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Starfield Resources Inc.
(SRU-CDNX, SRFDF-OTCBB)
A newly discovered high-grade platinum group metal zone may be the clincher that turns Starfield’s Ferguson Lake project into a winner.
The company has spent the past two years systematically extending the size of a nickel-copper-cobalt-PGM deposit that was discovered half a century ago. Even as the base metal deposit was coming close to being a major-company-sized deposit, Starfield’s geologists found a parallel zone that produced some exceptionally high PGM values.
The Ferguson Lake deposit was a originally discovered in 1950 by Inco, the world's largest nickel producer. Over the following five years, Inco carried out an extensive exploration program that resulted in the delineation of a 6.4 million tonne deposit.
Inco’s attention was then diverted by the discovery of the Thompson district, 700 kilometers to the south in Manitoba. That district has been an important part of Inco’s production for the past four decades.
The Ferguson Lake area was staked by a prospecting syndicate in 1997, which then vended the project to Starfield in 1999. Starfield carried out a geophysical survey which indicated that the area drilled by Inco represented only a small portion of the potential mineralized zone.
The company proved the validity of its geophysical model with 15 drill holes in 2000. Having demonstrated the presence of a much larger mineralized zone than previously believed, the company raised enough money to carry out an extensive drilling program this year.
A preliminary calculation completed on the basis of the drill results through July defined an indicated resource of 51.7 million tonnes grading 0.92% copper, 0.58% nickel, 0.1% cobalt and 1.44 grams per tonne palladium and platinum. By comparison, Inco’s Thompson district has total proven and probable reserves of 42 million tonnes grading 2.26% nickel and 0.14% copper.
The presence of the cobalt and the platinum group metals in Starfield’s deposit produces a contained metal value almost as high as the major company’s deposit. However, the Starfield deposit, being somewhat more remote, needs some combination of higher grade and/or larger tonnage to justify the development of a new mine.
First, it is important to point out that the Ferguson Lake deposit is not nearly as remote as it is sometimes reputed to be. The deposit is located just 250 miles north of the Manitoba border. Access is currently by air from either of two nearby communities, both of which have regular scheduled airline service. A plan by the federal government to extend a road from northern Manitoba to those communities (Baker Lake and Rankin Inlet) would bring an all weather road right past the Ferguson Lake deposit.
Early in my career, while working for mining giant Cominco, I worked on the feasibility study for a base metal project known as Polaris. There was a great deal of skepticism that a project located only 70 kilometers from the magnetic north pole could ever be developed. That project was indeed developed, and generated a substantial portion of Cominco’s income over the 20 year life of the mine. Polaris is much more remote than Ferguson Lake.
The driving force behind the Polaris project was an innovative mining engineer named Hank Geigrich, who is now a director of Starfield. After developing Polaris, Hank went on to become the vice-president in charge of all of Cominco’s northern operations, and then president of subsidiary Cominco American Inc. In that position, he directed the development of the Red Dog mine in northern Alaska, which is now the world's largest zinc mine. (Red Dog is further north than Ferguson Lake.)
Hank’s involvement as a director of Starfield brings an enormous amount of mining talent as well as an important stamp of approval for the Ferguson Lake project. Hank is part of a well qualified management team, with considerable strength in finance and exploration.
Building the additional tons in the Ferguson Lake deposit to carry the project over the major company threshold should not be difficult. Drilling has so far tested only 1,500 meters of a zone that has been defined by geophysics for more than four kilometers and remains open beyond that. In fact, some of the highest grades have come from near the limit of the deposit as currently defined.
Drilling has demonstrated that geophysics is a reliable tool in this setting. Further drilling is intended to continue to extend the deposit along the well-defined geophysical trend.
Starfield geologists received a pleasant surprise in October when assays from a zone 15 meters above the base metals zone returned 130 grams per tonne of palladium plus platinum (4.1 ounces per ton!) over 0.35 meters. For comparison, most of the world's platinum comes from the Bushveld Complex in South Africa, where the mines average about 5 grams per tonne averaged over a typical 1.2 meter mining width.
The exceptionally high grades encountered at Ferguson Lake are hosted in a very subtle zone with no visible evidence of the presence of metals. Once the assays arrived, the geologists began a systematic review of the drill core from other holes.
A zone believed to be the same zone has been identified so far in several other holes. The core from those holes is now being split and sent for assay. Over the winter, the company intends to re-examine all of the core available on the project. That is a huge task, as there is about 40,000 meters of core from the project. The objective is to trace the zone already discovered, and also to look for other prospective zones. If the high-grade PGM zone can be confirmed in other holes, it would add considerable value to the project.
Starfield’s share price fell considerably from the C$0.83 high of last January. As the palladium price fell earlier this year, a lot of Starfield shares were sold by investors that were originally attracted by the palladium potential of the Ferguson Lake project. The price spiked on news of the high-grade PGM horizon, but softened when the next hole hit a value of “only” 11.3 grams per tonne in the PGM horizon. The base metal values in that hole demonstrate that the grades continue to increase at depth.
At the current share price, Starfield looks very attractive. It is only a matter of time until the base metal deposit is extended enough to make it irresistible to a major mining company. In the short term, further high-grade PGM values from the newly discovered zone could have a big impact on the share price.
It is worth getting a stake in this company in anticipation of further assay results, which will continue to flow throughout the winter. The price might dip slightly if the next set of assays fall short of market expectations. Treat a dip as a buying opportunity to build a longer term position.
Price November 2: C$0.48
Shares outstanding: 34.8 million
Fully diluted: 38.5 million
Market Cap: C$16.7 million
Contact: Glen Indra, president, 604-608-0400 |
