SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 40-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003 Commission File Number 001-31704
__________________________
FNX MINING COMPANY INC.
(Exact name of Registrant as specified in its charter)
Ontario 1000, 1098 Not Applicable
(Province or other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification No.)
Incorporation or Classification
Organization) Code Number)
55 University Avenue
Suite 700, Toronto, Ontario
M5J 2H7
(416) 628-5929
(Address and telephone number of Registrants' principal executive offices)
CT Corporation System
111 Eighth Avenue
New York, NY 10011
(212) 894-8940
(Name, address (including zip code) and telephone number
(including area code) of agent for service in the United States)
_______________________________________________________________
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Name of each Exchange on which
Title of each class Registered:
--------------------------- ------------------------------
Common Shares, No Par Value American Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.
None
For annual reports, indicate by check mark the information filed with this
Form:
[X] Annual information form [X] Audited annual financial statements
Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by this annual
report.
The Registrant had 47,415,169 Common Shares
outstanding as at December 31, 2003
Indicate by check mark whether the Registrant by filing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
(the "Exchange Act"). If "Yes" is marked, indicate the filing number assigned
to the registrant in connection with such Rule.
Yes ____ 82-____ No __X__
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No _____
DOCUMENTS FILED UNDER COVER OF THIS FORM
----------------------------------------
Document No. 1: Annual Information Form for the year ended
December 31, 2003, dated March 23, 2004.
Document No. 2: Audited Financial Statements for the financial
year ended December 31, 2003, prepared in
accordance with Canadian generally accepted
accounting principles, and reconciled to United
States generally accepted accounting principles in
accordance with Item 17 of Form 20-F.
Document No. 3: Management's Discussion and Analysis of Financial
Condition and Results of Operations for the year
ended December 31, 2003.
Document No. 1
FNX MINING COMPANY INC.
ANNUAL INFORMATION FORM
FOR THE YEAR ENDED DECEMBER 31, 2003
DATED MARCH 23, 2004
_______________________
TABLE OF CONTENTS
GLOSSARY OF TERMS.............................................................1
CORPORATE STRUCTURE............................................................7
Name and Corporation..................................................7
GENERAL DEVELOPMENT OF THE BUSINESS............................................7
Three Year History....................................................7
Significant Acquisitions - Acquisition of Sudbury Basin Properties....7
Technical Report......................................................9
Trends .............................................................9
NARRATIVE DESCRIPTION OF THE BUSINESS.........................................10
Principal Properties.................................................10
Employees............................................................10
Competitive Conditions...............................................10
Risk Factors.........................................................11
SELECTED FINANCIAL INFORMATION................................................15
Dividends............................................................16
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATING RESULTS.......................16
General..............................................................16
DIRECTORS AND OFFICERS........................................................16
MARKET FOR SECURITIES.........................................................19
SHARE CAPITAL.................................................................19
ADDITIONAL INFORMATION........................................................19
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained herein including, without limitation,
financial and business prospects and financial outlooks, may be forward-looking
statements which reflect management's expectations regarding future plans and
intentions, growth, results of operations, performance and business prospects
and opportunities. Words such as "may", "will" "should", "could", "anticipate",
"believe", "expect", "intend", "plan", "potential", "continue" and similar
expressions have been used to identify these forward-looking statements. These
statements reflect management's current beliefs and are based on information
currently available to management. Forward-looking statements involve
significant risk and uncertainties. A number of factors could cause actual
results to differ materially from the results discussed in the forward-looking
statements including, but not limited to, changes in general economic and
market conditions and other risk factors. Although the forward-looking
statements contained herein are based upon what management believes to be
reasonable assumptions, we cannot assure that actual results will be consistent
with these forward looking statements. Investors should not place undue
reliance on forward-looking statements. These forward-looking statements are
made as of the date hereof and we assume no obligation to update or revise them
to reflect new events or circumstances.
Forward-looking statements and other information contained herein
concerning the mining industry and our general expectations concerning the
mining industry are based on estimates prepared by us using data from publicly
available industry sources as well as from market research and industry
analysis and on assumptions based on data and knowledge of this industry which
we believe to be reasonable. However, this data is inherently imprecise,
although generally indicative of relative market positions, market shares and
performance characteristics. While we are not aware of any misstatements
regarding any industry data presented herein, the industries involve risks and
uncertainties and are subject to change based on various factors.
