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Properties


Birch Lake PGM Properties

Location

The 14,789 acre Birch Lake project lies along the western margin of the Duluth Mineral Complex, approximately 80 miles north-northeast of Duluth, Minnesota and about 7 miles east-northeast of Babbitt, Minnesota. Its proximity to the Minnesota Iron Range provides extensive infrastructure including sources of water, electric power, mining labor and professionals, equipment suppliers and a well-developed road and rail transportation network linking the area to the port of Duluth on Lake Superior.

Resources

Franconia's extensive land package, the largest in the district, encompasses three copper-nickel-PGM resources (subject to Resource Estimates & Preliminary Economic Assessments prepared to NI 43-101 standards):

  • Birch Lake Underground Inferred Resource of 100.4 million tonnes
  • Maturi Inferred Underground Inferred Resource (3 miles NW of Birch Lake) of 83.1 million tonnes
  • Spruce Road Resource (3 miles NW of Maturi):
    • Inferred resource of 124 million tones - Underground Scenario
    • Indicated resource of 376 million tones- Open Pit Scenario

PRE-FEASIBILITY STUDIES:

Prefeasibility work is currently focused on the development of the Birch Lake and the Maturi Resources. Exploration has revealed a 75-foot thick mineralized zone at the Birch Lake Resource that occurs approximately 1,800 feet beneath the surface and three miles northwest at the Maturi property, another 75-foot thick, dipping mineralized zone that extends form 175 feet to 2000 feet beneath the surface.

The current pre-feasibility studies are aimed at evaluating the viability of separate mines at Birch Lake and Maturi that would feed a single processing complex built near the Birch Lake deposit.

While neither Birch Lake nor Maturi has been fully drilled out, the combined resource currently has the potential to generate annual production of 74 million pounds (lbs) copper, 19 million lbs nickel, 2.9 million lbs cobalt, 7,400 ounces (oz) gold, 33,000 oz platinum and 68,000 oz palladium over a mine life of about 25 years. More than 500 jobs would be created over the life of the operation.

BIRCH LAKE INFERRED RESOURCE - 100.4 MILLION TONNES (NI 43-101 compliant)

Cut Off NSR Copper (%) Nickel (%) Cobalt (%) Palladium (g/t) Platinum (g/t) Gold (g/t)
$25.00 0.59 0.19 0.08 0.65 0.32 0.14

Metal price assumptions: copper $1.50/lb; nickel $6.00/lb; cobalt $10.00/lb; palladium $300/oz; platinum $800/oz; gold $450/oz.

MATURI INFERRED RESOURCE - 83.1 MILLION TONNES (NI 43-101 compliant)

Cut Off NSR Copper (%) Nickel (%) Cobalt (%) Palladium (g/t) Platinum (g/t) Gold (g/t)
$34.00 0.70 0.26 0.02 0.26 0.10 0.05

Metal price assumptions: copper $1.50/lb; nickel $6.00/lb; cobalt $10.00/lb; palladium $300/oz; platinum $800/oz; gold $450/oz.

PRELIMINARY ECONOMIC ASSESSMENT

The economic assessment was prepared by Scott Wilson Roscoe Postle Associates (Scott Wilson RPA) to NI 43-101 standards, and are available on SEDAR. (All amounts are expressed in U.S. dollars, unless otherwise indicated.)

The scenario considered in the economic assessment includes:
  • Development of a 100.4 million tonne resource at Birch Lake and development of an 83.1 million tonne resource at Maturi, 3 miles northeast of Birch Lake, both containing recoverable copper, nickel, cobalt, gold, platinum and palladium.
  • Underground room and pillar mining (10,000 tonnes per day [tpd]) at Birch Lake and underground long-hole transverse open stoping mining (8,000 tpd) at Maturi, flotation concentration and hydrometallurgical recovery with a combined annual production of 74 million lbs copper, 19 million lbs nickel, 2.9 million lbs cobalt, 7,400 oz gold, 33,000 oz platinum and 68,000 oz palladium over a 26-year mine life at Birch Lake and a 24-year mine life at Maturi. Material from Maturi would be transported to the Birch Lake site for concentration and hydrometallurgical recovery.
  • Pre-production capital of $616 million.
  • Average operating cost of $25.87/tonne.
  • Cash flow projections (before tax) show the following range of Net Present Value (NPV) associated with the project at various discount rates:
  Pre-Tax Cash Flow
Base Case Metal Prices $1,891 million
Current Prices 09/06

$9,411 million

   
  Net Present Value (before tax)
Discount Rate 7.5% 10% 12.5%
Base Case Metal Prices $365 million $171 million $41 million
Base Case +10% $618 million $364 million $193 million
Base Case less 10% $113 million ($23 million) ($112 million)
Current Prices $3,132 million $2,288 million $1,704 million
Note: Scott Wilson RPA also presents a series of sensitivity analyses between -30% and +30% in its economic assessment report.

