Yellowknife (Feb 12/03) - Fortune Minerals is moving forward with plans for an underground mine at its NICO deposit, 160 kilometres northwest of Yellowknife.

The London, Ontario company hopes to have the gold/cobalt/bismuth mine in production by 2005.

Soaring gold and sagging cobalt prices have forced the firm to re-design the NICO mining plan several times over the past year.

Prices for cobalt have plummeted -- to as low as $6 per pound -- while gold has skyrocketed to $375 per ounce and higher. The NICO deposit is estimated to contain about 100 million tonnes of ore.

Gold underneath, cobalt on top

It features a high-grade gold core underground and a large volume of easily-accessible cobalt near the surface.

"With the drop in cobalt prices we have had to develop an engineering plan that enables us to access the higher grade gold very quickly," said Fortune's Robin Goad.

Last year, Fortune completed a viable economic model for a combination underground-open pit mine based on gold prices at $315 (US) per ounce, cobalt at $7 per pound, and bismuth at $3.25 per pound.

With that "worse case scenario," the company would realize a 16.55 per cent rate of return.

"That is pretty attractive," said Goad.

Fortune plans a 33-hole, 4,000 metre drilling program at the NICO site this month to gather more details on the high-grade gold deposit in particular.

"We are especially interested in an area that is grading at 30 grams per tonne, which is open."

Fortune also plans in-fill drilling at the ends of the deposit to provide sufficient data for both underground and open pit optimization.

"With that data added to our economic model, the next step will be to go underground. We are seriously looking at an underground bulk sample next year," said Goad.

As it sits now, Fortune is planning a 2,500 tonnes/day operation -- 2,000 tonnes via underground mining and 500 via open pit -- with an on-site concentrator or mill.

The underground gold deposit would be accessed employing "trackless mining," said Goad. "In effect we will be using a ramp to gain access to this material."

Trucking it in

The NICO site is eight kilometres from the now closed Rayrock Mine and its access road, and 20 kilometres from the Snare hydro complex.

Gold-bismuth concentrates would be trucked to the Teck Cominco smelter in Trail, BC.

Gold-cobalt concentrates would be processed at Miramar's Con mine mill in Yellowknife.

The mine is projected to have a 12 year operating life.

Underground mining and milling costs would be about $51 per tonne. Open pit costs would be about $26 per tonne, increasing slightly as the underground deposit is depleted.

Fortune is currently in discussions with Miramar to purchase the Con mill in Yellowknife prior to its projected 2005 shutdown, said Goad.

"We are contemplating that we would own that facility by then."

Goad said Fortune is "interested" in any plans the GNWT might have for realigning the existing winter road to Rae Lakes and Wha Ti.

"I understand they (the GNWT) have an agreement to do so, but the final alignment is still in question. We would be very interested in having that road upgraded to all-weather capability with bridged water crossings."

Daniel Auger, of the GNWT Department of Transportation, said realignment of the Wha Ti road was raised by the communities involved in the fall of 2001. In response, the GNWT asked for a formal request to change the realignment but hasn't yet received one.

Auger said without other funding involved, the GNWT prefers the existing road alignment.

"It is the most economical to operate and also the shortest distance to the communities."