Wednesday, 19 December 2012

Cadillac Ventures looks to take former tungsten mine to production, armed with experience

Cadillac Ventures (CVE:CDC) has recently turned its focus to the former Burnt Hill tungsten mine in New Brunswick – a property on which the company expects to restart development for little cost. 
Late in November, the Toronto-based company announced that it resumed exploration on the property, which covers more than 125 square kilometres and has NI 43-101 compliant tungsten, tin and molybdenum resources. 
The base metals explorer has generated buzz since the news, with its stock up more than 10 per cent in the last month.
Historical work on the mine dates back to the early part of last century, but new showings have since been discovered, in particular for tin, which will be tested in the new year. 
Cadillac’s CEO, Norman Brewster, has been himself involved with the mine since the 1970s, when he was hired as a consultant by then-owner – Canadian International Paper – to assess whether the mine could be put back into production economically. 
Based on a pilot plant test operation with some 14,000 tonnes, a feasibility study was done in the early 1980s, combined with a flow sheet and mill processing approach, but the price of strategic metal tungsten fell, says Brewster, after which the project became “uneconomic”. “As a result, it didn’t see the light again until 2000, when I bought it,” he adds. 
Tungsten is the second hardest substance with the highest melting point, and has several industrial and military applications. 
After some ownership changes, Cadillac Ventures now holds a 51 per cent interest in the Burnt Hill project, with Noront Resourcesholding the remainder. Brewster did some twinning of historical holes on the property, as well as some other diamond drilling to pull together the latest NI 43-101 resource estimate from 2009. 
“The proposed gravity plant at the site is a simplistic, inexpensive plant to build by comparison to other base metal projects,” Cadillac’s CEO asserts. “The intent is to re-take the project to feasibility study and put it into production with as little money as we can, and by replicating previous work as completely as we can.”
The phase 1 ground exploration program at the property will target the Tin Hill, Burnt Hill Brook Area, the Burnt Hill Mine Area, and the 2 1/2 Mile Brook Area, with two prospecting crews currently in the field. 
The company has said that the sampling program in each area has successfully located outcrop mineralization with quartz veining at each site. The mineralization found has been sampled, with more than 2,800 samples submitted to a lab for testing, with results to be released when available.
Cadillac has just raised $1.2 million under a recent financing to fund exploration, and plans to raise more funds next year. 
“The drilling program at Burnt Hill, of some 3,000 metres, will hopefully allow us to update the resources in the next few months,” says Brewster. 
Burnt Hill currently holds 461,000 tonnes of total NI 43-101 compliant underground and open pit resources in the indicated category, grading 0.489% tungsten and 0.01% tin. The inferred category holds a total of 590,000 tonnes, grading 0.535% tungsten and 0.013% tin.
Cadillac also stands to benefit from its nickel and copper Thierry project in northwestern Ontario, which consists of the past producing Thierry Mine and hosts two NI 43-101 compliant resources at the Thierry Mine and the K1-1 deposit. 
The idea at this property is to blend the two ores from K1-1 and Thierry, and process material together in a common plant, running the plant at around 15,000 tonnes per day. 
In September, the company released results from its summer drilling program on the K1-1 open pit deposit, located about three kilometres from the Thierry Mine. It said the campaign was a success as each hole found mineralization outside of the current NI 43-101 compliant Whittle Pit model. The results included notable intersections such as 225 feet at 0.48% copper and 0.11% nickel, as well as 160.2 feet at 0.51% copper and 0.1% nickel.
Based on a preliminary economic assessment, the Thierry project was estimated to produce a total of 5.25 million tonnes per year, comprised of 3.85 million tonnes from open pit, and 1.4 million tonnes from the underground operation.
The report showed a pre-tax net present value of $380 million using a six per cent discount rate and an internal rate of return, on a pre-tax basis, of 19 per cent, with a life-of-mine NSR revenue total of $3.7 billion.
Total estimated capital costs were seen at $843 million, or $11.93 per tonne, with a payback period of four years from the start of commercial production on pre-production capital.
“The project is far more complex and costly than Burnt Hill, and we would need to sign a strategic alliance agreement with a third party to further develop Thierry.”
In the meantime, the junior base metals explorer is planning to continue drilling on the K1-1 deposit, with the aim of creating “substantially more tonnage” on the open pit deposit. The company is working to update the resource at K1-1, and is targeting "further positive results" outside the current pit, with mineralization extending at depth.
Brewster says that an additional 5,000 to 7,000 metres needs to be drilled before the K1-1 resource is updated, with around 3,000 metres having been drilled so far. Baseline monitoring and environmental work is also continuing at Thierry, but a partnership is necessary to take the project to the next level. 
Discussions for a potential partnership agreement at Thierry are ongoing. The Thierry Mine, which remains open at depth and to the west, has 8.8 million tonnes in estimated measured and indicated resources and 14.9 million tonnes of inferred, using a cut-off NSR of C$41/tonne. The open pit K1-1 deposit holds 53.61 million tonnes in the inferred category, at an NSR cut-off of C$11/tonne.
Cadillac’s Brewster is an optimist when speaking of the market for Canadian juniors. “There is a dichotomy between commodity prices and prices of juniors. Stock prices are at all-time lows and commodities are at near all-time highs, but I expect this will get better.”
“We have created an environment where investors will hopefully be supportive of our stock. I have had a long history with the Burnt Hill property and I know what is required to put the mine back into production.”
Indeed, Brewster forecasts a supply cliff for tin in the world beginning sometime in 2015, which he says will also apply to some degree for tungsten given that China uses nearly all what it produces internally – boding well for the Burnt Hill asset in the future. 

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