Franconia is close to completing drilling a series of pilot holes and the collection of of material for pilot plant runs of both concentration and hydrometallurgical processes at Birch Lake (45 tonnes are required from Birch Lake and Maturi combined). A similar drill program is expected to be completed at Maturi in 2008. These drill programs will provide in-fill and delineation drilling to better quantify the resource and allow pre-feasibility level mine planning. The entire program will also help the Birch Lake project to move towards final feasibility determination and with the State's environmental review and permitting process.

SPRUCE ROAD

Franconia also controls the Spruce Road resource, located about 5 miles east northeast of Maturi. Spruce Road is not part of the Company's ongoing pre-feasibility program but it dramatically expands the long-term potential for the Birch Lake Project. Spruce Road was the subject of surface drilling, bulk sampling, metallurgical testing and a pre-feasibility study by American Copper & Nickel Co. between the 1950s and 1970s. Spruce Road was the subject of an engineering study by Bechtel Corporation in 1967. The current estimate is based on 220 surface drill holes. Franconia has yet to initiate its own work programs to confirm the historical data but based on ACNC's work Franconia has defined resource estimates for both underground and open pit scenarios for the Spruce Road copper-nickel deposit, part of the Birch Lake Project in Minnesota. The estimates show an underground Inferred Resource at Spruce Road of 124.4 million tonnes grading 0.59% copper and 0.21% nickel and an open pit indicated resource of 377 million tonnes (see table).

Open Pit Resource Estimate (October 2007), Spruce Road Deposit, Birch Lake Project, Minnesota
  Indicated Resource Inferred Resource
Cut Off Grade (%) Tonnes (millions) Copper (%) Nickel (%) Tonnes (millions) Copper (%) Nickel (%)
0.26 CuEq 2,7 376.7 0.39 0.14 28.4 0.23 0.09
0.30 Cu 290.8 0.44 0.15 12.0 0.46 0.19
0.40 Cu 170.5 0.50 0.17 8.3 0.50 0.17
0.50 Cu 67.2 0.57 0.20 4.3 0.58 0.23

Notes:
  1. CIM definitions were followed for Mineral Resource estimation and classification.
  2. Mineral Resources are estimated at a zone definition (wireframe) cut-off grade of 0.26% copper equivalent.
  3. Mineral Resources were estimated using average long-term metal US$ prices of $1.50/lb copper and $6.00/lb nickel.
  4. Bulk density is estimated at 3.02 t/m3.
  5. Resources are estimated from surface to a maximum depth of approximately 450 m.
  6. The 0.26% copper equivalent cut-off grade includes all material in the wireframed zones. Incremental cut-offs are for block cut-off grades.
  7. Copper equivalent grade CuEq%=Cu% + (2.59 x Ni%) and is based on respective metal prices and estimated payable metals.
  8. Copper assay grades were capped at 2% and nickel assay grades capped at 1%.
  9. Open pit is constrained to within the Federal Lease property boundaries. Pit slopes are 45 degrees; no provision is made for a ramp or operating widths at the pit floor.
  10. Waste to ore ratio for the 0.26% CuEq cut-off is 0.88:1.


Links:

Maps

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Birch Lake Project - Drill Holes
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Birch Lake Project
Schematic of drill hole showing wedging for multiple samples
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Birch Lake Project
PGE-Cu-Ni Deposit - Longitudinal Sections A - A' and B - B'
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Birch Lake Project
Schematic of possible mining system
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Birch Lake Project
Schematic longitudinal section showing heading and bench mining
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Schematic plan of drill barge showing arrangment of containment booms
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Schematic diagram of casing system installed on drill barge to collect drill cuttings
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Schematic diagram of spill containment measures during barge drilling
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Birch Lake Project - The mining cycle
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Schematic cross section showing possible room and pillar configuration
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Birch Lake detailed location map
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aerial photo birch lake
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