CERTAIN HISTORICAL INFORMATION CONTAINED IN THIS ANNUAL INFORMATION
FORM HAS BEEN PROVIDED BY, OR DERIVED FROM INFORMATION PROVIDED BY, CERTAIN
THIRD PARTIES. ALTHOUGH THE CORPORATION HAS NO KNOWLEDGE THAT WOULD INDICATE
THAT ANY SUCH INFORMATION IS UNTRUE OR INCOMPLETE, THE CORPORATION ASSUMES NO
RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF SUCH INFORMATION OR THE
FAILURE BY SUCH THIRD PARTIES TO DISCLOSE EVENTS WHICH MAY HAVE OCCURRED OR MAY
AFFECT THE COMPLETENESS OR ACCURACY OF SUCH INFORMATION BUT WHICH IS UNKNOWN TO
THE CORPORATION.
GLOSSARY OF TERMS
The following capitalized terms used herein have the meanings set out
below:
AG Silver.
AS Arsenic
AU Gold.
BHID Borehole Identification Number.
BLEBBY Containing blebs, or characterized by blebs which are globular in shape.
BQ Diamond drill core diameter 1 7/16" (36.5 mm)
BRECCIA A rock dominated with angular fragments within a finer grained matrix and
usually a product of faulting.
CHALCOPYRITE Copper Iron Sulphide - CuFeS2. The main ore of copper.
CLOSURE PLAN An environmental plan covering the closure of a mining operation.
CO Cobalt.
CONTACT DEPOSITS In the Sudbury Camp these are deposits occurring at the contact between the
Sudbury Igneous Complex (SIC) and the footwall country rocks.
CU Copper.
DEPOSIT A mineralized body which has been physically delineated by sufficient
drilling, trenching, and/or underground work, and found to contain a
sufficient average grade of metal or metals to warrant further
exploration and/or development expenditures; such a deposit does not
qualify as a commercially mineable ore body or as containing ore
reserves.
DEVELOPMENT The preparation of a known commercially mineable deposit for mining.
DEVELOPMENT STAGE A company is in the development stage when it is engaged in the
preparation of an established commercially mineable deposit (reserves)
for its extraction which is not in the production stage.
DIORITE Fine grained basic igneous rock. Usually intruded as a dyke.
DIP The inclination of a geologic structure (bed, vein, fault, etc.) from the
horizontal; dip is always measured downwards at right angles to the
strike.
DISSEMINATIONS Mineralization distributed between the grains in a rock.
DOWN DIP Down the plane of the dip; opposite to up dip.
DYKE A long mass of eruptive rock.
EM Electromagnetic
EMBAYMENT A topographic irregularity in the footwall in which mineralizing
solutions may pond and give rise to orebodies.
EXPLORATION STAGE A company is in the exploration stage when it is engaged in the search
for mineral deposits which are not in either the development or
production stage.
FE Iron
FELSIC (NORITE) An iron/silica rich rock.
FOOTWALL DEPOSITS Mineralization in the footwall below the contact with the SIC. Primarily
fracture and vein type of mineralization.
FRACTURE FILLINGS Material infilling fractures.
GABBRO A coarse grained calcic igneous rock.
GEOLOGICAL SURVEY The exploration of an area through the use of physical properties
relating to geology i.e. mapping. Geophysical methods include seismic,
magnetic, gravity, induced polarization and other techniques.
GNEISS A metamorphic rock showing banding and resulting from regional metamorphism.
GNEISSIC Term applied to the texture of gneiss.
GRADE The amount of valuable metal in each tonne of ore, expressed as % for
base metals and as grams per tonne for precious metals.
GRANITIC PLUTONS Large intrusions of acid igneous rocks.
GRANODIORITE A quartz rich diorite with >10% K feldspar.
GRAVITY ANOMALY A geophysical anomaly based on density differences.
GREYWACKE SANDSTONES A green/grey, granular sedimentary rock.
HAULAGE DRIFT An underground tunnel for hauling materials and rock.
IDX Inverse distance grade inter-polation as used in 3D block modelling.
IN-FILL DRILLING More detailed drilling generally used to follow up a discovery hole.
JOINT FILLINGS The material infilling joints in rocks.
MA Time measure. Millions of Years ago.1825 Ma=1.825 billion years.
