Optimism remains for investment in Northwest Territories

A driller at Kennady Diamonds' Kennady North diamond project in the Northwest Territories. Credit: Kennady DiamondsA driller at Kennady Diamonds' Kennady North diamond project in the Northwest Territories. Credit: Kennady Diamonds

VANCOUVER — The Northwest Territories, which has led Canada in diamond and tungsten production, became a single-commodity producer in late 2015 after North American Tungsten (CVE: NTC) closed its Cantung Mine, 300 km from Watson Lake, Yukon, due to plummeting tungsten prices.

Shortly thereafter, De Beers put on care and maintenance Snap Lake, Canada’s only underground diamond mine, 220 km northeast of Yellowknife, as its parent company Anglo American (US-OTC: NGLOY) said it would sell or shelve its unprofitable assets to curb costs.

Pamela Strand, director of Mineral Resources for the Government of the Northwest Territories, says that while companies worldwide face growing economic pressures, there’s still good momentum for some projects in the territory.

“We have a wealth of natural resources that can be developed,” she tells The Northern Miner during a phone interview. “We recognize that companies are under pressure, but we have a number of things within our power to move those projects forward.”

Strand notes that in early 2013, the federal government devolved its management of public land, water and resource to the territorial government, giving northerners more control over their economic and political destiny.

“Devolution is relatively new, and presents a huge opportunity for the territories,” she says. “Our economy is based largely on resource development, so with a transfer of those powers, future development decisions are made in the North by the people of the North … if you come here, you can meet with the people who are the decision makers, so it’s positive for everyone.”

These decisions include support for the fully permitted Sable kimberlite pipe at Dominion Diamond’s (TSX: DDC; NYSE: DDC) Ekati diamond mine, 300 km northeast of Yellowknife, which is scheduled for development later this year, she says.

The deposit, along with the nearby Jay kimberlite, could add 11 years of mine life with extended to 2033.

Rio Tinto (NYSE: RIO; LSE: RIO) and Dominion have also advanced development of their A-21 pipe at the Diavik diamond mine, 300 km northeast of Yellowknife, which will add proven and probable reserves of 3.7 million tonnes at 2.7 carats per tonne for 10 million carats.

“The Slave geological province is an old craton with deep mantle roots, and that has allowed for the preservation of diamonds,” Strand says, explaining why so many kimberlite pipes are found in Canada’s North.

“There are 300 known kimberlites here and there are still more to be found, and junior companies such as Kennady Diamonds provide proof of that.”

For the past three years, owner and operator Kennady Diamonds (TSXV: KDI; US-OTC: KDIAF) has outlined a unique, high-grade kimberlite pipe at its Kennady North project, located at the feet of the Gahcho Kué diamond mine, which is being developed by partners De Beers and Mountain Province Diamonds (TSX: MPV; NASDAQ: MDM), 280 km east of Yellowknife.

Kennady plans to recover a 500-tonne bulk sample from its flagship Kelvin pipe early this year, building on a previous 443-tonne bulk sample that returned 2.02 carats per tonne.

Although diamonds are often the focus for northern explorers, Strand says there are plenty of other mineral targets.

“On the Fraser Index, we rank fourth out of the 122 worldwide jurisdictions for geological potential, so this is where you can expect to find giant, world-class deposits,” she says, listing Seabridge Gold’s (TSX: SEA; NYSE: SA) Courageous Lake gold project and Selwyn Chihong’s Selwyn advanced  zinc-lead project as examples.

“If Selwyn came online right now it’d be the third-largest zinc producer in the world, and by the time it does, it’ll likely be the top producer,” she says, as resources diminish at the Red Dog mine, operated by Teck Resources (TSX: TCK.B; NYSE: TCK) in northwestern Alaska.

The proposed Selwyn mine, located in eastern Yukon and extending into the Northwest Territories, has open-pittable, indicated resources of 186 million tonnes grading 5.2% zinc and 1.8% lead for a metal content of 21.3 billion lb. zinc and 7.3 billion lb. lead.

Inferred resources add another 238 million tonnes grading 4.5% zinc and 1.4% lead, for a metal content of 23.5 billion lb. zinc and 7.2 billion lb. lead.

Strand says that Courageous Lake, 100 km southwest of Diavik, is the “13th largest unmined gold deposit in the world,” with proven and probable reserves of 91.1 million tonnes at 2.2 grams gold for a total of 6.46 million oz. gold, using US$1,244 per oz. gold.

Close to home, Strand says, is TerraX Minerals’ (TSXV: TXR) Yellowknife City Gold project located outside Yellowknife’s city limits — a lode gold property that targets the major extensions that host the historically mined 7.6 million oz. gold Giant and 5.5 million oz. gold Con deposits.

“TerraX has done an extremely technical and systematic approach to the greenstone belt,” she says. “The property has been locked up for decades, so it’s been exciting to see results.”

Other advanced projects primed for development include Fortune Minerals (TSX: FT) gold-cobalt-bismuth-copper NICO project, Avalon Rare Metals’ (TSX: AVL) rare earth Nechalacho project and Canadian Zinc’s (TSX: CZN) zinc-lead Prairie Creek project, which have all been placed on hold while the owners focus on southern-based projects.

“Avalon’s rare earth deposit is an important one because China controls the heavy rare earth production in the world, and we expect these metals to be in short demand globally, it’s just a matter of time,” she says.

Natural Resources Canada estimated that $93 million was spent in 2015 on exploration and deposit appraisals in the northern territory, down $8.7 million, or 9%, from 2014 expenses. The estimate places the region in seventh place out of the 12 Canadian jurisdictions surveyed.

The depressed metal markets have also impacted land acquisitions, with the amount of land covered by mineral tenure falling from 19.8% to the current 2% since 2005.

Strand says that to promote investment in the Northwest Territories, the territorial government has implemented a “Mining Incentive Scheme” that gives companies cash incentives to explore the region, along with offering explorers extra assessment credits.

“Any mineral rights holder can get 1.5 times their expenditures in exploration credit,” she says. “Manitoba has the same incentive right now, and the Yukon is looking at one in the coming year. It encourages early-stage exploration.”

The department is also executing regional-scale, multi-year projects to boost mineral exploration.

“World-class geoscience is also important, and our geological survey created an innovative, multi-year project over the Slave geological province to look regionally at the glacial history and permafrost conditions,” she says. “We’re hoping that will help us with the next wave of diamond and metal exploration, but also provide us with permafrost and geotechnical information towards decisions like infrastructure and climate change.”


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