Nalunaq Gold Mine - Greenland

Project description and location

Crew concluded the sale of Nalunaq Gold Mine including all the assets, Infrastructure. Inventories and goodwill to Angus and Ross plc, the effective date being 1st July 2009.  The completion of the agreement was delayed by the elections in Greenland and ratification of the license transfer has yet to be formally granted by the Greenland Government.

Crew held a 100% interest in the Nalunaq Gold Mine, which commenced commercial mining operations on July 1, 2004 and had been operating uninterrupted until the decision to place Nalunaq on care and maintenance was taken on September 30, 2008 on the basis of the uneconomic nature of the resource.

Ore shipping and processing

The Nalunaq operation had no processing facility on site. During the first years of Crew Gold’s operation, ore from Nalunaq was processed at the El Valle plant of Rio Narcea Gold Mines Ltd in Spain. The process was fully documented and an independent consultant was in attendance when the Nalunaq ore was treated.

In October 2006, Crew acquired the Nugget Pond processing plant in Newfoundland, Canada. Following refurbishment of the plant, ore shipments to Nugget Pond commenced in February 2007. Nalunaq entered into a milling agreement with Nugget Pond, according to which the ore and resultant gold remained the property of Nalunaq until they were sold after final refining.

Total ore processed at Nugget Pond in the year ended December 31, 2008 was 141,390 tonnes at a grade of 13.1 g/t (period from the commencement of mill operations at the end of February 2007 to December 31, 2007 – 132,579 tonnes at 14.9 g/t).

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 one-to-two meter wide shear zone with a remarkably constant orientation. The regular sheet has an average strike of 45-50° and an average dip of 36° 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 meters to 1.8 meters 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.

Resources and Reserves

Recent developments

Ore resources at Nalunaq underwent review during 2008. It was found that the Mountain Block was the only mining area remaining where a reasonable degree of confidence could be had in the ore resource. The Mountain Block cannot be effectively drilled from the surface because of the difficult terrain.

Historical information

In April 2007, Crew Gold released an updated ore reserve and resource statement for Nalunaq. The effective date for the data was December 31, 2006. The 2006 surface drilling program, combined with new underground development, provided the basis for updating of resources and the first reporting of ore reserves for this operation. The majority of resources at NGM are classified as inferred, due to the narrow vein, nuggety nature of the deposit, where drilling on its own does not provide reliable grade estimation. Measured and indicated resources are only defined after underground drifting on structure and detailed sampling have been completed.

Total inferred resources were estimated at 1.5 million tonnes at approximately 17 g/t (diluted to 1.5 m assumed mining width and zero cut-off grade) containing approximately 823,000 oz gold. Inferred resources are defined on the basis of a potentially mineralized area, defined by regular drilling intercepts, and excluding areas where more closely spaced sampling and underground development have allowed for classification of indicated resources. All inferred resources were subject to reduction by assuming 40-50% payability within the areas defined by drilling intercepts and surface sampling. The grade is assumed to be similar to the average of previously recovered ore, within a range of 16-21 g/t, as the drill intercepts appear to show a similar level of variability as the earlier resources.

Indicated resources were estimated at 535,000 tonnes at 18 g/t for approximately 315,000 oz gold and are based on data derived from underground drifting and systematic sampling at 1-3 m intervals. Indicated resources have a payability factor of 80% recoverable, in line with previous production performance. A total of 5,000 meters of on-vein development has been completed in strike drives and raises within the Main Vein structure. A total of 2,440 channel and chip samples were collected during the exploration stages and a further 3,400 chip samples were taken in the faces of strike drives and slot raises after production commenced in 2004.

Indicated and inferred resources are summarized in the following table. The most significant difference to previous estimates is that Indicated Resources are now included from the Upper Block. This is due to the fact that mining development has advanced into this area and therefore activated substantial indicated resources, which are based on continuous sampling along surface outcrops. In addition, a small contribution is added from underground development near the 500 m level. The South Block is slightly expanded due to new underground development while the Target Block shows a reduction of approximately 50,000 oz, largely due to mining depletion.

Reserves

Probable reserves are a subset of indicated resources and are defined where stope layouts have been completed following sublevel drift and raise development. The design of stopes is based on closely spaced sampling and assignment of actual grades from at least three sides of individual blocks, using a cap of 300 g/t Au. Current probable ore reserves total 205,000 tonnes at 18.8 g/t Au for 124,000 oz gold. A mining recovery factor of 84% has been applied for expected losses in pillars and other unrecoverable areas. A gold price of US$ 575/oz has been used in the estimation of ore reserves.

Mining

Nalunaq has posed considerable challenges due to the simple, yet difficult, geometry of the Main vein. The most challenging factors include a narrow vein width of 0.7 meters and a 30-40 degree dip. The narrow width calls for a high degree of drilling and blasting accuracy to prevent dilution 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 was longhole mining, which comprised drifting horizontally along the strike at 11 meter vertical spacing, resulting in ore blocks of about 14-16 meters length on dip. The ore drifts were either mined as a whole face or in two cuts separating the ore and the waste (resue). This block was then subdivided into 14-meter-wide stopes between 1.5 meter stability pillars (rib pillars). Each block was opened with a short raise along one pillar and then blasted using long blast holes drilled either from the top or the bottom. Following stoping and removal of the ore, the stope was cleaned of any residual fine ore, some of which was at high grade.

Due to the review of resources during 2008 and because there is only a one ramp access area with limited strike length, the rate of mining was not expected to exceed 300 tpd. With the cost structure and camp infrastructure in place, it was decided that the operation would not be profitable at current gold prices. This resulted in a decision to suspend operations and move to care and maintenance with a view to seeking a suitable buyer.

Operations

All underground mining activities at Nalunaq were completed prior to February 28, 2009 and the mine was placed on care and maintenance. Crew completed the sale of all the assets, infrastructure, inventories and goodwill at the Nalunaq gold mine to Angus & Ross Plc in early July for a total agreed-upon price of $1.5 million cash.

Ore mined at Nalunaq during the quarter ending March 31, 2009 totalled 20,600 tonnes (quarter ended March 31, 2008 – 35,710 tonnes). This figure for 2009 was calculated at February 28, as this was the date by which all mining activities were completed. Ore mined in the year ended December 31, 2008 totalled 107,992 tonnes (year ended December 31, 2007 – 132,930 tonnes).