MAFIC INTRUSIVE An intrusion rich in iron and magnesia and low in silica.
METAGABBRO Metamorphosed gabbro.
METASEDIMENTARY Metamorphosed sedimentary rock.
MICROPEGMATITE A pegmatite (dyke rock) with small fragments and inclusions.
MIGMATITES A textural term describing rocks of mixed igneous and metamorphic origin,
such as bands, veins and pods of igneous rocks in a metamorphic host.
MINERALIZATION A natural aggregate of one or more metallic minerals.
MINERALIZED Mineral-bearing; the minerals may have been either a part of the original
rock unit or injected at a later time.
MINERAL RESERVES AND MINERAL Have the meaning ascribed to such terms by the Canadian Institute of
Mining,
RESOURCES Metallurgy and Petroleum, as the CIM Standards on Mineral Resources and
Reserves Definitions and Guidelines adopted by CIM Council on August 20,
2000 as those definitions may be amended from time to time by the
Canadian Institute of Mining, Metallurgy and Petroleum.
MINING CLAIM/MINERAL CLAIM That portion of public or private mineral lands which a party has staked
or marked out in accordance with federal, provincial or state mining laws
to acquire the right to explore for and exploit the minerals under the
surface.
MRI Mineral Resource Inventory (internally generated Inco document).
NET SMELTER RETURN ROYALTY/NSR A phrase used to describe a royalty payment made by a producer of metals
based on gross metal production from the property, less deduction of
certain limited costs including smelting, refining, transportation and
insurance costs.
NI Nickel.
NI-CU-PGM Nickel-copper-platinum group metals.
NORITE A dark coloured igneous rock with pyroxene.
NQ Diamond drill core diameter 1 7/8" (47.6 mm)
ORE A metal or mineral or combination of these of sufficient value as to
quality and quantity to enable it to be mined at a profit.
ORE BODY (IES) A body(ies) of rock containing economically extractable ore minerals.
PD Palladium.
PENTLANDITE Iron-nickel-sulphide.
PGE Platinum Group Elements
PGM Platinum Group Metals.
PIPE A rod shaped ore shoot.
PLUNGE The angle between any inclined plane and the horizontal plane. The term
is used to designate the inclination of the axis of an oreshoot.
PT Platinum.
PYRRHOTITE Magnetic iron sulphide. The process by which lands disturbed as a result
of mining activity are reclaimed back to a beneficial land use.
Reclamation activity includes the removal of buildings, equipment,
machinery and other physical remnants of mining, closure of tailings
impoundments, leach pads and other mine features, and contouring,
covering and re-vegetation of waste rock piles and other disturbed areas.
RECOVERY A term used in process metallurgy to indicate the proportion of valuable
material obtained in the processing of ore. It is generally stated as a
percentage of valuable metal in the ore that is recovered compared to the
total valuable metal present in the ore.
REFINING The final stage of metal production in which impurities are removed from molten
metal.
RILL Irregular furrow-like physical feature.
S Sulphur.
SCHISTOZE The cleavage in rocks that are sufficiently recrystallized to be termed
schist or gneiss. Usually in metamorphic rocks.
SEDIMENTARY ROCK Rocks formed from material derived generally by erosion of other rocks and laid
down by a chemical or mechanical process i.e., limestone, shale and sandstone.
SHAFT A vertical or steeply inclined passageway to an underground mine for
moving personnel, equipment, supplies and material including ore and
waste rock.
STRIKE The direction of the line of intersection of a bed or vein with the
horizontal plane. The strike of a bed is the direction of a straight line
that connects two points of equal elevation on the bed.
STRINGERS Narrow mineralized veins usually indicating proximity to larger systems.
TAILINGS The material that remains after all metals considered economic have been
removed from ore during milling.
TPM Total Precious Metals. In this case Platinum+ Palladium+Gold.
TURBIDITE SEQUENCE Sediment deposited as a result of an underwater slump or avalanche.
ULTRAMAFIC Rocks which are very basic (high in magnesia and iron) in composition as
opposed to acidic. Usually host to nickel deposits.
UTEM University of Toronto Electro-Magnetic.
XENOLITH A foreign piece of rock that became enclosed in igneous rock prior to its
solidification, thus forming an inclusion.
ZN Zinc.
The terms "associate", "affiliate" and "subsidiary" have the meanings
ascribed to such terms in the Securities Act (Ontario).
