On Friday 5th May, the market suddenly woke up to the fact that Landore Resources has a tidy bit of nickel stashed away at its Junior Lake property in Ontario.
During a week which saw the start of the bidding war between Norilsk and Xstrata for LionOre, which saw AIM-listed nickel laterite producers and explorers rise to astonishing heights, and which saw nickel go through the $50,000 per tonne mark without stopping, Landore?s AGM had passed by virtually without comment.
Yet it?s a fact that this nickel exploration junior ? run by Brancote stalwarts Bill Humphries and Richard Prickett - has established an NI 43-101 compliant resource at the VW Zone at Junior Lake worth $730 million in-situ at today?s prices. At the adjacent B47 Zone, exploration has defined resource potential worth a further $500 ? 700 million at today?s prices. That?s at least $1.2 billion in current defined and potential in-situ resources ? versus a market cap of only £18 million.
What?s more, Junior Lake is a sulphide deposit. Flavour of the month right now are the nickel laterite producers, who strip their surface-lying ore and ship it to smelters and processors elsewhere, at a fraction of the LME price for the contained nickel. It?s a cheap ? though lucrative - operation to run, but the ore is expensive to process, and in the case of the lower-grade limonite ore, complex hydrometallurgical treatment is required, which has caused big headaches and long delays for the new large scale operations such as BHP Billiton?s Ravensthorpe and CVRD?s Goro project.
Sulphide ores, on the other hand, are cheap to process and the technology is well developed and well understood. The problem with sulphides is that very few such deposits are now being found and developed, and most involve underground mining with its attendant expense. Junior Lake, however, is open-pittable, so Landore have everything going for them: cheap mining and cheap processing. Metallurgical work so far carried out indicates good Ni recovery of 80-82% and copper at 90% from the VW ores, although the B47 zone is less straightforward and further work may be required to float off the copper to a separate concentrate.
The Junior Lake properties, comprising a total area of 5,493ha owned outright by Landore, are situated about 235 kilometres north-northeast of Thunder Bay, and lie within the Caribou-O-Sullivan Greenstone Belt. At least 10 occurrences of Ni-Cu-PGE mineralisation are known to exist on the site and the adjacent Lamaune Lake property. Last summer?s diamond drilling campaign produced good results from the two most advanced deposits, and ? as well as providing the basis for the NI 43-101 - have increased the likelihood of open-pit mining at both the VW Zone nickel deposit and the adjacent B4-7 nickel-copper deposit.
The VW Zone Ni Resource, discovered only in November 2005, sits at the southeastern end of the Junior Lake licence and has been drilled at 50m spacing over an area just 300m x 200m, to an average depth of around 250m. Scott Wilson RPA, who produced the resource statement, recommend more drilling is undertaken to expand the resource to depth, particularly on the northern portion, where drilling has been shallower. Landore will also drill further along strike this year and plan to double the resource estimate from its current level of 14,300 tonnes of Ni and 2,100 tonnes of Cu.
Three kilometres to the west of the VW Zone lies the B4-7 Ni-Cu deposit, which has been drilled over half-a-kilometre of strike length to an average depth of approximately 250m. An independent statement was prepared last March by Scott Wilson RPA, which estimated potential for 9,000 - 14,000 tonnes of Ni and 6,000 ? 9,600 tonnes Cu. Further drilling to be carried out this coming season is designed to complete the upgrade of this potential to full resource status.
The 2007 drilling season, as well as progressing the resources at VW and B47, will also use 3,000m of diamond drilling to explore further mineralized targets such as Carrot Top in the Lamaune Lake property adjacent to Junior Lake, where grab samples have revealed 1.6% Cu, 1.1% Ni and 0.9 g/t Pt and Pd.
Whilst Junior Lake is the focus of Landore?s activities right now, with the accent on metallurgy, scoping/pre-feasibility studies and fast tracking to production whilst nickel prices remain so buoyant, Landore owns a large portfolio in Canada, from which it has prioritised those projects which have the best potential.
The first of these is West Graham, where Landore?s acreage is located to the south of First Nickel?s Lockerby Mine in the nickel-prolific Sudbury region. An historic resource defined by Conwest in 1970 came up with 4.3 million tons at 0.52 % Ni and 0.33% Cu, located relatively close to the surface. West Graham has now been optioned to First Nickel, for whom it provides an excellent fit, whereby they can earn 70% of the property by spending $6 million over 4 years. Drilling results over the last two seasons have led them to believe that the deposit could extend to as much as 400m depth. In addition, untested potential exists to the east of the known mineral occurrences.
At the Lessard property, located in Quebec, 107km north of the mining and logging town of Chibougamau, Landore owns 91 contiguous claims over 1,456ha. Lessard is a VMS (volcanogenic massive sulphide) deposit, with low lead content and potentially a zinc rich margin and a copper rich core. Exploration work has been undertaken sporadically since 1958, and in 1975, Selco Mining produced a non-compliant resource of 1.46mt at 1.73%Cu, 2.96%Zn and 1.1oz/t Ag. Last year, Landore completed a survey over the area using VTEM, a unique electromagnetic technique which can detect anomalies up to 400m beneath the surface. This highlighted several additional targets, and a 7 hole drilling campaign totalling 1,731m ? designed mainly to verify historic drilling results - encountered significant mineralisation including 0.5m of sphalerite running at 48% Zn. Plans for 2007 include exploration and infill drilling totaling 8,000 metres, the recovery of core for metallurgical testing and production of an NI 43-101 compliant resource estimate.
So what of the future? Whilst most analysts still maintain a ?long-term? nickel price in the region of $6 per lb, it seems unlikely that supply will meet demand for the rest of this decade. And when it does, there are several in-built price controls which may swing into action to reverse the supply-demand equation again. For instance, low grade stainless steel is now being made in China from nickel pig-iron, smelted from imported high-Fe/low-Ni grade ores. But the economics of making nickel pig-iron are highly price sensitive, and if there is downward pressure on the price, the smelters will just stop doing it. Similarly, whilst there are projects that could be coming on stream in the early part of the next decade, some of these are being deliberately deferred to avoid the possibility of over-supply and maintain a high nickel price. Whilst yet again, although China?s demand may ease in a few years time, what of the other developing countries who are not as advanced as China, but will soon be following a similar path? Barring the ever-present possibility of a technological fix which can find a substitute for nickel, a return to $6 per lb seems unlikely in the foreseeable future.
Landore?s potential mine at Junior Lake would seem, therefore, to have few economic obstacles in its way. Next season?s work is already well financed by the recent injection of £2.1 million by Consolidated Press Group, a non-brokered deal concluded at a small premium to the prevailing price with Packer family interests who have long been supporters of Landore?s management team. ?It took us less than a week to secure the finance?, said Richard Prickett, ?and we are now well funded through 2007.?
So, provided that the outcomes of feasibility studies and metallurgical testing continue positive, Junior Lake could be producing saleable nickel concentrate well before the end of the decade. That is, of course, as long as no-one comes along in the meantime with ? to quote Bill Humphries ? ?a cheque of an acceptable size?!