5.5 5.4 4.2 3.8 3.4 2.9 2.7 57.5 24.0 22.0 18.1 17.5 15.7 15.1 12.9 12.3 10.3

WEEK

VOLUME CLOSE CHANGE

Compass Mnls* Hi-Crush Part* Royal Gold* Randgold Res* Newmont Mng* Yanzhou Coal* Agnico-Eagle* Silver Std Re* Gold Resource* Goldcorp* Agrium* BHP Billi-BHP* BHP Billi-BBL* Pac Booker Mn* Mosaic* Rio Tinto* Potash C Sask* US Silica Hld* Coeur Mng* Minas Buenavn*

CMP HCLP RGLD GOLD NEM YZC AEM SSRI GORO GG AGU BHP BBL PBM MOS RIO POT SLCA CDE BVN

115803 83.51 78810 24.97 830979 61.95 895980 64.41 8646635 22.59 603805 6.31 8427085 28.59 3030011 6.02 970091 2.48 14193494 16.67 225677 101.53 16223385 38.40 3991025 37.00 22969 1.86 7678095 44.71 1316073 38.53 11203151 28.63 672396 25.32 8396374 5.06 5880471 9.36

+ 0.90 + 0.47 + 0.32 + 0.26 + 0.18 + 0.18 + 0.16 + 0.16 + 0.10 + 0.07 - 3.65 - 2.89 - 2.87 - 2.52 - 1.23 - 1.19 - 1.17 - 0.82 - 0.75 - 0.74

2015-07-15 6:49 PM

Technology Metals Pages 7-9

July 20-26, 2015

Western Lithium, Lithium Americas eye strategic merger of directors.

VANCOUVER — On “The merged company June 30, juniors Westwill hold two of the leading ern Lithium (TSX: lithium development projWLC; US-OTC: ects in the world,” ChmeWLCDF) and Lithium lauskas said in a prepared Americas (TSX: LAC) statement. “We believe this announced a strategic combination will also rebusiness combination sult in better liquidity, maragreement the compaket capitalization and fundnies hope will create a

BY MATTHEW KEEVIL ing opportunities.” “leading lithium-develChmelauskas noted that opment company combining expertise, technology and his management team had watched two significant lithium deposits Lithium Americas’ progress for based in North America and South several years, and said it was the America.” Western Lithium will “right time to combine our efforts acquire Lithium Americas in an all- and take a leadership role in the sector with our shared vision and share deal valued at $80 million.

Under the arrangement Lithium commitment to develop the lithAmericas investors will receive a ium market in a disciplined man0.789 share of Western Lithium for ner, and a focus on technical innoeach share held. Based on the com- vation and successful project panies’ closing prices on June 29, execution.”

In May 2014 Western Lithium the offer values Lithium Americas at 50¢ per share, which represents released a prefeasibility at its Kings a 36% premium. Western Lithium Valley lithium property, 100 km will continue to be led by CEO Jay northwest of Winnemucca, Nev. Chmelauskas, while Lithium The project is spread over five minAmericas executives Tom Hodg- eralized lenses — named Stage I son, John Kanellitsas and Franco through Stage V — that extend 30 Mignacco will join the joint board See LITHIUM, Page 8

Tasman’s Norra Karr on top of Europe’s wish list

BY LESLEY STOKES

VANCOUVER — The global rare earth element supply crisis in 2010 served as a “wake-up call” to businesses and governments, and future supply “poses supply security concerns,” according to a recent study commissioned by the European Parliament.

Written by the European Rare Earths Competency Network (ERECON), the report states that by 2017, demand for the group of 17 elements could rise by more than 20%, and double between now and 2020.

The growth would partly be driven by the increased demand for the green technologies that require their unique properties, such as hybrid cars and wind turbines.

But China’s monopoly on producing these elements raises manufacturers concerns over reliable and sustainable access to them.

According to the report, such vulnerability “threatens to undermine European innovation and competitiveness, and may slow the diffusion of priority technologies.”

Rare earths made industry

TNM July 20 2015 Issue.indd 7

headlines in September 2010 when China reduced its export quota by nearly 40%, increased duties to 15–25%, and embargoed shipments to Japan.

The changes bottlenecked global supply and set off a speculative price rally for the commodities, driving prices between four and nine times the previous value in less than a year.

End users and manufacturers stockpiled supplies, making it difficult to procure the elements, while others were forced to fly them from one plant to another to avoid production outages.

The price hike also prompted Molycorp (NYSE: MCP) to reopen its Mountain Pass rare earth mine in California, while Lynas (ASX: LYC) kick-started operations at its Mount Weld mine in Australia.

But the bubble burst in the second half of 2011, as greater resource efficiency, substitution efforts and more recycling of processing wastes contributed to a drop in demand.

See TASMAN, Page 9

Stars to realign for Largo in Brazil

A view of the crushing area at Largo Resources’ Maracas Menchen vanadium mine in Bahia, Brazil.

BY SALMA TARIKH

Largo Resources (TSXV: LGO; US-OTC: LGORF) is keeping its 2015 guidance at the Maracas Menchen vanadium mine in Bahia, Brazil, despite the slowerthan-expected ramp up.

Maracas, which produced its first vanadium pentoxide (V2O5) flake last August, has had hiccups in reaching its first-phase nameplate capacity of 9,600 tonnes V 2O5 per year, or 26.4 tonnes per day, by October.

“The primary issue the facility has been struggling with is mechanical conveyance issues — just trying to get the material from one part of the process to the other,” CEO Mark Smith says. He joined Largo in April and also serves as executive chairman of NioCorp Developments (TSX: NB; US-OTC: NIOBF). He was also the CEO of Molycorp until 2013.

“Some of those pieces of equipment weren’t made with the right materials of construction, or they were not built robust enough,” Smith says of Maracas’ plant,

LARGO RESOURCE

“and so it was a constant maintenance problem.”

To fix that, Largo is rebuilding several of those conveyance systems. They are set to arrive on-site from July through November. This should help increase production at the Maracas mine, starting in mid-July or early August, Smith says.

However, the executive says Maracas will not finish the ramp-up in September as guided. “It may be a couple of months later than that because one of the primary pieces of equipment that we have been struggling with is the pan conveyor … and the new one isn’t scheduled to arrive until November,” Smith explains, we will have that installed immediately. And I anticipate that in December we should be hitting full nameplate capacity.” He adds the plant should be “very close to 90%” of capacity before the pan conveyor arrives.

In May, Maracas hit a record monthly production rate of 487 tonnes, or 23 tonnes per day, representing See LARGO, Page 8

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2015-07-15 6:49 PM

8

JULY 20-26, 2015

Te c h n o l o g y M e t a l s

THE NORTHERN MINER

Largo in Brazil

Lithium merger

LARGO, From Page 7

LITHIUM, From Page 7

87% of the plant’s design capacity.

(Largo is selling all of its vanadium to Glencore International AG under a six-year off-take agreement.)

Despite the slight setback at the plant, Largo is sticking with its annual 2015 and 2016 guidance. It forecasts 2015 production of 7,850 tonnes (17.3 million lb.) V2O5 at cash operating costs of US$3.78 per lb.

Costs are set to drop to US$3.21 per lb. V2O5 before 2016.