The following abbreviations of measurements are used herein:
cm = centimetres kv = kilivolts (1000 volts)
Ha = hectares m = metres
Km = kilometres Mamsl = metres above mean sea level
ppm = parts per million ml - millilitres
ft = feet mm = millimetres
yd3 = yards cubed LHD = load haul dump
psi = pounds per square inch cfm = cubic feet per minute
Conversion into imperial equivalents is as follows:
TO CONVERT FROM TO MULTIPLY BY
Centimetres Inches 0.394
Metres Feet 3.218
Kilometres Miles 0.621
Hectares Acres 2.471
Tonnes short tons 1.102
Grams ounces (Troy) 0.032
grams per tonne ounce (Troy) per ton 0.029
The factor used to convert ounces (troy) per short ton (oz/t) to grams
per short ton (g/t) is 31.1048 grams.
All intersection lengths referred to are lengths of drill core and
should not be interpreted as being true widths.
CORPORATE STRUCTURE
NAME AND CORPORATION
FNX Mining Company Inc. (the "Corporation") was incorporated under the
Business Corporations Act (Ontario) as "Fort Knox Gold Resources Inc." by
articles of incorporation dated June 26, 1984. The Corporation became a
reporting issuer in the Province of Ontario following the filing of an exchange
offering prospectus dated November 26, 1984. The Corporation is also a
reporting issuer in the Provinces of British Columbia, Alberta, Manitoba and
Quebec. By articles of amendment effective June 20, 2002, the Corporation
changed its name to "FNX Mining Company Inc."
The registered office of the Corporation is located at 200 King Street
West, Suite 2300, Toronto, Ontario, M5H 3W5 and the principal office of the
Corporation is located at 55 University Avenue, Suite 700, Toronto, Ontario M5J
2H7.
The business of the Corporation consists of all phases of mineral
exploration, development and mining with a particular emphasis on exploration,
development and mining for commercial deposits of base and precious metals,
including platinum-palladium and gold. The Corporation does not have any
material subsidiaries.
GENERAL DEVELOPMENT OF THE BUSINESS
THREE YEAR HISTORY
The Corporation was founded in 1984 as Fort Knox Gold Resources Inc.
The Corporation became a reporting issuer in the Province of Ontario following
the filing of an exchange offering prospectus dated November, 1984. Effective
June 20, 2002 the Corporation changed its name to "FNX Mining Company Inc."
SIGNIFICANT ACQUISITIONS - ACQUISITION OF SUDBURY BASIN PROPERTIES
On November 29, 2001 the Corporation and Inco Ltd. ("Inco") entered
into a definitive agreement (the "Option to Purchase Agreement") to acquire a
100% interest in the mineral rights to five Inco mineral properties located in
the Sudbury Basin, Ontario (collectively, the "Properties"), and the right to
use such part of the surface rights and on-site facilities as are required to
permit exploration, development and mining operations to be conducted on the
Properties. The Option to Purchase Agreement became effective January 10, 2002
(the "Effective Date"). The Corporation entered into a joint venture
arrangement with Dynatec Corporation ("Dynatec") which also became effective on
the Effective Date, pursuant to which Dynatec acquired 25% of the Corporation's
interest in the Option to Purchase Agreement and Dynatec and the Corporation
formed the "Sudbury Basin Joint Venture".
All requirements to exercise the Option to Purchase Agreement were met
and the option to acquire the mineral rights for the Properties (the "Option")
was exercised by the Sudbury Basin Joint Venture on December 1, 2003 resulting
in the acquisition by the Sudbury Basin Joint Venture of a 100% interest in the
mineral rights to the Properties. As a result, the Sudbury Basin Joint Venture
holds a 100% interest in fee simple to the mineral rights to the Properties and
the right to access and use such part of the surface rights and on-site
facilities as are specified from time to time to permit exploration,
development facilities and mining to be completed in, on or under the
Properties.
