From Stockhouse..
A Vanguard Review
September, 2000 by the Publisher of The Hard Rock Analyst " Mines are made… "
OVERVIEW
Major General is an exploration company run by a group of highly respected professionals that
has consistently brought projects of merit to the market. Many juniors have had to undergo huge
dilution to finance new exploration in the past couple of years. Major General refilled its treasury
by selling projects to majors, a rarer occurrence than many people imagine and a sign of the
quality of its projects. The company is now embarking on what may prove to be one of its most
important drilling programs ever.
The South Voisey's Bay area was one of the few speculative exploration plays of the past four
years to excite the market. It has the potential to be the important third deposit that could justify
the development of a nickel smelter on the coast of Newfoundland. Past work has located
high-grade mineralization within the project, but not yet discovered a deposit. While its partners
moved focus elsewhere, MGJ has developed its exploration model and is about to begin testing
one of the strongest targets that the project has produced. And, by proceeding on its own with
this year's work Major General will regain its control position in this area of the project.
Major General has a number of other active projects, including a northern diamond project being
funded by Dia Met Minerals, Hawkeye Gold International and De Beers, that offer back up to the
South Voisey's Bay speculation. At current prices the company has little downside, and the
potential for a big upwards move on drilling success.
Corporate Summary
Major General was listed in early 1990 and soon afterwards purchased all the Canadian
exploration projects of a European Copper producer, including huge databases of grass roots
exploration data. It worked on these for several years before branching out to acquire it's own
projects.
This large property base did work to the company's advantage as it contained projects such as
the Despinassy Gold property now a Cameco Gold - MGJ joint venture. The Rendell-Jackman
project in Newfoundland, MGJ's original property was the focus of work for several years, which
lead to the discovery of the Hammerdown gold deposit. In 1999 the company negotiated the sale
of this deposit and the immediate surrounding mining lease for $4 million dollars, $3.4 paid on
execution and an additional $600,00 to come from royalties. This sale is funding this year's work
programs, and leaves plenty to spare to carry on further work well into 2001. Joint venture
partners will fund most of the more expensive programs. MGJ retains the property surrounding
the Hammerdown lease, now royalty free, and plans to undertake more work there on its own.
A quick look at the chart on page one gives a good indication of the reason for the timing of this
piece. This is a one-year chart but a three or five year ones show a similar pattern. Major
General has always been able to attract analyst attention due to the quality of the projects it
assembles. During periods when there are results on the way from the projects, the stock tends
to trade well and, importantly, trade a lot more. Volume has been increasing now for the past
week or two and we expect this trend to continue as the drilling starts at Sarah Lake. One
important point to note is that the Voisey's Bay play created a lot of good trading opportunities.
Although that play has not produced another major find yet, a lot of investors did well following it
and this will be to MGJ's benefit. It should be easy for the company to attract attention and
speculative buying for a drill program in this area.
Project Summary
Major General holds a variety of Canadian exploration projects that cover the gamut from
holdings in the northern diamond play to one of Quebec's gold belts and base metal plays in
Newfoundland. The diamond project on Victoria Island has a strong potential to generate a find
over the next six to 12 months. MGJ has the largest ground position in the play and two strong
partners paying the bills. The market will however wait for results here before responding.
It is the nickel project in Labrador that is most likely to move the company's market near term.
The project is well known and the recent move by INCO Ltd. to acquire that portion of the
Voisey's Bay project it did not already own is likely to put that much more attention on it. Though
Voisey's Bay is one of the most important nickel finds in several decades, it has been stalled by
a dispute between INCO and the Newfoundland government over the government's insistence
that nickel metal be produced in the province. INCO wants to concentrate the ore on site and
ship this to one of its existing smelters for finishing. At a practical level, building a smelter on the
Newfoundland coast requires another deposit be discovered in the region. A new deposit could
be combined with Voisey's Bay, and possibly with Falconbridge Ltd.'s Raglan Mine on the Arctic
coast, to provide sufficient feed to justify the capital costs of building a new smelter. This added
incentive will make the Sarah Lake drill program heavily watched, and make Major General an
obvious take-over target if its exploration is successful.
South Voisey's Bay
The South Voisey's Bay project covers a gabbro intrusive of the Nain Plutonic Suite, one of a
series of similar rock formations in Labrador that includes the Reid Brook Intrusive in which the
Voisey's Bay nickel deposit formed. These rocks formed when magma (molten rock) slowly
cooled and crystallised at depth below the earth's surface. Because the magma cooled slowly
the heavier (more dense) material settled towards the outer edges and base of the mass. The
deposits are created when metals that settled to the base combine with sulphur to form masses
of sulphide minerals that include the common pyrite group plus nickel and copper sulphides. At
the original Voisey's Bay find, the famous "ovoid", appears to be part of a block that was tilted
over by faulting and brought to surface. The balance of INCO's resource there is in a layer at
depth, near the base of the intrusive.
In 1996 the various land holders at South Voisey's Bay pooled their interests and farmed
interests into a Joint Venture between Donner Minerals Ltd and Teck Corp. which acted as
operator. This allowed the other companies, including Major General, to trade the up front risk
for a strong database of information that was gathered in a coherent fashion, in return for
reduced property interests. The primary tools for targeting drilling at South Voisey's Bay were
geophysical surveys, including the gravity survey on which this year's Sarah Lake work is based.
The best assay results from this drilling were from testing of the ground adjacent to Sarah Lake.