The miner anticipates costs will sink next year, as Maracas undergoes a planned expansion to bolster V2O5 output to 11,000 tonnes (24.3 million lb.) annually, with estimated year-end 2016 costs of US$2.60 per lb.

When that happens, Smith claims the Maracas mine will become the world’s lowest-cost vanadium producer, due to its ore grades. The reserve at Maracas contains 13.1 million tonnes of 1.3% V2O5, compared with the industry average grade of 0.5%.

But before Largo can take the lowest-cost producer title it needs to reach its first-phase production target. To give it a solid financial footing to achieve that goal, Largo recently stretched out its debt repayments and raised US$75.2 million in equity.

km. The company’s Stage I reserve base supports annual production of 26,000 tonnes lithium carbonate, 90,000 tonnes potassium sulphate and 100,000 tonnes sodium sulphate.

Based on an update published in late 2011, Kings Valley hosts 27 million proven and probable tonnes grading 0.4% lithium, 3.9% potassium and 1.4% sodium. The initial development would advance in two stages, with the initial build costing US$248 million, and a second phase costing US$161 million.

The plan would carry a 24% aftertax net present value (NPV) at an 8% discount rate, along with a 20% internal rate of return (IRR).

Western Lithium reported producing 99.8% of high-quality lithium carbonate in its first trial run at a demonstration plant in Germany. Studies have been advanced to finalize the design of the company’s lithium hydroxide circuit, and it expects pilot testing later this year.

Meanwhile, Lithium Americas has invested US$47 million in advancing its Cauchari–Olaroz project, which consists of a big part of two adjacent salt lakes on Argentina’s Puna Plateau. The project hosts 2.7 million tonnes lithium carbonate equivalent (LCE) at a lithium cut-off grade of 354 milligrams per litre.

The company released a feasibility study (FS) at Cauchari–Olaroz in mid-2012 that contemplates staged development with a US$315million price tag. The FS assumes the project is built over two stages, with each stage consisting of a 20,000-tonne-per-year lithium carbonate facility and a 40,000-tonne-per-year potash facility.

The study features an after-tax NPV of US$464 million at an 8% discount rate and a 20% IRR. In January Lithium Americas unveiled a cooperation agreement with Posco, Korea’s largest steel company and a leader in developing advanced material processes.

Posco has been working on innovative extraction technology, which it claims produces lithium much faster than traditional brine evaporation technology, minimizes the environmental footprint associated with large-scale evaporation ponds and has a “significantly higher” recovery rate.

The company followed up in May with an announcement that it was in discussions with Posco to jointly commercialize Cauchari–Olaroz, after receiving promising results from a lithiumextraction demonstration plant

LARGO RESOURCES

Les Ford, Largo Resources technical director of Brazil operations, at the Maracas vanadium project in Brazil. behind us now.”

In mid-June, the Brazilian Development Bank (BNDES) and a consortium of commercial banks agreed to extend Largo’s construction debt and export credit loans for the Maracas mine. The agreement defers Largo’s repayments on

‘I think you are going to see Largo as a significant contributor in the vanadium market. That is really where we want to be.’

— Mark Smith , CEO, Largo Resources Largo faced a cash crunch earlier this year due to several factors, including the slowed ramp-up at Maracas, the drop in vanadium prices in the first half of 2015, and the company’s looming debt payments. “The best way to say it is that the stars were not aligned,” Smith says, noting those “issues are

the R$461.2 million (US$147 million) BNDES loan by two years and extends the maturity date by three years for the U.S. dollar component, or 67% of the facility. The banks also pushed out amortization for the export credit loans by a year, and the maturity date by two years.

METALS FOR THE FUTURE TANTALUM

NIOBIUM AND RARE EARTH ELEMENTS

Be a part of the team

TSXv:CCE / FSE:D7H / commerceresources.com

TNM July 20 2015 Issue.indd 8

The debt restructuring followed a US$75.2-million private placement in May, and a $12-million convertible bridge loan with Arias Resource Capital in March. (Arias is Largo’s largest shareholder at 46.3%.)

Largo is “pretty excited” about the equity raise and the debt-restructuring agreement, Smith says, explaining it showed that the market had confidence in the Maracas project and the miner’s capabilities. “So the morale is much improved in the company.”

Vanadium prices have also improved. After hitting a low of US$3.37 per lb. in May, the specialty metal used mainly as an alloy to strengthen steel is now trading in the US$4.30 to US$4.50 per lb. range, Smith notes. The earlier price drop came after Chinese vanadium producers put their extra V2O5 production on the market following the slump in Chinese steel production.

“The general feeling is that a lot of that is through the system now, and so we are now back into a relatively stable price and demand situation. And prices have recovered probably over $1 per lb. already.”

In a June corporate presentation, Largo reported that total global V2O5 equivalent supply is 127,000 tonnes, while total demand is 136,000 tonnes and growing. China provides 70% of the world’s supply, followed by South Africa and Russia.

Chinese producers extract vanadium as a co-product from iron ore mines and are the lowest-cost V2O5 producers, with unit prices of US$3.50 per lb. However, Smith reckons Chinese producers could shut down many of their iron ore mines, as those mines suffer from low ore grades and high production costs of US$125 per tonne iron ore.

That is more than double the current iron ore price of US$55 per tonne.

“When that iron ore production shuts down — remember China produces only 10–12% of the world’s iron ore supply, but 70% of the world’s vanadium supply — I think we’re going to be in for some interesting times in the vanadium market, if this iron ore issue plays out in the market,” Smith says.

He envisions that scenario occurring later this year, adding that “if things continue to go well and the market turns around, I think you are going to see Largo as a significant contributor in the vanadium market. That is really where we want to be.”

that Posco had set up at the project in December.

The demo operation has a 200tonne annual LCE capacity and achieved full operating rates throughout a test period that ended in January. The companies have produced over 20 tonnes lithium phosphate and exported the product to Posco’s facility in Korea, where it was processed into battery-grade lithium carbonate and lithium hydroxide.

“Manufacturers of lithium-ion batteries are increasingly looking for alternative sources of lithium supply, particularly as they buildout major production facilities.

We are creating a combined entity that will pursue innovative process technology, with a goal of producing improved lithium products,” Lithium Americas CEO Kanellitsas commented in a press release.

“This transaction is occurring at an important inflection point for the sector, with the strong fundamentals of the lithium sector all coming into focus from the continued growth of electrified vehicles, consumer and industrial energy storage, and consumer electronics, using lithium-ion batteries,” he said.

The combined company expects to generate revenue this year from Western Lithium’s wholly owned Hectatone subsidiary, which manufactures organoclay products used in complex oil and gas exploration, animal feed and other applications. Hectorite clay is an enabling mineral with thermal stability superior to bentonite clays in high-pressure and hightemperature environments.

The new-look Western Lithium is contemplating revenue from Cauchari–Olaroz based on a twoyear development timeline, and potential revenues from Kings Valley under a four-year development schedule.

The companies will also have a good amount of starting capital, thanks to financings that Western Lithium negotiated in the past few months. In May the company closed a US$2.8-million convertible security funding agreement with New York-based asset management firm The Lind Partners.

