Chasing big copper in Canada's north

Mineralized boulders at Aston Bay's Storm project on Somerset Island, Nunavut.

The mineralized boulders at surface, stained with rich turquoise hues, are impressive.

But it's what could be sitting beneath the surface at Aston Bay Holdings' Storm copper project on Somerset Island, Nunavut that intrigues economic geologist Tom Ullrich.

"Nobody's had the opportunity to do any proper work in looking for the big prize on that property," says Ullrich, Aston Bay's Chief Operating Officer and Executive Vice-President.

The "big prize" is a potential bounty of rich sediment-hosted copper mineralization hinted at by chalcocite leakage at surface, geophysical anomalies and limited historical drilling.

These are early days at Storm. But if Aston Bay can prove up a high-grade copper deposit there, the impact on Nunavut's economy could be considerable. As Voisey's Bay and other discoveries have demonstrated, majors will pay big money to secure and develop base-metal deposits with size and grade.

Enter BHP Billiton.

The $94-billion mining giant is interested enough that it recently signed an option deal with Aston Bay Holdings for a 75% interest in the Storm project. The agreement requires exploration expenditures of $40 million over 9 years, including a minimum of $2.5 million in the first two years.

The deal was announced May 31 and will include a drill program starting in July. Aston Bay is the operator, BHP is paying the bills and Ullrich has been working closely with BHP geologists to prioritize targets.

"We're happy to have them call the shots," Ullrich says. "We're in complete agreement about what is happening here and what the targets are."

The veteran geologist has only been with Aston Bay since Feb. 1, but he has an intimate knowledge of the Storm project.

Geologist Tom Ullrich, COO of Aston Bay Holdings

That's because Ullrich came to Aston Bay from Chilean copper producer Antofagasta, where he was Chief Geologist, North America for five years. Antofagasta signed an earn-in agreement on the Storm project in 2014 but pulled the plug in early 2015, blaming copper price weakness. Ullrich says Storm is the reason he jumped ship to Aston Bay Holdings.

"The best thing I saw in five years at Antofagasta were these targets," he explains. "This is an area with all the characteristics in place where you can actually find these sorts of things, this Congo-style mineralization that's the target here."

A 2011 VTEM airborne electromagnetic survey identified numerous conductive zones and suggested mineralization continues below the shallow intercepts (to about 150 metres) drilled by Cominco (now Teck). But Ullrich notes that geological detective work completed so far suggests that if the large sediment-hosted layer of copper is there, it will be above the 500-metre mark. That means no deep, expensive holes.

Cominco geologists confirmed high-grade copper mineralization in the mid to late-1990s. Intercepts included 110 metres of 2.45% copper from surface and 56.3 metres of 3.07% from 12.2 metres.

But the drilling was limited to zones of surface mineralization, Ullrich explains, and the geologist believes Cominco's historical drilling only scratched the surface. Quite literally.

"They didn't really get a budget to target the real prize here," he says.

Storm's geological features are similar to those hosting the world's largest sediment-hosted, high-grade copper deposits, according to Ullrich. Those stores of wealth include Poland's Kupferschiefer, which has been mined for centuries, and the rich Central African copper deposits in Zambia and the Democratic Republic of Congo.

The Storm project is located near tidewater just south of the famed Northwest Passage. Mineral exploration is expensive in the North, but Aston Bay's path forward is assisted by an annual sea lift and a commercial airport in the town of Resolute. The Storm project is a short Twin Otter flight away.

Cominco (now Teck) operated the Polaris underground zinc-lead mine about 100 kilometres to the north from the 1970s to the 1990s.

Ullrich visited the copper project twice while working for Antofagasta. He describes the property - which has little soil and no vegetation - as "Arctic desert" that is well-suited to exploration. The region only gets 1-2 metres of snow a year. That's enough to provide free-running water for summer drilling, but not enough to affect mining operations.

There are no caribou in the area - "there's nothing for them to eat" - and the only wildlife are seals and the occasional muskox and polar bear. Midnight sun during the two-month drill season is also a bonus, Ullrich notes: "We can move a rig in the middle of the night if we have to."

It's a long ways from Oshawa, Ontario, the auto-plant city where Ullrich grew up. As a kid, he enjoyed cracking open rocks and looking for fossils but said he didn't realize geology was a viable career path until he was at university.

Twenty-four years later, Ullrich has worked on both large-scale mining operations and significant discoveries in 24 years in the business.

He started his career studying, then working at the Candelaria copper-gold mine in Chile's Atacama region, an operation recently purchased by Lundin Mining.

After a brief foray into academia - he set up a geochronology lab at the University of B.C. - Ullrich returned to the field, this time in Mexico. He worked with Duane and Morgan Poliquin's Almaden Minerals for three years and managed the drill program that discovered the Ixtaca gold-silver deposit. Almaden hit on the first hole of 2010, drilling 302 metres of 1 g/t gold and 48 g/t silver.

Ullrich, an elected director on the Association for Mineral Exploration B.C. board, recalls being pitched by Aston Bay Holdings CEO Benjamin Cox at a San Francisco Hard Assets investment conference about four years ago.

It was the start of a journey that takes him later this month to northern Nunavut, where Aston Bay will be putting in an exploration camp for the summer program. Ullrich says the company couldn't have a better partner in BHP, which has opened an office in Tucson, Arizona after minimizing its North American presence in recent years.

BHP has identified copper as a core area of strength and is sharpening its focus on exploration, with an eye to Tier 1 greenfield discoveries, CEO Andrew Mackenzie told a recent mining conference.

"We are increasing our exploration activity to take advantage of falling costs as others pull back," Mackenzie stated at the Bank of America Merrill Lynch Global Metals, Mining and Steel Conference in Miami on May 10.

"This agreement speaks to how aggressive and serious BHP is here," Ullrich says. "They really think there's something to be found here and they want to find it."

Aston Bay Holdings (BAY-V)Price: .42Shares outstanding: 54.8 millionMarket cap: $23 millionTreasury: $500,000

James Kwantes

DISCLAIMER: Author owns shares of Aston Bay Holdings. The work included in this article is based on SEDAR filings, current events, interviews, and corporate press releases. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the CEO.CA website do not necessarily reflect the views of Pacific Website Company Inc., publisher of CEO.CA. Aston Bay Holdings is a Pacific Website Company Inc. advertiser, which makes CEO.CA biased in its coverage of that company. This publication is provided for informational purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles onwww.SEDAR.com for important risk disclosures. It's your money and your responsibility.