Drill hole 97-67 contained three narrow (10-60cm) sections of sulfides with up to 1.93% nickel
(Ni), 1.64% copper (Cu), and 0.26% cobalt (Co). Hole 97-75 intersected 1.1 meters of 11.75%
nickel, 9.70% copper and 0.42% cobalt. This section of 97-75 is nearly pure economic (verses
iron) sulphide mineral. In addition to these high-grade results, a number of other drill holes cut
lower grade material in the same location at the base of the intrusion, but no deposit of economic
dimensions was located. This drilling also provided important geological information that is being
used in the Sarah Lake program.
Although there was considerable room for continued testing of the JV ground, the work was
suspended after the 1998 program due to a dispute with the local native groups. This is part and
parcel of agitation related to the Voisey's Bay development at the same time. The program's
potential didn't change, merely the ability to work the ground. Major General has now concluded
agreements with these groups that allows it to operate unimpeded on its own projects, and has
chosen to continue on its own with the Sarah Lake program after Donner declined to participate
this year.
Sarah Lake
Major General staked the 38 square km Sarah Lake property during the aftermath of the
Voisey's Bay find when the search for new deposits broadened from the Reid Brook intrusive to
other unexplored formations of the same type. The project is therefore free of royalties. During
the farm-out to the Donner-Teck joint venture MGJ allowed its interest in the project to go to
40%. Since Donner (and by default Teck) is not contributing to this year's program costs, Major
General has the opportunity to regain a majority interest in Sarah Lake. MGJ has recently staked
ground adjacent to the original Sarah Lake property that holds the extension of the gravity
anomaly being tested, and acquired 50% of a third strategic ground package to the north of this.
Major General will therefore have the commanding position of 300 claims or 70 square
kilometres from any find during this year's work.
The work in 1997-98 was focused on the area around the high-grade intersections (the
"Teck-Donner" discovery on the geology map shown above) and along a trend to the southeast
from it.
The gravity survey over the more prospective areas of the JV had indicated the thickness of the
gabbro host, and located possible depressions at its base. It does this by indicating changes in
the density of the rock. Because the gabbro is denser than its host rock, the survey mapped out
the contact between the two rock types. This information is combined with sampling of the
surface to detect changes in its chemistry that indicate nickel could have been drawn out of the
mass to settle to the base of the intrusion. Locating depressions is useful because heavier
elements sinking through molten rock will tend to collect in low areas. Another important
consideration is that a source of sulphur must be present so that the metals combine with it to
form sulphide minerals.
While it is possible to develop nickel deposits with other mineral forms these are uneconomic
because of the cost of breaking them down to pure metal is prohibitively expensive. The past
work at South Voisey's Bay has now demonstrated that all of these needed deposit-forming
conditions exist. The early phase risks were the reasons MGJ choose to JV the project. It is now
moving forward on its own with this risk behind it. It is in a much stronger position to gain from
this year's work than had been the case previously.
The target of this year's work is very specific; combining the gravity survey's results with
geological information from the drill testing. From the drill results MGJ has interpreted the
presence of a vent located between the Sarah Lake target and the discovery area to the
southwest. The gravity results show a strong density high relative to the surrounding rock at the
target location, which could be indicative of a mass of heavy sulphide minerals within the
surrounding gabbro. (See the cross section on the previous page, which shows the relative
positions of the 1997 drilling, the interpreted vent and the gravity high that is the current target.)
The combination of proximity to a vent area and a large relative high anomaly makes this a
strong target. And the size of the target allows for a potential 100s of millions of tonnes of
nickel-copper mineralization. A single strong drill result from this target would completely revalue
MGJ.
Other Projects
Major General has a second, earlier phase nickel project in Labrador. Though exploration has
just begun on the Satellite project, a smaller intrusive to the west of the South Voisey's Bay
project, it has all the earmarks of an intrusive with a high potential for discovery of a nickel
deposit. Work will progress on it in conjunction with the drilling at Sarah Lake, and would likely
bring it to a targeting stage this year.
The Victoria Island diamond projects in the Arctic are in our opinion the company's second
most important project base. Major General has interests in over 1.4 million acres and is being
carried by two different partners on different areas of the play. Strong indicator mineral
anomalies on this island has lead to the discovery of a number of diamondiferous kimberlite
pipes, but has not yet located an economic deposit. The work seasons in this far northern
location are short and the market is not therefore likely to anticipate success here since it can be
a long wait between releases. Its partner Dia Met undertook a large till sampling program last
winter, which returned several strong indicator counts. Those results are now being followed up
and may lead to a winter drill program this year. As the Winspear takeover has demonstrated,
there is real appetite for Canada's northern diamonds and even a small interest in an economic
looking diamond deposit would easily mean a 10-fold increase in Major General's capitalization.
The Despinassy gold project in Quebec's rich Val d'Or gold district will see further drill testing
by joint venture partner Cameco Gold Inc. later this year, Cameco has earned 70% joint venture
interest on this property. Past drilling by Cameco has located some ore quality results including
11 g/t gold over 3.1 metres. If Cameco's work finds a "sweet spot" in this high-grade system, the
project is well placed for development in Quebec's largest gold producing region. Cameco plans
another 8-10 drill holes this fall.
Major General also holds a series of base metal projects in eastern Canada that are at varied
stages of exploration, and ground near the Hammerdown gold deposit it sold earlier this year.
Work outside of the mining lease area in past years uncovered several areas of high-grade
mineralization and there are several kilometres of prospective rocks that have seen little
exploration. Also in Newfoundland are the Green Bay properties, a large holding that covers
most of a volcanic belt with similarities to the nearby rich Buchans base metal mining camp.
Major General has optioned this project to Hudson Bay Exploration & Development Co. Ltd.
which is beginning early stage work there. |