Western Lithium followed up in June with an $8-million boughtdeal offering, wherein it issued 11.4 million units priced at 70¢ per unit.

Each unit consists of a share and one-half purchase warrant priced at 90¢ for 24 months.

Company representatives were not immediately available for comment.

LITHIUM AMERICAS

The processing plant built by Lithium Americas and Posco at the Cauchari– Olaroz lithium project in Argentina.

2015-07-15 6:50 PM

Te c h n o l o g y M e t a l s

THE NORTHERN MINER

JULY 20-26, 2015

9

Tasman’s Norra Karr on top of Europe’s wish list TASMAN, From Page 7

“If the manufacturers have concerns about the supply, then they’ll look at other ways of doing things,” Mark Saxon, president and CEO of Tasman Metals (TSXV: TSM; NYSE-MKT: TAS) — a rare earthfocused junior explorer — told The Northern Miner during a telephone interview.

Of the 124,000 tonnes of rare earth oxides consumed in 2014, most of them were used in magnets, polishing and batteries.

But engineers have found alternative materials to reduce or substitute rare earths in manufacturing. For example, Saxon says engines and batteries for electric vehicles now come in several versions: some contain large quantities of rare earths, while others contain none or only negligible amounts.

He says these substitutions make demand forecasts for rare earths liable to unusually large margins of error.

“Until they understand the supply chain better, they’re not happy to introduce as many rare earth magnets into their vehicles,” he says. “If they know that supply will be around forever, manufacturers can go back to engineering with more rare earths, and create a much bigger industry.”

Saxon adds that diversifying the supply would increase confidence. According to the ERECON report, Molycorp and Lynas — at a target capacity of producing a total of 40,000 tonnes of rare earth oxide annually — will “likely meet non-Chinese demand for light rare earths in coming years.”

But this means the world will depend on China to produce the “heavy” rare earths — the elements that enable production of hot-ticket items such as electric vehicles, turbines and computers.

Mark Saxon, Tasman Metals president and CEO. Because of the new mines, China’s share in global output fell from 95% in 2010 to 80% in 2015, but it still controls 100% of heavy rare earth production.

As stated in the report, over 30% of the world’s known rare earth deposits are in China, with most of the production from lowgrade, clay-hosted deposits in the south.

Saxon says that 40% of all the heavy, high-value rare earths produced in China are traded on the black market. The rest of the $4 billion industry, he says, is in “government hands,” as the country has spent the past decade centralizing operations into six private, state-owned enterprises.

Saxon explains that it’s difficult for western producers to match

TNM July 20 2015 Issue.indd 9

TASMAN METALS

Consultant Tony Mariano (left) and Tasman Metals chief geologist Magnus Leijd at the Norra Karr rare earth project, 300 km southwest of Stockholm, Sweden. the cost of production in China, since illegal mining offers rare earths at a significant discount because of low-labour costs and environmental negligence.

But the U.S., European Union and Japan approached the World Trade Organization (WTO) and argued that the restrictions were intended to give Chinese indus-

‘It’s a tiny industry, yet the environmental impact is way, way more than it needs to be.’

— Mark Saxon, president and CEO, Tasman Metals “Really, it’s Western companies wanting to pay as little as possible, including the consumers,” he says.

“They don’t like the uncertainty of supply, and they aren’t happy to pay more than the Chinese customer.”

But it’s the unspoken cost that can raise the most attention. The ERECON report suggests that given the frequent use of rare earths in green products, the sources that are not considered environmentally sound “are likely to come under growing public scrutiny.”

“It’s a tiny industry, yet the environmental impact is way, way beyond what it needs to be,” Saxon says, adding that Chinese mines operate “behind closed doors,” and “the Western world doesn’t know if reserves will last two or 200 years.”

China allegedly tried to stamp out illegal mining and improve its environmental record when it introduced its new legislation in 2010, which caused a frenzy in the industry.

tries protected access to goods, lending to an unfair advantage.

On most counts, the WTO agreed, and requested in March of last year that China revoke the changes violating the trade agreements.

China implemented the changes, and as of May there has been no ceiling on the amount of rare earths that can be sold abroad, but companies will need a licence to export them.

ERECON says that rare earth prices — although still higher than before the crisis — have dropped by over 80%, compared to their mid-2011 peaks.

And as a result, questions remain about the commercial sustainability of rare earth suppliers outside of China. Molycorp filed for bankruptcy protection in June to restructure its US$1.7-billion debt load, and Lynas is trading at all-time lows.

“People are concerned about the profitability of rare earths because of the bubble we went through,”

Saxon says, adding that it is hard to gain traction with investors.

Despite the market sentiment, ERECON recommends that policy-makers in the European Union consider new mines for building a diversified and sustainable supply chain.

The report says Tasman’s Norra Karr deposit, 300 km southwest of Stockholm, Sweden, has the potential to secure European supply for “decades to come.”

Norra Karr has the highest percentage of heavy rare earth oxide of all major Western projects, and has already been granted a 25-year mining lease.

Tasman hopes to enter production in 2017 and produce an average of 5,119 tonnes of total rare earth oxide annually, at operating

costs of US$39.7 per kilogram of rare earth oxide.

But right now, Saxon says that contract prices are “too low for the mine to enter production,” and instead, the company wants to include other by-products to leverage the project’s economics against market fluctuations.

“If we add by-products, then I think we’ll be incredibly robust in terms of withstanding any cycle,” he says. Saxon has scheduled the full feasibility study to begin in November 2015, subject to financing.

Tasman has traded within a 52week window of 40¢ to $1.33, and closed at 62¢ at press time. The company has 66.14 million shares outstanding for a $39.7-million market capitalization.

2015-07-15 6:50 PM

10 JULY 20-26, 2015 THE NORTHERN MINER

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Trainer, Mobile Equipment Rabbit Lake Operation Online Reference No: 62164 You will be responsible for the delivery of practical and classroom training to site personnel. This will include delivering training through a variety of methods, providing coaching and feedback, evaluating on-the-job performance and identifying training gaps.

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Instrumentation Technologist Cigar Lake Operation, Saskatchewan, Online Reference No: 61889 Cameco is looking for motivated and ambitious individuals to join our maintenance team at the world’s second largest high grade uranium deposit, located at the Cigar Lake operation in northern Saskatchewan.

Manager Langly, BC Online Reference No: 61628 Working within Cigar Lake’s environment department, you will be responsible for supervising the daily activities of the environment technicians by providing guidance, training and priority setting of their daily duties, as well as developing and delivering technical training to environment technicians and site employees as required.

Administrator, Contractor Management McArthur River,Saskatchewan Online Reference No: 62135 Your responsibilities will include providing confidential administrative support to the projects, maintenance engineering and maintenance planning groups at McArthur River. Your contributions and the support you provide to these groups will play a significant role in the success of the operation at large.

Underground Boom Truck Operator Musselwhite, Ontario Online Reference No: 62095 As a boom truck operator you will be required to perform lifts of varying nature in an approved manner consistent with current OH&S practices.

Metallurgist Key Lake Operation Online Reference No: 62075 You will assist operations personnel in process monitoring, reporting and testing as well as investigating process enhancements. You will be exposed to and gain experience in all areas of the milling process including ore blending, grinding, leaching, counter-current decantation, solvent extraction, impurity and uranium precipitation, drying, packaging and waste-water treatment.

