Nalunaq Gold Mine - Greenland

Property Description and Location

Nalunaq Gold Mine commenced commercial mining operations on July 1, 2004 and has been operating uninterrupted since then, producing approximately 58,700 oz gold in fiscal 2007. For the first three years of its operation the mine was 82.5% owned by the Corporation, with NunaMinerals A/S (Nuna) holding 17.5% equity. In November 2007 Crew concluded an agreement with Nuna to purchase its interest in Nalunaq Gold Mine.

The opening of Nalunaq was a milestone for Greenland, being its first gold mine and the first new mine to be developed in the country for over 30 years. The mine is located approximately 40 km NE of the town of Nanortalik in the southernmost tip of Greenland and is a Proterozoic narrow-vein, high-grade gold deposit. Transportation to Nalunaq takes approximately 40 minutes by helicopter from the international airport at Narsarsuaq.

The terrain is moderately alpine with mountain peaks reaching 1,200-1,600 m above sea level. Nalunaq mountain, which hosts the gold deposit, is 1,340 m high and is located in a wide glacial valley reaching into the Saqqa Fjord about 9 km from the mine site. Deep fjords allow access for shipping and the overall climate is moderate allowing full operations around the year. In late 2006, we acquired Nugget Pond to process ore produced from Nalunaq. 

Ownership and Management

The Corporation owns 100% of the Greenlandic limited liability company, Nalunaq Gold Mine A/S (NGM), which operates the mine and holds the mining license, granted by the Greenlandic and Danish Governments in 2003 for 30 years. The license covers an area of 16 km² around the mine site. In 2004, NGM received its final permits for the underground operation and commercial production started in July 2004.

Geology

The Nalunaq deposit is a high-grade, gold-only mineralization associated with quartz-veins in a major shear zone. As a generic type, the deposit is a mesothermal vein-type gold mineralization, hosted in Proterozoic amphibolite-facies metavolcanic rocks. Visible gold is found in sheeted quartz veins which are located in a large-scale shear structure that appears to be related to regional thrusting. However, possibly due to extensive post-mineralization deformation, there is no simple relationship between the gold grade and amount of quartz at Nalunaq.

The most pronounced structure at Nalunaq is a narrow zone of ductile shearing surrounded by relatively brittle margins. The Main Vein itself is hosted in a 1-2 m wide shear zone with a remarkably constant orientation. The regular sheet has an average strike of 45-50° and an average dip of 36º SE, varying between 22° and 55°.

The presence of quartz is the single-most important factor for the gold occurrence and is found as sheeted veins with stripes and bands of included calc-silicates. The quartz veins vary from 0.05 m to 1.8 m in width and often display pinch and swell structure with clear evidence of both compressive and dilatational post-mineralization deformation.

Systematic sampling of the underground exposures of the vein has shown that distribution of gold grade is erratic in nature, due to a pronounced nugget effect. Despite this variation, a regular zonation in grade can seemingly be identified in a series of high-grade segments running approximately northeast-southwest throughout the mine area. The reason for this regularity is not clear, but observations suggest that the highest-grade sections occur in or near the contact to medium-grained metadolerite sills. Lower-grade segments generally seem to be hosted in finer-grained metapillow basalt, which has suffered more intense shearing.

Resources and Mine Development

After the close of Q1 2007 the Company released an update of mineral reserves and resources for Nalunaq as at 31 December, 2006. This included the first-time reporting of probable ore reserves, which total 124,000 oz (205,000 tonnes at 18.8 g/t Au). The results showed that last year’s program maintained the operation’s approximate 10-year resource inventory (at current production rates) and delivered a modest 7% increase to indicated resources after depletion through mining operations. Indicated resources totaled 535,000 tonnes at 18 g/t for approximately 315,000 oz gold whilst inferred resources were estimated at 1.5 million tonnes at approximately 17 g/t gold (assuming a 1.5m mining width and zero cutoff grade) containing approximately 823,000 oz gold.

Drilling continued through 2007 and the first six months of 2008 and resource estimates will be reviewed and re-evaluated in Q2 2008.

Ore produced at Nalunaq in the six months to June 2008 totaled 61,952 tonnes (compared with 68,514 tonnes for the same period in 2007).  During Q2 2008, stoping operations at the mine continued on a curtailed basis as the stockpiled material was prepared for shipping to Nugget Pond. The curtailment was planned to allow for the large stockpiles of previously mined material to be shipped and to reduce costs while exploration of the Mountain Block is accelerated through concentrated development of the internal ramp access to the area.

During the quarter, two ore shipments totaling 15,498 tonnes were shipped to Nugget Pond, bringing the year-to-date ore shipped total to 43,875 tonnes. At June 30, 2008, 24,119 tonnes of run-of-mine ore was stockpiled at Nalunaq’s port in Greenland, containing management’s estimate of approximately 10,000 oz of gold.

Mining

Nalunaq has posed considerable challenges due to the simple, yet difficult geometry of the Main vein. The main factors being a narrow vein width of 0.7 m and a 30-40 degree dip. The narrow width calls for a high degree of drilling and blasting accuracy to prevent dilution, and the dip both precludes efficient footwall layouts for mechanized mining and also requires additional rock handling activities to ensure all the ore is successfully transferred to the bottom of the stope for mucking and cleaning.

The preferred mining method is longhole mining, which comprises drifting horizontally along strike at 11 m vertical spacing resulting in ore blocks of about 14-16 m length on dip. The ore drifts are either mined as a whole face or in two cuts separating the ore and the waste (resue). This block is then subdivided into 14 m wide stopes between 1.5 m stability pillars (rib pillars). Each block is opened with a short raise along one pillar and then blasted using long blastholes drilled either from the top or the bottom, giving the method its name. Following stoping and removal of the ore, the stope has to be cleaned of any residual fine ore, some of which is at high grade.

Ore Shipping

Nalunaq has no processing facilities on site. For over two years ore processing took place at the El Valle plant of Rio Narcea Gold Mines Ltd (RNGM) in Spain. The last shipment of ore from Nalunaq to Rio Narcea was in early October 2006 and, since February 2007, ore has been shipped to Nugget Pond in Newfoundland, Canada (See “Nugget Pond” on this site.)

The Mine Site

Camp

The camp layout currently consists of modular single occupancy living units, office complex, kitchen complex, clinic, assay laboratory, change house, recreation hall with gym, warehouse, potable water supply system, sewage treatment system, electric power plant and workshop facilities. The camp currently has accommodation for about 100 people. Telecommunication systems include high-speed Internet connection available to all via a wireless network.

The camp has an approved helipad facility. There are regular charter flights from Qaqortoq and Narsarsuaq with onwards connections to regular scheduled transatlantic flights to Europe and charter flights to Newfoundland.

The Assay Laboratory

Nalunaq is equipped with a fully functional assay laboratory, consisting of a preparation lab, a wet chemistry lab and an assay section with computerized AAS instrumentation.

Gold produced at Nugget Pond during Q2 2008 was 11,001 oz (same quarter in 2007 – 19,555 oz). Total gold produced in the six months to June 30, 2008 was 22,507 oz (same period in 2007 – 24,670 oz).

Gold sold during the quarter was 12,113 oz at an average realised gold price of $896/oz (quarter ended June 30, 2007 – 20,476 oz at an average price of $666/oz). For the six months to June 2008, gold sold totaled 24,159 oz at an average gold price of $913/oz (six months to June 2007 – 20,476 oz at an average price of $666/oz).