The Northern Miner, 7/11/2008

Duluth deluge: Franconia updates copper-nickel-PGM resource

Vancouver - On the heels of Duluth Metals' (DM-T) resource update for its Nokomis deposit in the Duluth Complex in northeastern Minnesota, Franconia Minerals (FRA-T) has announced the doubling of its own resource estimate for the Main zone at its nearby Birch Lake copper-nickel-PGM deposit about 11 km northeast of Babbitt.

In 2006 Franconia had calculated an inferred resource of 100 million tonnes grading 0.54% copper, 0.19% nickel, 0.01% cobalt, 0.65 gram palladium per tonne, 0.32 gram platinum per tonne and 0.14 gram gold per tonne.

But with 20,000 metres of new wide-diameter drilling, Franconia has updated this to 108 million indicated tonnes grading 0.53% copper, 0.16% nickel, 0.01% cobalt, 0.60 gram palladium, 0.28 gram platinum and 0.13 gram gold.

In addition to the indicated resource, Franconia also reports 87 million inferred tonnes grading 0.54% copper, 0.17% nickel, 0.01% cobalt, 0.48 gram palladium, 0.23 gram platinum and 0.11 gram gold.

Brian Gavin, Franconia's president, says the last two years of drilling had two objectives. Not only did Franconia want to expand the resource and bump it up into the indicated category but the company also wanted to collect enough material for bulk metallurgical testing, "something you only want to do once, given the costs, which run into the millions."

So far results from bench scale tests using 200 kg samples have all been very good, he says.

Now that the resource has been updated, Gavin says Franconia will complete a prefeasibility study over the summer that will consider a new scenario. In a 2006 study, Franconia had considered building two mines, one at Birch Lake and another about 5 km away at their Maturi deposit, as well as a hydrometallurgical facility for processing.

But the new scoping study will focus on developing a mine at Birch Lake alone and consider the trade-offs of building a hydromet facility versus not building one at all and instead selling a concentrate directly to market. This is a scenario, Gavin notes, that PolyMet Mining (POM-T) plans to use in their advanced stage copper-nickel-PGM project also in Minnesota's Duluth Complex.

The advantage of selling the concentrate, he says, is not only avoiding the capital costs associated with construction of a hydromet plant, but that it takes advantage of today's good metal prices. He adds that, in this scenario, Franconia might later build the hydromet facility with funds generated by selling concentrate.

Franconia will consider dropping plans for a mine at Maturi in large part because it would simplify the permitting process. Much of the Maturi deposit is on federal land and "anytime the feds are involved," Gavin says, "the process seems to slow down." Birch Lake, on the other hand, generally falls on land with private surface rights and state mineral rights.

He calls these circumstances "a blessing" as he expects, if a prefeasibility study came back positive and Franconia decided to further develop the project, permitting would be easier.

He also says Franconia is fortunate to be following in the footsteps of PolyMet – which will likely become the first large copper-nickel mine in Minnesota. With PolyMet and state regulators both going through the permitting process for the first time, many of the bugs have been worked out for Franconia, he says.

Assuming the results of the scoping study are positive, Franconia would look to complete bulk metallurgical tests and a feasibility study in 2009. "If we had a positive feasibility study, we'd like to get to production as quickly as possible," Gavin says.

For the moment he still has his eyes on PolyMet and is waiting for the company to file its environmental assessment. All indications are, he says, that PolyMet is on track. Not only will the filing be a big step for PolyMet, but it will help forge a path Franconia may soon find itself following.