Regional Supervisor, Mineral Exploration & Development, Timmins, ON Online Reference No: 62160 Are you looking for an opportunity to further develop your leadership skills while using your knowledge of the mining and exploration industry in leading the delivery of the Mineral Exploration and Development Program? If so, consider this opportunity to further advance mineral exploration and development in the North.

Jumbo Operator ​ID, Papua, ID Online Reference No: 61982 P.T. Redpath Indonesia has an immediate opening for a Jumbo Operator to join their dynamic team at our project in Indonesia.

Chief Engineer Klondex Mines Winnemucca, Nevada, USA Online Reference No: 61407 Supervision of all technical personnel related to Mine Engineering, including contractors.

For full job details visit MINING-JOBS.NET and enter the Online Reference No. in the search field

TNM July 20 2015 Issue.indd 10

2015-07-15 6:50 PM

THE NORTHERN MINER

11

JULY 20-26, 2015

METALS, MINING AND MONEY MARKETS SPOT PRICES

PRODUCER AND DEALER PRICES

COURTESY OF SCOTIABANK

Wednesday, July 15, 2015 Precious Metals Price (US$/oz.)

Gold $1154.75 Silver $15.31 Platinum $1028.00 Palladium $656.00

Change +0.50 +0.32 -30.00 -23.00

Base Metals Nickel Copper Lead Zinc

Change -105.00 -18.00 +19.50 +32.50

Price (US$/tonne) $11510.00 $5545.50 $1859.50 $2086.00

LME WAREHOUSE LEVELS Metal stocks (in tonnes) held in London Metal Exchange warehouses at opening, July 13, 2015 (change from July 6, 2015 in brackets): Aluminium Alloy 13620 (-160) Aluminium 353475 (-34100) Copper 331450 (+9950) Lead 170975 (-925) Nickel 454896 (-1554) Tin 7185 (-405) Zinc 458350 (-5025)

Thermal Coal CAPP: US$41.03 per short ton Coal: Central Appalachia, 12,500 Btu, 1.2 S02-R,W: US$54.90 Coal: Powder River Basin, 8,800 Btu, 0.8 S02-R, W: US$10.00 Coal: CME Group Futures Aug. 2015: US$41.05; Sept. 2015: US$41.40 Cobalt: US$14.29/lb.

Copper: US$2.50/lb.

Copper: CME Group Futures Aug. 2015: US$2.53/lb.; Sept.

2015: US$2.53/lb Ferro-Chrome: US$2.09/kg FerroTungsten: US$29.54/kg Ferrovanadium: US$22.10/kg Iridium: NY Dealer Mid-mkt US$525/tr oz.

Iron Ore 62% Fe CFR China-S: US$49.40/tonne Iron Ore Fines: US$60.04/tonne Iron Ore Pellets: US$85.02/tonne Lead: US$0.82/lb.

Magnesium: US$2.21/kg Manganese: US$1.78/kg Molybdenum Oxide: US$5.44/lb.

Phosphate Rock: US$115/tonne Potash: US$307.00/tonne Rhodium: Mid-mkt US$1,000.00/tr. oz.

Ruthenium: Mid-mkt US$45.00/tr. oz.

Silver: Handy & Harman Base: US$15.35 per oz.; Handy & Harman Fabricated: US$18.87 per oz.

Tantalite Ore: : US$170.28/kg Tin: US$6.61/lb.

Uranium: U3O8, Trade Tech spot price: US$36.25/lb.; The UX Consulting Company spot price: US$36.25/lb.

Zinc: US$0.91/lb.

Prices current July 15, 2015

NORTH AMERICAN STOCK EXCHANGE INDICES 52-week

Date TSX Composite S&P/TSX-Ven Comp S&P TSX 60 Global Gold TSX Metals & Mining Gold & Silver XAU Arca Gold Bugs

July 13 14523.14 643.46 850.07 146.82 659.13 59.48 141.15

July 10 14533.22 640.98 842.74 146.56 630.99 59.01 141.69

July 9 14411.07 636.71 834.13 148.25 631.13 59.69 143.11

July 8 14274.49 637.69 841.90 149.32 620.20 59.95 144.06

July 7 14412.07 652.83 854.28 154.66 639.48 60.41 144.85

High 15685.13 1028.26 905.09 209.26 954.68 102.61 251.83

Low 13635.53 363.71 787.83 128.54 513.00 57.58 141.06

TSX SHORT POSITIONS

TSX VENTURE SHORT POSITIONS

Short positions outstanding at June 15/15 (with changes from May 31/15).

Short positions outstanding at June 15/15 (with changes from May 31/15).

Largest short positions New Gold NGD 34689487 B2Gold BTO 29387761 PotashCorp POT 25538915 Lundin Mining LUN 22101962 Teck Resources TCK.B 17825874 Rubicon Minerals RMX 15179176 Kinross Gold K 14744965 Iamgold IMG 14305596 Detour Gold DGC 12291212 Thompson Creek Mtl TCM 11019513 Barrick Gold ABX 10598425 First Quantum FM 10485704 Yamana Gold YRI 8826146 Denison Mines DML 8320539 Argonaut Gold AR 7833911 Largest increase in short position Iamgold IMG 14305596 Capstone Mining CS 3149674 Detour Gold DGC 12291212 Yamana Gold YRI 8826146 Rubicon Minerals RMX 15179176 Largest decrease in short position New Gold NGD 34689487 Timmins Gold TMM 807158 Western Lithium WLC 72800 First Majestic Silver FR 5953306 First Quantum FM 10485704

Largest short positions Nexgen Energy NXE 1161000 Bear Creek Mining BCM 722613 Zenyatta Ventures ZEN 683295 Northern Graphite NGC 374634 Azincourt Uranium AAZ 308000 Kaminak Gold KAM 298511 CMC Metals CMB 292000 Integra Gold ICG 281400 Lakeland Res. LK 235600 Roxgold ROG 229781 Canasil Res. CLZ 200000 California Gold CGM 190500 Noka Resources NX 185000 Gold Standard Vent. GSV 146000 Precipitate Gold PRG 144000 Largest increase in short position Nexgen Energy NXE 1161000 Bear Creek Mining BCM 722613 Azincourt Uranium AAZ 308000 Northern Graphite NGC 374634 CMC Metals CMB 292000 Largest decrease in short position Strikepoint Gold SKP 0 Dajin Resources DJI 52000 Golden Valley Mines GZZ 4000 Lion One Metals LIO 900 Monument Mining MMY 6500

-6588494 -93284 161075 -810060 685228 801206 610677 5054758 1204100 -934708 247431 -1240388 806115 407705 -49887 5054758 1244373 1204100 806115 801206 -6588494 -3821274 -2338700 -1499798 -1240388

1160100 347600 125700 302000 308000 12000 292000 219300 225400 -43100 0 190000 112000 113900 143800 1160100 347600 308000 302000 292000 -4005000 -1482000 -255000 -199200 -184000

EXCHANGE RATES CANADIAN/U.S. EXCHANGE (Bank of Canada noon rate) Date July 13 July 10 US$ in C$ 1.2762 1.2715 C$ in US$ 0.7836 0.7865

July 9 1.2729 0.7856

July 8 1.2740 0.7860

July 7 1.2626 0.7849

EXCHANGE RATES (Bank of Canada, July 13, 2015) Currency Aus $ Euro In C$ 0.9452 1.4063 In US$ 0.7406 1.1019

Japan 0.01035 0.00811

Mex P 0.08111 0.06356

SA Rand 0.1025 0.08032

LEGEND A – Australian Stock Exchange C – CNSX Canadian National Stock Exchange J – Johannesburg Stock Exchange L – London Stock Exchange M – Mexico Stock Exchange N – New York Stock Exchange O – U.S. over-the-counter Q – NASDAQ or U.S. OTC T – Toronto Stock Exchange V – TSX Venture Exchange X – NYSE Alternext U.S. * – Denotes price in U.S.$

UK £ 1.9803 1.5517

STAFF INVESTMENT POLICY The Northern Miner does not permit any editorial employee to file stories about companies in which the writer owns shares. Editorial employees are also not permitted to take part in initial public offerings or to engage in short selling.

