Lynn Lake: the next revived nickel mine?

After spending seven months digitizing and analyzing a truckload of paper data, Seymour Exploration (SEZ-V) is testing the resulting targets on its Lynn Lake property in northern Manitoba.

Seymour drilled its first hole in mid-February and expects to wrap up the $1.2-million, 9-hole program within the next couple of months. The results will help determine if Lynn Lake has enough remaining nickel-copper potential to consider reopening the former mine.

Seymour acquired Lynn Lake last year from Glencairn Gold (GGG-T, GLE-X) when Glencairn was divesting itself of its non-gold assets. Wallbridge Mining (WM-T, WLBMF-O) had an option to earn a 50% interest in the property, but has since given up that right in exchange for half a million common shares of Seymour with warrants attached.

The acquisition gave Seymour access to historic data from more than 7,800 drill holes. The junior spent the bulk of last year entering the collar positions, surveys, assays, lithologies and other information for roughly half of those holes and scanned 395 drawings, sections and plans into a digital database to create three-dimensional geological models of the mine area.

Among the missing pieces are results from metallurgical testing completed by Sherritt-Gordon — now Sherritt International (S-T, SHERF-O) — the operator of the mine from 1953 to 1976. Sherritt reported mill recoveries from lower-grade zones to be 75-78% for nickel and 83-84% for copper and, from 1973-1976, concentrate grades of 8-9% nickel and 30% copper. The concentrates were then shipped to a plant and leached with ammonia to release nickel, copper and a small amount of cobalt.

Sherritt mined more than 20 million tonnes of ore at a grade of 1.02% nickel and 0.54% copper over the mine’s 23-year life. A poor nickel market eventually forced the mine to close and it has been 30 years since a drill has penetrated the ground there.

Although Seymour has identified 15 exploration targets, the company is currently focusing its initial efforts on the Echo zone, a 1,200-ft.-long zone with an average thickness of 66 ft. The zone was tested by 13 boreholes between the 740-ft. and the 3,180-ft. levels, but remains open at surface and depth. Historic intersections include up to 2.18% nickel and 1.06% copper over 14.7 ft.

“It’s a huge zone of mineralization that has never been drilled from surface,” says Richard Murphy, president and CEO of Seymour. “We recently did an EM survey over it and found a conductive anomaly coincident with the updip projection of Echo.”

Another priority target is the Golf deposit, where a historic fan of seven drill holes encountered consistent mineralization, including 54 ft. of 1.72% nickel and 0.62% copper and 75 ft. of 1.22% nickel and 0.52% copper.

As part of the program, Seymour will use borehole EM surveys to determine the shape, size and continuity of each of the target zones. The company estimates that about 50% of the host intrusion remains unexplored because historic holes were widely spaced and confined to developed levels of the mines.

“It is evident that many areas in the mine have not been adequately explored, and that a potential orebody can have been easily missed at the drill spacing executed during the mine’s operation,” says a technical report on the property prepared by Wardrop Engineering of Toronto.

The Lynn Lake deposits are typical magmatic deposits occurring within two adjacent mafic to ultramafic intrusive igneous plutons of the Lynn Lake greenstone belt. There are 10 separate orebodies within the near-vertical “A Plug” pluton. All of the orebodies have been affected to some degree by faulting that has thrusted the higher sections of mineralization to the east. Mineralization consists primarily of pyrrhotite, pentlandite and chalcopyrite.

Using a cutoff of 0.8% nickel equivalent, Seymour has identified a remaining resource of 6.4 million tons grading 0.85% nickel and 0.39% copper in the measured and indicated category. The company is now working on a scoping study to determine the economic potential of reopening the mine. This study will identify the approximate costs and establish the resource thresholds required to advance Lynn Lake to feasibility.

“We have rehabilitation costs in front us, but the capex would be far lower at Lynn Lake than for any new mine development,” Murphy says. He adds that operating costs per tonne also should be reasonable because the deposit appears to be amenable to bulk mining.

Though the mine has been stripped of most of its supporting infrastructure over the years (only a headframe, hoist building and warehouse remain), Seymour has also been relieved of any environmental liabilities related to historic operations at Lynn Lake by the Manitoba government.

Sherritt Gordon left behind several million tonnes of tailings covering more than 200 hectares. Though Seymour is off the hook, it remains unclear who is liable for the cleanup, since the mine property has had four separate owners since Sheridan ceased production in 1976, including Sherrgold, LynnGold Resources, DCC Equities Hayes Resources and Black Hawk Mining.

Though the mineralization at Lynn Lake is relatively low-grade compared to an average grade of 1.8-2% mined from magmatic nickel deposits in Canada (e.g. Sudbury and Thompson) over the past five years, the strong nickel market should improve the economics of the deposit considerably. Nickel is trading at US$6-US$7 per lb., up from about US$2 five years ago.

Once the phase-1 program is complete, Seymour will launch phase two, a 7-hole program with a projected footage of 5,580 metres. The targets in this phase are mostly smaller than those identified for the previous phase, but still have potential to contain undiscovered mineralization.

Seymour has raised about $2 million through non-brokered private placements of flow-through shares. The latest placement consisted of 2.1 million common units at a price of 25 per unit. Each unit consisted of one share and one warrant exercisable for one share at a price of 35 per share over two years.

The treasury will easily cover the first phase of the exploration program. Seymour will go back to the market for further financing once results become available.

— The author is a freelance writer specializing in mining issues, and principal of Toronto-based GeoPen Communications (www.geopen.com).