The Option to Purchase Agreement includes the following additional
terms:
o In order to exercise the Option, the Sudbury Basin Joint Venture
incurred exploration expenditures totalling Cdn. $30 million (the
"Expenditure Requirement") on the Properties over a 23 month period
commencing the Effective Date. The Corporation satisfied the
Expenditure Requirement on December 1, 2003 as an aggregate of $33.9
million was spent on the Properties from January 10, 2002, to November
30, 2003. To March 1, 2004, $43 million in expenditures had been spent
on the Properties by the Sudbury Basin Joint Venture of which $28.8
million had been spent by the Corporation.
o If the Corporation discovers a New Deposit (as defined in the Option
to Purchase Agreement) on any of the Properties that contains mineral
resources having a value (based on then current metal prices) of at
least 600 million pounds of nickel, Inco has a right to reacquire a
51% interest in such a New Deposit (the "Back-in Right") by bringing
the New Deposit into commercial production without recourse to the
Corporation. Until Inco achieves payback, it shall receive 80% of net
revenues from production from the New Deposit. If Inco retains or
reacquires a 51% interest in a New Deposit, Inco and the Sudbury Basin
Joint Venture will form a joint venture, with Inco as the operator, to
hold and operate the New Deposit.
o Inco continues to be responsible for all environmental liabilities
existing on the Properties at the Effective Date. The Sudbury Basin
Joint Venture is responsible for all environmental liabilities
incurred on the Properties that result from the actions of the Sudbury
Basin Joint Venture after the Effective Date. Processing environmental
obligations cease on delivery of ore to Inco.
o Inco has a right of first offer to purchase any interest in the
Properties that the Sudbury Basin Joint Venture proposes to sell to an
arm's-length third party (the "Right of First Offer"). Inco's Right of
First Offer does not apply to any transfer of interest in the
Properties between the Corporation and Dynatec.
On the Effective Date, the Corporation and Inco agreed to a form of
off-take agreement (the "Off-take Agreement") which forms the basis of separate
Off-take Agreements to be entered into between the Sudbury Basin Joint Venture
and Inco as the Sudbury Basin Joint Venture commences mining any deposits found
on each of the Properties. As of March 23, 2004, the Sudbury Basin Joint
Venture had entered into an Off-take Agreement with Inco for the McCreedy West
Property. Under each Off-take Agreement, Inco is granted the right (the
"Purchase Right") to purchase all mineral products produced by the Sudbury
Basin Joint Venture on the relevant Property. Pursuant to each Off-take
Agreement, Inco is required to pay the Sudbury Basin Joint Venture for
recovered accountable metals derived from the Properties, less applicable
milling, smelting and refining charges. Inco has the right to refuse to
purchase any mineral products that are unsuitable for treatment or if Inco does
not have sufficient processing capacity to handle such mineral products, in
which case, the Sudbury Basin Joint Venture is entitled to have such mineral
products processed by a third party whereby Inco will be entitled to be paid a
2% net smelter royalty for nickel, copper and cobalt and a net smelter royalty
ranging from 2.5% to 5% for precious metals.
Production on the McCreedy West Property commenced in the second
quarter of 2003, with commercial production declared November 1, 2003. Revenue
from commercial production in November and December, 2003 and January 2004 is
recognized in January, February and March 2004 due to the two month delay in
setting the commodity prices under the terms of the Off-take Agreement with
Inco. The Corporation expects that capital invested in the McCreedy West
Property will be paid back within the first 12 months of commercial production.
TECHNICAL REPORT
Dr. James M. Patterson, BA (Hons. Geology), Ph.D., P. Geo., DIC.
("Patterson") prepared a report for the Corporation dated March 23, 2004,
relating to the Properties, entitled "Property Report, Sudbury, Ontario
Cu-Ni-PGE Properties (Victoria, McCreedy West, Levack, Norman and Kirkwood)"
(such report is referred to herein as the "Property Report"). Set forth as
Appendix A to this annual information form is a summary of the Property Report
which has been prepared under the authority, and with the consent of Patterson
and in some cases is an extract from the Property Report. The full text of the
Property Report will be available on SEDAR.
TRENDS
The Corporation is engaged in the acquisition, exploration and
development of mineral properties with an emphasis on the exploration of base
and precious metal deposits, including platinum-palladium and gold.
Nickel prices increased significantly in 2003, starting at US$3.24 per
pound and finishing at US$7.55 per pound. Nickel demand grew 7% in 2003 and is
expected to grow at the same 7% rate in 2004. Strong economic growth around the
world, led by China, is expected to provide support for nickel demand.
Management of the Corporation believes that little shutdown capacity exists and
substantial new mines will not be providing significant material to market
before 2006. Accordingly, substantial supply increases are not expected by
management in the near term. Prices are expected by management to stay firm for
the next few years.