CONVERSIONS OF WEIGHTS & MEASURES 1 troy ounce = 31.1 grams 1 kilogram = 32.15 troy ounces 1 kilogram = 2.2046 pounds 1 (metric) tonne = 1,000 kilograms 1 (metric) tonne = 2,204.6 pounds 1 (short) ton = 2,000 pounds 1 (metric) tonne = 1.1023 (short) tons

1 gram per (metric) tonne = 0.02917 troy ounces per (short) ton = 0.03215 troy ounces per (metric) tonne 1 kilometre = 0.6214 miles 1 hectare = 2.47 acres

REPRINTS Reprints of any article published in The Northern Miner or on our website are available.

We will provide them in a “PDF” format for $350.

Contact: moliveira@northernminer.com or 416-510-6768

TNM July 20 2015 Issue.indd 11

DAILY METAL PRICES Daily Metal Prices Date July 13 July 10 July 9 July 8 BASE METALS (London Metal Exchange -- Midday official cash/3-month prices, US$ per tonne) Al Alloy 1715/1730 1750/1765 1740/1755 1735/1750 Aluminum 1658.50/1705 1652/1692 1648/1692 1619.50/1660 Copper 5605/5620 5561/5579 5571/5589 5370/5380 Lead 1819/1829 1814/1810 1803.50/1807 1733.50/1743 Nickel 11450/11560 11265/11300 11285/11315 10875/10925 Tin 14200/14200 13995/13975 14350/14300 14075/14025 Zinc 2031/2043 2001/2007 2008/2009 1954/1955 PRECIOUS METAL PRICES (London fix, LBMA silver price, US$ per troy oz.)

Gold AM 1154.95 1162.40 1162.10 Gold PM 1154.00 1159.30 1164.25 Silver 15.45 15.45 15.38 Platinum 1023.00 1032.00 1032.00 Palladium 661.00 655.00 654.00 670.00

1154.25 1158.50 14.99 1016.00 642.00

July 7 1760/1775 1644.50/1686 5440/5454 1742/1752 11135/11195 14200/14100 2001/2003

1166.25 1156.25 15.61 1046.00 661.00

TSX WARRANTS Alamos Gold (AGI.WT) - Wt buys sh @ US$29.48 to Aug 30/18.

Coeur Mining (CDM.WT) - Exercisable on a cashless basis. See TSX Bulletin 2013-0377 for calculation. To Apr 16/17.

Crocodile Gold (CRK.WT) - Wt buys sh @ $2.25 to Mar 24/16.

Dalradian Resources (DNA.WT) - Wt buys sh @ $1.50 to Jul 31/17.

Dundee Precious Metals (DPM.WT.A) - Wt buys sh @ $3.25 to Nov. 20/15.

Franco-Nevada (FNV.WT.A) - Wt buys sh @ $75 to Jun 16/17.

Gran Colombia Gold (GCM.WT) - Wt buys sh @ $65.00 to Aug 24/15. (GCM.WT.A) - Wt buys sh @ $3.25 to Mar 18/19.

Hudbay Minerals (HBM.WT) - Wt buys sh @ $15.00 to Jul 20/18.

IMX Resources (IXR.WT) - Wt buys sh @ C$0.62 or A$0.60 to Sep 14/15.

Ivanhoe Mines (IVN.WT) - Wt buys sh @ $1.80 to Dec 10/15.

MBAC Fertilizer (MBC.WT) - Wt buys sh @$1.00 to Apr 17/19.

New Gold A (NGD.WT.A) - Wt buys sh @ $15 to June 28/17.

Osisko Gold Royalties (OR.WT) - Wt buys sh @ $36.50 to Feb 18/22 Primero Mining (P.WT) - Wt buys sh @ $8 to July 20/15 Quest Rare Minerals (QRM.WT) - Wt buys sh @ $.40 to Jul 17/17.

Royal Nickel (RNX.WT) - Wt buys sh @ $.80 to Jul 11/16.

RTG Mining (RTG.WT) - Wt buys sh @ $1.50 to Jun 4/17.

Rubicon Minerals (RMX.WT) – Wt buys sh @$2 to Mar 12/15.

Sandstorm Gold (SSI.WT.A) Wt buys 1/5 sh @ US$5 to Oct 19/15. (SSI.WT.B) Wt buys sh @ US$14 to Sep 7/17. (SSI.WT.C) Wt entitles holder to receive 0.145 of a sh to Oct 7/14.

Stonegate Agricom (ST.WT.A) - Wt buys sh @ $0.40 to Jul 24/15.

Stornoway Diamond (SWY.WT.A) - Wt buys sh @ $0.90 to Jul 3/16.

Vista Gold (VGZ.WT.U) - Wt buys sh @ US$5 to Oct 22/15.

Supplied by TMX Group.

TSX VENTURE EXCHANGE WARRANTS Atlantic Gold (AGB.WT) - Wt buys sh @ $0.60 to Aug 20/18.

Avala Resources (AVZ.WT) - Wt buys sh @ $4.80 to Mar 6/16.

Brazil Resources (BRI.WT) - Wt buys sh @ $0.75 to Dec 31/18.

Delta Gold (DLT.WT) - Wt buys sh @ $0.17 to Sep 14/17.

Jet Metal (JET.WT) - Wt buys sh @ $0.25 to Sep 16/19.

Kilo Goldmines (KGL.WT) - Wt buys sh @ $0.15 to Mar 30/16.

Monarques Resources (MQR.WT) - Wt buys sh @ $0.20 to Dec 14/15. (MQR.WT.A) - Wt buys sh @ $0.18 to Dec 15/17.

NexGen Energy (NXE.WT) – Wt buys sh @ $o.65 to Mar 26/16 Oceanic Iron Ore (FEO.WT.A) - Wt buys sh @ $0.65 to Nov 30/15. (FEO.WT.B) - Wt buys sh @ $1 to Nov 30/15.

Sunridge Gold (SGC.WT) – Wt buys sh @ $0.35 to Oct 18/17.

West African Resources (WAF.WT) - Wt buys sh @ $0.40 to Jan 17/17.

West Kirkland Mining (WKM.WT) - Wt buys sh @ $0.30 to Apr 17/19.

