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Gold/Mining/Energy : Commander Resources Ltd -- Ignore unavailable to you. Want to Upgrade?

To: jamesien who wrote (104)	10/17/2003 12:30:34 AM
From: VAUGHN	Read Replies (4) \| Respond to of 169

Hello jamesien Thank you for your input and as you say we probably should continue this discussion on at least the DML thread if necessary. I appreciate your knowledgeable perspective but as the drill targets on CMD's SVB claims appear to start well over 200 meters below ground I have considerable doubt that 3 meters of .5% Ni .4% Cu without considerable PGE credits (which in SVB are unlikely,) would make a mine at Sarrah Lake. Even if consistent 11% Ni was intersected which is very, very unlikely, building an underground mine to recover 3 meters of ore at 200-300 meters underground is in my opinion just as unlikely. To illustrate my point, Dundee research published a paper on CZZ today which has claims about 15 km south of Raglan somewhat closer than Knight does. CZZ appears to be intersecting significant mineralization and have reported a recent hole with an average of .5%Ni .4%Cu 1.4g/t PGE over 116m with higher grade portions within. At today's metals prices that intersection has a gross metals price of $80/t. Dundee estimates a reasonable break-even direct mining cost of $50/t in an open pit operation at that grade. CZZ's high grade Mesamax deposit was delineated in 2002 with an April 2003 resource estimate of 1.45 million tonnes (indicated) of 2.1%Ni 2.7%Cu and 4.2g/t combined PGE. That resource represents a gross in-situ rock value of US $350/tonne at today's metal prices. However, if CZZ had to sink a shaft 200 to 300 meters underground to recover that ore its cost of production would quickly move from an estimate of $50 break-even open pit to +$260/tonne which is what Miramar's costs are with (.225oz/tonne Au) existing infrastructure in a major community and obviously not factoring in the cost of sinking a new shaft, adits, hoists, ventilation, dewatering, etc. Lets say the initial 3 to 7 year cost per tonne recovery horizon of building a new underground operation worked out to roughly $340/tonne (conservatively) depending of course on a number of factors including tonnage moved. If CZZ had to pay for that even at their higher average Ni/Cu/PGE ore grades and ore depths, they would be barely projecting a profit... Unless Knight proved up huge tonnage in a much more consolidated ore body close to or at surface, it would be difficult to see how they could assure themselves of a profit. By the time capital mine development costs were paid off say 3 to 7 years down the road, miners would be travelling miles from the shaft to recover ore and with such a narrow break-even, and limited ore body size, the economics of such a scenario would be debatable. Lets face it, if 1 meter of 11%Ni 6%Cu and .9%Co with an in-situ value of US$1,000/tonne was sufficient to consider a mine 100 meters down, DML/Teck/NAI would have done a great deal more drilling on their high grade SVB intersection seven years ago and certainly Falco would be doing that now,... and they're not. Large underground operations are quickly becoming cost prohibitive in North America unless ore bodies are consolidated and/or promise long term in-situ ore values significantly greater than the cost of recovery which is rare. Small owner/operator type mines are feasible with their inherent efficiencies, but to go that deep they would still have to be mining ore grade material all the way down or they couldn't pay for or finance the up-front capital cost and of course infrastructure would still have to exist nearby such as a community, roads, power and a smelter to limit such costs. If Knight ultimately proves up a much deeper more consolidated ore body of say 2m tonnes, or more, then they may well have a potential winner, but so far, I do not see any evidence of that in their NR's. I trust you see my point? Vaughn