A Sudbury exploration outfit has taken a great leap forward toward establishing itself as the city’s next nickel miner.
SPC Nickel has struck a "cooperation agreement" with mining giant Vale to consolidate ownership of two adjacent nickel and copper deposits —SPC’s undeveloped West Graham and Vale’s Crean Hill 3 — into an advanced exploration project.
The junior miner is calling the deal a "transformational growth opportunity" for a one-time private company that went public two years ago with the objective of becoming the next nickel mining player in the Sudbury camp.
The properties are situated 20 kilometres west of the city, between the Totten and Creighton mines at the southeast corner of the Sudbury basin. Two former mines, Lockerby and Crean Hill, are nearby.
The deal gives Vale an avenue to shed a valuable, but non-core, asset in Crean Hill 3 while giving a junior miner a shot at bringing the ground into production.
Vale will realize some benefits down the road through a one per cent net smelter return and 37 per cent net profits royalty on any future profits generated by a potential mine on a quarterly basis. Vale also has the first right of refusal on ore feed into its Clarabelle mill.
"We tried to structure a deal that was win-win for both," said SPC's CEO Grant Mourre, a geologist who’s worked for both Vale and Glencore.
According to the terms of the agreement, for SPC Nickel to gain full ownership of Crean Hill 3’s mineral and surface rights, it must release a feasibility study within three and a half years: June 30, 2026.
There’s an option by SPC to extend the deadline for an additional two years. When at that deadline, SPC will pay Vale $1 million cash.
A feasibility study is a final, detailed economic study assessing whether a deposit can be mined profitably.
"Really, we have five and a half years, which is more than enough (time) to get that work done," said Mourre.
Crean Hill 3 is not to be confused with Magna Mining — another Sudbury mining upstart — and its plans to put the nearby Crean Hill Mine back into production. That project is two kilometres to the west.
The West Graham deposit has nickel grades that were promising enough to support a mine. With Crean Hill 3 in the fold, Mourre is confident the combined resource base could easily double.
SPC believes the two West Graham-Crean Hill 3 deposits are part of one larger system. They’re planning a drill-heavy campaign this year with the goal of putting out a combined mineral resource estimate of the two properties by year’s end.
“We have a pretty good idea what's there," said Mourre.
Vale provided them a peek into the property’s database, which included assay results from the last time Crean Hill was drilled by INCO between 1958 and 1960.
"We think the grade will be fairly consistent across the property, and we think there's an equal amount or double the resource on the Creen Hill side."
West Graham has already a 10-million-tonne nickel resource — proved up by First Nickel in 2009 — “so the possibly of a 20- to 30-million-tonne resource is not out of the question.”
Mourre’s team also had noticed the grades of mineralization at their West Graham deposit seemed to improve closer to the Creen Hill 3 property line. But to get a better handle on the larger mineral resource, the boundary line had to be erased and the ground combined into one project.
He said mineralization from West Graham comes within 40 metres of surface. At Creen Hill 3, it outcrops at surface. "You can stand on it."
Removing the property boundary provides SPC with many options, including carving out a starter pit in the higher grade mineralized areas, with expansion from there.
West Graham is part of SPC’s Lockerby East Project, which includes two former Falconbridge mines. It’s an unmined area of the property with a 10.55-million-tonne nickel and copper resource, with an indicated grade of 0.45 per cent nickel and 0.31 per cent copper.
SPC had been drilling at West Graham last year to validate the 2009 resource estimate. Now they’re preparing to move the drill rigs next door.
In preparing for the year ahead, Mourre said they’re working on the details of an infill drilling program at Crean Hill 3 in the order of 20,000 to 30,000 metres with the goal of publishing a new nickel and copper resource by year’s end.
The infill drilling, meaning drilling with tighter spacing between drill holes, would allow them to better delineate the resource. The spacing by INCO more than 60 years ago was pretty wide, 100 to 150 metres apart.
Though Crean Hill 3 is a nickel-copper system, Mourre said there’s potential to find platinum group metals in the footwalls, just like at Magna's nearby Crean Hill project.
On the exploration financing side, with an estimated $2.5 million to $3 million in the bank, Mourre said they’ll likely be looking to raise money at some point.
A funding source could be Dundee Goodman, a major shareholder and a big supporter of Sudbury-mined nickel.
Mourre said the company is perfectly willing to develop the West Graham-Crean Hill project on their own, which was the original intent of forming SPC, to become a mining player in the basin.
At the moment, they're not looking for a strategic financing partner, "but we'll see where things end up."
SPC has two other exploration projects in the Sudbury area.
At Aerr-Kidd, at promising prospect on prime ground between Vale’s Totten Mine and KGHM’s Victoria Mine Project, the company had been running a drill program.
Fifty kilometres northeast of the city at the Janes property, they were reporting some high-grade nickel hits.
Those projects will likely be on the backburner as the focus will be on West Graham-Crean Hill, he said.
But Mourre hinted the company may be on the hunt for more ground in the basin.
He explained there are other very prospective non-core assets held by the major mining companies that sometimes, due to a property’s size, location and commodity, are not a priority for them to explore and develop.
"To me, there are tons of opportunities in Sudbury for some of these resources to be unlocked. It takes these major companies to get that mindset to start having discussions with (junior miners), and we hope it’s the first of many. But for us, it's a good start."