Supplied by TMX Group Inc.

NEW 52-WEEK HIGHS AND LOWS — DATE JULY 6-10, 2015 11 New Highs Explor Res Galantas Gold Goldrush Res Grizzly Discvr I-Minerals Malbex Res Metalcorp Midasco Cap OM Group* Playfair Mng Quaterra Res

239 New Lows Abcourt Mines Aben Res Adriana Res Advance Gold Alamos Gold* Alamos Gold Alcoa* Alder Res Alderon Iron O Alexandria Mnl Alloycorp Alpha Nat Res* Altima Res Alto Vent Alum Cp China* AndeanGold Anfield Nickel Arch Coal* Argus Metals Aroway Mnls ASA (Bermuda)* Astur Gold Atlatsa Res* Augen Gold Aurcana Corp Avino Silver* Balmoral Res Bannerman Res Barisan Gold Barker Mnrls Baroyeca Go&Si Bayswater Uran Bear Creek Mng Berkwood Res BHP Billi-BBL* BHP Billi-BHP* Bison Gold Res Bitterroot Res Blue Sky Uran Bravada Gold Cabot Corp* Cameco Corp* Canada Rare Ea Canadn Zinc Canamex Res Candente Coppr Canterra Mnls Cavan Vent Centurion Mnls Champion Bear

Claim Post Res Colorado Res Commander Res Comstock Mng* Conquest Res Consol Energy* Copper Mtn Mng Copper North M Cornerstone Ca Coronado Res Corsa Coal Cypress Dev Decade Res Denison Mines Denison Mines* Dominion Diam* Duncan Park H Dynasty Met&Mn Eldorado Gold* Emgold Mng Energizer Res Energold Drill Energy Fuels Equitorial Exp Europn Uran Rs Excellon Res Exeter Res* Exeter Res Fairmont Res Falcon Gold Finlay Minrls Firestone Vent Flinders Res Focus Graphite Foran Mng Fortune Mnrls Full Metal Mnl Geologix Ex Gitennes Expl Glen Eagle Res Golden Band Golden Goliath Golden Queen Golden Tag Goldrea Res Great Panther Harmony Gold* Heatherdale Rs Highbank Res Huntington Exp Indigo Expl Inspiration Mg Intl Bethl Mng Intl Montoro R Intl Vestr Res Intrepid Pots* Ivernia Jaxon Mnls Katanga Mng Kilo Goldmines Kivalliq Enrgy Klondike Gold Kobex Mnls

Lara Expl Latin Am Mnls Lincoln Mng Lomiko Mtls MacDonald Mns Marengo Mng McEwen Mng* McEwen Mng Medallion Res Melior Res Metallis Res Midlands Minls Minco Gold* Mindoro Res Mines Managem* Mines Managmnt MPVC Mundoro Cap Natural Rs Pt* Network Expl Nevada Expl Nevada Sunrise New Millennium New Milln Iron Nippon Dragon Nitinat Mnls Noka Res Nordex North Am En P* North Am Pall North Am Tung Northern Abiti Northern Freeg Northern Lion NovaCopper NovaCopper* NV Gold Oracle Mng Orbit Garant D Orestone Mng Orex Minls Oroco Res Pac Booker Min Pac Booker Mn* Paladin Energy Pan Am Silver* Panoro Minls Philippine Mtl Phoenix Gold Pilot Gold Pinecrest Res Planet Mng Platinum Gp M* Platinum Gp Mt Potash C Sask* Prospctr C Res Purepoint U Quadro Res Rambler Mg&Mtl Red Tiger Mng Reunion Gold Rhino Res* Rio Tinto*

Rupert Res Russell Metals Salazar Res Santa Fe Metls Serengeti Res SG Spirit Gold SGX Res Sherritt Intl Silver Wheatn* Silvercorp Mt* SilverCrest M* SilverCrest Mn SinoCoking Cl* SnipGold Soc Quim&M Ch* Source Expl Sprott Res Stans Energy Starcore Int V Stellar Pac Vt Stillwater Mg* SunCoke Engy* Sunset Cove Mg Taipan Res Talon Metals Tanzania Mnls Taseko Mines* Taseko Mines Tawsho Mng Teck Res A Tembo Gold Terraco Gold Thompson Creek Thompson Crk* Timmins Gold* Timmins Gold TNR Gold Transition Mtl Trevali Mng TriMetals Mng Trio Gold Corp U3O8 Corp UEX Corp Ultra Lithium Ur-Energy* Uranium Res* Uranium Valley Vantex Res Vena Res Venerable Vent Victory Nickel VMS Vent Volcanic Mtls Wallbridge Mng West Af Iron O Westminster Rs Xmet Xtierra Yamana Gold* Yamana Gold Yanzhou Coal* Zadar Vent Zazu Metals

FOR DAILY MINING NEWS, VISIT WWW.NORTHERNMINER.COM

2015-07-16 1:49 PM

12 JULY 20-26, 2015 THE NORTHERN MINER

Abitibi Royalties inks three deals in 30 days

BY TRISH SAYWELL

Within a month of launching an online platform that junior mining companies and prospectors can use to pitch their properties to Abitibi Royalties (TSXV: RZZ; US-OTC: ATBYF), CEO Ian Ball says the company has received 41 submissions and signed three deals.

Under the scheme unveiled on June 9, Abitibi pays a company or prospector’s claim fees on their existing mineral properties, or provides money upfront that allows them to stake new ground, in exchange for a net smelter return royalty (NSR).

“Each of the three deals we’ve signed so far have the ingredients we’re looking for,” Ball says in an interview. “They’re near existing mine sites, have good geology and signs of mineralization.”

On July 8, Abitibi Royalties announced its third deal: a 2% NSR on Nordic Minerals’ 3.3 sq. km property, which sits 5 km southwest of Hudbay Minerals’ (TSX: HBM; NYSE: HBM) flagship 777 mine in the Flin Flon greenstone belt in Manitoba.

Agnico Eagle Mines and Yamana Gold’s Canadian Malartic gold mine in Quebec. The mine is Abitibi Royalties’ main royalty stream.

(The 777 mine produces zinc, copper, gold and silver, and production is expected to continue until 2020.)

In exchange for the NSR, Abitibi Royalties will pay Nordic’s annual [$5,000] claim fee on the property, due in 2016. There is also a threeyear option for Abitibi Royalties to

pay an amount equal to the annual maintenance fees to keep the property in good standing, in consideration for which the NSR will increase by 1% for each annual payment made on behalf of Nordic.

In addition, Abitibi Royalties has agreed to pay Nordic $5,000 in exchange for the right to receive 15%

of the total proceeds should the property be sold. The cash will be paid from Abitibi Royalties’ working capital.

The agreement with Nordic follows a deal Abitibi Royalties struck on July 6 with Ivars Azis, a businessman with a background in geotechnical engineering, to acquire a

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2% NSR on 2.8 sq. km of mineral claims, 3.5 km east of Metanor Resources’ (TSXV: MTO; US-OTC: MEAOF) Bachelor mine in Quebec, and 225 km northeast of Val-d’Or. The deal is similar to Abitibi Royalties’ arrangement with Nordic.

