Spec Value Hunter Comment - July 13, 2012: First Point confirms 15,000 m summer drill program for Decar
First Point Minerals Corp announced on July 12, 2012 that a 15,000 m drill program is now underway on the Decar nickel project in central British Columbia under 75% option to Cliffs Natural Resources Inc, with camp mobilization starting on June 18. This follows news on June 6 that Cliffs and First Point had secured a memorandum of understanding with the Tl'azt'en Nation regarding exploration protocols and a framework for negotiating a future impact and benefits agreement. There was some market worry that Cliffs might not embark on the infill drill program this summer recommended by Caracle Creek as a followup to the initial 43-101 resource estimate published in April 2012 because conversion of the inferred resource into indicated is not required for the PEA Cliffs must deliver by March 2013. The latest news release seems to confirm this fear because it states that the drilling will consist entirely of stepout drilling designed to delineate the limits of the Baptiste zone, with an emphasis on the open areas in the south-central and northwest parts of the deposit where higher nickel grades are present. An obvious and worrisome interpretation of this drilling focus shift is that Cliffs is unhappy with its internal assessment of project economics involving the established resource and is drilling to find higher grade zones. According to First Point's Ron Britten this interpretation is wrong; the explanation he provided has very positive implications for the Decar project.
The sampling method for prior core involved sawing the core in half, and for each 3 metre interval, submitting a single 1 metre segment of half core for assaying. The remaining core in the interval would be used for metallurgical work down the road if needed. Cliffs and First Point have apparently received a goahead from a third party consultant that the infill drilling is unnecessary to convert the inferred resource to indicated if Cliffs conducts whole core analysis using the Davis Tube method on the rest of the core in each interval. This conclusion is based on geostatistical studies of the mineralization and the results to date. Apparently Cliffs will assay the remaining core this year and be able to upgrade the resource to indicated at a fraction of the cost of the initially proposed infill drilling program. The 15,000 m stepout program is thus a surprise bonus for First Point shareholders, because Cliffs is spending money on completely understanding the Baptiste Zone at Decar so that it will be in a position to design a mine plan which starts with higher grade hotspots so that capital payback can be accelerated, and to consider scaling the production rate to as high as 100,000 tonnes per day. The 2012 Decar work program will not generate any news flow that will change the market's perception of Decar's potential, but it will put the project well ahead of where it normally is when a PEA gets first published. If we judge them by their actions and trust that they are rational, it is hard to avoid the conclusion that Cliffs is already sitting on a very robust draft PEA.
With Cliffs clearly forging ahead at Decar we can stop worrying that Cliffs might be having second thoughts about mining very low grade nickel deposits characterized by a nickel-iron alloy mineral called awaruite, and start looking for results from summer drilling programs on First Point's 100% owned Klow and Wale projects in British Columbia. First Point is on the fourth hole of a six hole drill program on Klow, and will move the rig to Wale in early August to test this Big Anomaly whose footprint and surface values suggest a deposit similar to Decar in scale and grade. Assays from Klow will start arriving in September, with Wale assay results flowing in October. In the meantime the trading pattern for First Point will likely track general market sentiments, trending lower if the already gloomy global macroeconomic outlook further darkens, higher if light starts to emerge at the end of the tunnel. In terms of standalone, fundamentals driven price appreciation for First Point, we must wait for the Wale results in Q4 of 2012 confirming this Big Anomaly as a Big Discovery, and then for the PEA in March 2013 to provide us with an economic analysis of mining this type of low grade nickel mineralization.
As a sign of how shell-shocked resource investors are these days, First Point closed only $1.6 million of the $2 million flow-through financing at $0.60 it announced in June. This has left First Point with more than $7 million working capital heading into the 2012 summer drill season. In other news First Point announced on July 5 that it had acquired by staking the Fera and Leka properties in Norway based on anomalous surface nickel-iron alloy values within large packages of ultramafic rocks. Sampling has confirmed decent grain sizes and the absence of sulphides. This acquisition is part of First Point's global reconnaissance program designed to identify well-located prospects to which the Decar model applies. First Point continues to be a Good Relative Spec Value Buy.
*JK owns shares in First Point Minerals Corp