In June, Abitibi Royalties acquired a 2% NSR on Golden Valley Mines’ Smokehead prospect, 1 km southeast of the Canadian Malartic gold mine in Quebec.

Ball, who was promoted from company president to CEO on June 26, notes all three deals “are interesting in their own respects.”

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TNM July 20 2015 Issue.indd 12

On the property east of the Bachelor mine, for example, “there was various information in the technical reports about Metanor’s Bachelor mine stating that there were good targets to the east, so it looked to me like it was an interesting concept,” he says.

“We’re still reviewing a number of the 41 submissions we’ve had that look similar to these three,” Ball says, adding that the company is especially interested in Nevada, and Abitibi Royalties is speaking with a number of companies that either have claims in the state or hope to stake them. Ball also notes that claim fees are due in Nevada at the end of July — a deadline that is fast approaching.

So far, Ball considers the company’s new “royalty search” website a success. “It certainly has put us in contact with people we would never have spoken to before,” he says, “and it has raised the profile of the company in the royalty space.

Our objective was to see if we could acquire 20 to 30 of these in the next year, and so far we’ve moved toward that, so we’re pretty happy.

“As commodity prices continue their downturn, more and more claims will become available.”

2015-07-15 6:50 PM

THE NORTHERN MINER

13

JULY 20-26, 2015

PROFESSIONAL DIRECTORY srk consulting

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TNM July 20 2015 Issue.indd 13

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2015-07-15 6:50 PM

14

JULY 20-26, 2015

THE NORTHERN MINER

PROFESSIONAL DIRECTORY SURVEYORS & CORE SYSTEMS

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Val-d’Or (Quebec) Tel: (819)825-3702 Fax: (819)825-2863 E-mail: bureau@corriveaujl.com

Silver Wheaton circles the wagons against CRA offensive

Goldcorp’s Penasquito gold-silver mine in Zacatecas, Mexico. Silver Wheaton has an agreement to buy 25% of the mine’s silver.

SILVER WHEATON, From Page 1

income streams from its domestic contracts since its inception in 2004. Income generated outside of the country, however, was filtered through a subsidiary located in the Cayman Islands, which hasn’t been taxable under federal tax law.

“I want to reiterate that we remain confident in our business structure, which we believe is consistent with that typically used by Canadian companies, including streaming companies, that have international operations,” president and CEO Randy Smallwood added.

plicable taxes in compliance with the law,” he continued.

Smallwood noted that Silver Wheaton has invested over $1 billion in mining assets in Canada, while its subsidiaries have provided nearly $2 million in funding for Canadian mining companies’ assets overseas.

Though Silver Wheaton would face a substantial payment if the CRA wins during the reassessment, the real risk to the company could be what happens to more recent, and future, income. Silver Wheaton took in 35 million equivalent oz. silver last year from various streaming arrangements,

‘We’re very confident in our structure. It’s a structure that numerous Canadian companies employ, and we’re very comfortable with our position.’

— Randy Smallwood, president and CEO, Silver Wheaton “We understand that Canadian tax law generally imposes income tax on the income that a corporation earns in Canada, while nonCanadian income earned by foreign subsidiaries is not subject to Canadian income tax. Management believes the company has filed its tax returns and paid ap-

TNM July 20 2015 Issue.indd 14

which equated to operating cash flows of U$432 million, or $1.20 per share.

According to the company’s annual financial statements, nearly US$300 million of that cash flow originated from seven agreements on mines outside of Canada, namely: Primero Mining’s

Randy Smallwood, Silver Wheaton’s president and CEO. (TSX: P; NYSE: PPP) San Dimas; Glencore’s (LSE: GLEN) Yauliyacu; Goldcorp’s (TSX: G; NYSE: GG) Penasquito; Vale’s (NYSE: VALE) Salobo; and Barrick Gold’s (TSX: ABX; NYSE: ABX) Lagunas Norte, Pierina and Veladero.

Scotiabank analyst Trevor Turnbull said a “worst-case scenario” for Silver Wheaton would see taxes and penalties owing from 2005 to 2014 approach US$912 million.

The good news for the company is that these cases, rare as they may be, tend to take time.

For example, Cameco (TSX: CCO; NYSE: CCJ) has a transferpricing dispute with the CRA dating back to 2008, and has received notices of reassessment for the taxation years 2003 through 2009.

The uranium producer expects to go to trial for its 2003 reassessment in 2016, with a decision expected within 18 months after the trial concludes.

Cameco’s situation is different, however, since the company established a Swiss subsidiary to buy its own uranium, as well as uranium from “arm’s length” international sellers. The uranium was then sold to Cameco’s U.S. subsidiary for resale to buyers outside of Canada. For tax purposes, Cameco and its subsidiaries are deemed not to deal with one another. The CRA asserts the Swiss entity was a form of tax evasion.

If Silver Wheaton receives a reassessment notice from the CRA, it would file an objection within the required 90-day period provided under the Income Tax Act. In such a circumstance, the company would pay half of the reassessed amount of tax, interest and penalties. The cash, plus interest, would be refunded if Silver Wheaton succeeded.

“This doesn’t change our ap-

GOLDCORP

proach to near-term acquisitions,” Smallwood stressed when asked how the company’s business might be affected during the process.

“The streaming model works within Canada, where we are taxable. We have numerous significant streams in the country, so it works irrespective of how it’s treated and where it is located.

We’re very confident in our structure. It’s a structure that numerous Canadian companies employ, and we’re very comfortable with our position,” Smallwood said.

“Our calculations are based on a worst-case interpretation of the CRA proposal letter and are intended to demonstrate that Silver Wheaton shares are oversold already,” Scotiabank’s Turnball wrote on July 7. “We believe the company has a strong case to argue that transfer pricing provisions do not apply.”

Scotiabank has a “sector outperform” rating on Silver Wheaton, with a one-year price target of US$30-per-share. The company dropped 12.5%, or $2.78, after the CRA proposal, en route to a $19.43 close at press time. Silver Wheaton has 404 million shares outstanding for a $7.9-billion market capitalization, and reported US$88 million in cash-on-hand at the end of March.

2015-07-15 6:50 PM

THE NORTHERN MINER JULY 20-26, 2015 15

Capstone gets Santo Domingo EIA approval, mulls new plan

CAPSTONE MINING

Capstone Mining’s project team at its 70%-owned Santo Domingo copper-iron project in Chile’s Atacama region.

CAPSTONE, From Page 1

Magnetite iron was to be recovered from the rougher copper tailings using low-intensity magnetic separation. The magnetite concentrate would be thickened on-site and pumped via a concentrate pipeline to the port, where it would be washed, dewatered and stockpiled. The copper and magnetite concentrates would then be loaded onto ships for transportation to third-party smelters.

Analysts reacted differently to news of the revised feasibility study.

ket will begin assigning greater value to the project and the optionality on future magnetite production.”

At BMO Research, analyst Aleksandra Bukacheva notes that “while it is encouraging that Capstone is looking for opportunities to scale down construction at Santo Domingo, it is not immediately obvious to us that a phased approach would yield superior returns.

“Santo Domingo development capex was last estimated at US$1.7 billion, which would require sub-

Santo Domingo requires economies of scale. “ T h e proje c t ’s [rou g h ly] 60,000-tonne-per-day feasibility study mine plan generates 14% after-tax internal rate of return at current [US$2.50 per lb.] spot copper pricing,” he said in a client note.

“We anticipate the project’s updated [smaller] mine plan economics will also be sensitive to copper pricing.”

Ioannou said that depending on market conditions, “Capstone may look to defer Santo Domingo de-

velopment to pursue other opportunistic [corporate] growth initiatives.”

Capstone added Santo Domingo to its development pipeline by acquiring Far West Mining in 2011.

The project is 130 km north of Copiapo in Region III, 100 km from the Pacific coast and 50 km west of Codelco’s El Salvador copper mine.

Capstone has a strategic partnership with Korea Resources Corp., a state-owned resource acquisition company, which owns the remaining 30% of the project.

The mid-tier copper producer has three producing mines: Pinto Valley (copper) in Arizona, Cozamin (copper-silver) in Zacatecas state, Mexico, and Minto (copper) in Canada’s Yukon territory. It also owns 100% of the copper-zinc Kutcho project in B.C. At press time Capstone’s shares traded at $1.16 apiece, within a 52week range of $1.04 to $3.11.

CIBC’s Meyer has a 12- to 18month target price on the company of $3 per share. BMO’s Bukacheva has a $2.50 per share target price.

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CAPSTONE MINING

Core samples from Capstone Mining’s Santo Domingo project in Chile.

“Although one can point to capex savings by removing [US$310 million of] iron-related components, it is not clear what the reduction in scale of the overall plant will do to mill size, grinding configuration, copper flotation capacity, structural steel and concentrate requirements, etc.,” Tom Meyer of CIBC Capital Markets wrote in a client research note. “Furthermore, optimizing the mine plan for copperonly versus copper-and-iron previously adds to the complexity of the analysis. It will take approximately nine months to figure these things out.

“Directionally, Capstone is trying to make the project net present value-positive on copper only,” Meyer said. “We believe the mar-

TNM July 20 2015 Issue.indd 15

stantial amounts of external funding, as Capstone is forecast to generate US$100 million to 130 million per year of free cash flow in the next two years from its current operations.”

While the EIA is a milestone in de-risking the project, Bukacheva said, “multiple questions and concerns remain around the feasibility of funding and mine construction at Santo Domingo, given the current commodity price and market environment, as it relates to investor appetite for growth investment.”

Haywood Securities’ Stefan Ioannou said he conservatively pegs initial capital costs for a smaller mine plan at US$1.2 billion, and noted that as a lower-grade deposit,

2015-07-15 6:50 PM

16 JULY 20-26, 2015 THE NORTHERN MINER

BC government sets mandate for Mount Polley start-up

BY LESLEY STOKES

VANCOUVER — Imperial Metals (TSX: III; US-OTC: IPMLF) has been given the green light to temporarily resume operations at Mount Polley, 56 km northwest of Williams Lake, B.C., provided the company meets a number of conditions set by the B.C. Ministry of Energy and Mines and the Ministry of Environment.

The open-pit, copper-gold mine has been under care and maintenance since an unprecedented breach occurred along a section of the mine’s tailings dam facility last August.

“It’s a huge milestone for us — we’ve worked hard to get the permit for the restart,” Steve Robertson, vice-president of corporate affairs, tells The Northern Miner during an interview. “Now we can go forward with the confidence of the regulators and community, and move back into production.”

Under the new permit, Imperial can operate the mill at half capacity for one year and process up to 4 million tonnes of ore. The tailings facility will not be used during the operation, and any waste or water will be discharged into the existing Springer pit.

Robertson says the production decision “isn’t a big moneymaker for the company, it’s about bringing stability back into the lives of our workers, who depend on us for an income.”

But he adds that operating at half the rate gives the company enough time to go through the mandated permitting process, and plan for the mine’s longer-term restart.

Included in that process are short-term water management and monitoring plans that are due in the third quarter, around the same time natural water levels in the Springer Pit will reach permitted capacity.

“We have too much water on the mine site, and it needs to be discharged whether the mine restarts or not,” he says. “The bulk of the technical work has been completed for the short-term permit, and we’re examining this thoroughly to make sure we have the best option

Imperial Metals’ Mount Polley copper-gold project, which has been on care and maintenance since last August’s tailings spill at the site. possible to release that water to the environment.”

The production decision came as a disappointment to the Soda Creek and Williams Lake First Nation Bands, who stated in a recent press release that the B.C. government acted without their consent.

tinued failure to provide a shortterm water discharge plan,” Soda Creek Chief Donna Dixon stated.

“There was a commitment last year that a consent-based agreement was necessary to deal with the cleanup and potential reopening.”

But the Minister of Energy and Mines, Bill Bennett, says the deci-

‘We have too much water on the mine site, and it needs to be discharged whether the mine restarts or not.’

— Steve Robertson, vice-president of corporate affairs, Imperial Metals “Proper environmental due diligence has not been followed, and, even with the restrictions imposed, the decision fails to address serious and clear concerns raised by both First Nations … including the con-

sion was “rightly balanced.”

He tells TNM in a telephone interview that “while I understand the worry the First Nation groups are expressing, we did not break any term of a commitment

to them. We made sure the groups were fully aware of the progress the company was making on its application to reopen, and we are comfortable that the restricted operations do not place anyone, nor the environment, at any risk.

We are allowing this restricted permit so we can get 220 people back to work, and if Imperial cannot provide a short-term water management plan before the Springer pit reaches its acceptable maximum level, then they have to stop.”

Imperial is also required to submit a five-year reclamation and mine plan by the end of September, and follow up with a longer-term water discharge and treatment plan by next June. If the company fails to comply with the permitting schedule or the conditions noted by the two ministries, operations at the mine will be shut down.

Although Robertson says the

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TNM July 20 2015 Issue.indd 16

IMPERIAL METALS

company is “undecided” about using the tailings facility in the long term, he says that “we probably have the most thoroughly examined design and tailings facility in the world, and we’re well armed with enough information to provide a suitable solution to go forward.”

The company expects it will take a month to get the mine back into production under the new permit, and while in operation it plans to keep restoring Hazeltine creek, and add supporting structures along the tailing embankments.

The company has spent $67 million on remediation work since the dam failed last year, spilling 25 million cubic metres of mine waste and water into the surrounding environment.

An independent expert review panel that investigated the cause of the failure reported early this year that the breach occurred because of an original design flaw that didn’t take into account the strength and location of an underlying layer of clay, called the “upper glaciolacustrine unit.”

According to the report, this layer occurs discontinuously underneath the perimeter embankment, and was “situated at the worst possible place in the dam foundation,” reaching maximum thickness at the site of the failure.

It explains that many of the condemnation holes for the original design plan were too shallow, or the strength of the layer was misinterpreted. The report did not specify if a similar layer was found underneath the facility’s main embankment.

Investigators also found that “failure would have been avoided” if the slope along the perimeter dam was flattened as proposed in its original design, and speculated that emergency actions could have been more effective had there been less water backed up on the dam.

Imperial was building a supporting buttress when the breach occurred.

Investigations into the responsibility and liability of the breach are ongoing until September, but information could be kept back from the public if it gets held up in court.

2015-07-15 6:50 PM