Copper prices rose on demand during 2003, created by a strong world
economy and particularly by US housing starts. Copper prices started 2003 at
US$0.70 per pound and rose to US$1.05 per pound by year end.
Gold prices started 2003 at US$343 per ounce and increased to US$417
per ounce by year end. Weakness in the US dollar against many other world
currencies over the period was largely credited with the price increase.
Platinum prices increased from US$598 per ounce to US$814 per ounce
over 2003, on tight supply. Palladium prices decreased from US$233 per ounce to
US$193 per ounce over 2003 on oversupply and a thin market.
NARRATIVE DESCRIPTION OF THE BUSINESS
PRINCIPAL PROPERTIES
The Corporation's current business is conducted primarily in Ontario,
Canada. As at the date hereof, the Properties constitute the only material
properties of the Corporation. During 2003, the Corporation sold its other
non-material properties as described below:
Canwell Property, Alaska
On August 22, 2001, the Corporation announced that it had optioned the
Canwell property (comprising 44 state claims, or 2.75 square miles) of three
groups of contiguous claims totalling 827 mining claims in the State of Alaska
to Nevada Star Resources Corp. ("Nevada Star"). Nevada Star had the right to
acquire a 60% interest in the Canwell property by spending U.S. $600,000 and
issuing 200,000 Nevada Star common shares to the Corporation over a four year
period. During 2003, Nevada Star purchased the Corporation's remaining interest
in the property for 150,000 Nevada Star common shares and 300,000 share
purchase warrants of Nevada Star. Share purchase warrants are exercisable at
prices between $0.32 and $0.42 per share expiring during periods between July
2004 and July 2006.
Larder Lake Property, Ontario
In October of 1998 the Corporation entered into an option/joint
venture agreement on the Cheminis, Bear Lake, and Fernland mineral properties,
held by NFX Gold Inc. ("NFX") in the Larder Lake area of northeastern Ontario
(collectively called the "Larder Lake Property"). The Larder Lake Property
covers 4.5 km of strike length of the Larder Lake Break. In 1999, the
Corporation earned an undivided 25% interest in the Larder Lake Property after
making a cash payment of $12,500 and expending $1 million on exploration on the
property. NFX and the Corporation subsequently formed a joint venture to manage
the Larder Lake Property. During 2003, NFX purchased the Corporation's interest
in the Larder Lake Property in exchange for 2,000,000 NFX common shares.
Gunsite Property, Alaska
During 2003, the Corporation sold its 100% interest in the 7,560 acre
Gunsite property located about 90 miles north of Anchorage, Alaska in exchange
for a 1.5% net smelter royalty.
EMPLOYEES
The Corporation had 41 full-time employees as at March 23, 2004. The
Corporation also engages independent contractors and consultants from time to
time to carry on business. The Corporation anticipates hiring additional people
as its infrastructure requirements increase as it further explores and develops
the Properties.
COMPETITIVE CONDITIONS
The mineral exploration and mining business is competitive in all
phases of exploration, development and production. The Corporation competes
with a number of other entities in the search for and the acquisition of
productive mineral properties. As a result of this competition, the majority of
which is with companies with greater financial resources than the Corporation,
the Corporation may be unable to acquire attractive properties in the future on
terms it considers acceptable. As well, the Corporation competes with other
companies for the recruitment and retention of qualified employees. Finally,
the Corporation competes with other resource companies, many of whom have
greater financial resources and/or more advanced properties, in attracting
equity and other capital.
The ability of the Corporation to acquire properties depends on its
ability to develop its present properties and on its ability to select, acquire
and bring to production suitable properties or prospects for mineral
exploration and development. Factors beyond the control of the Corporation may
affect the marketability of base metals and precious metals mined or discovered
by the Corporation. Base metal and precious metal prices have historically been
subject to fluctuations and are affected by numerous factors beyond the control
of the Corporation. See "Risk Factors".
RISK FACTORS
Mining Industry
The exploration for and development of mineral deposits involves
significant risks which even a combination of careful evaluation, experience
and knowledge may not eliminate. While the discovery of an ore body may result
in substantial rewards, few properties which are explored are ultimately
developed into producing mines. Major expenses may be required to establish ore
reserves, to develop metallurgical processes and to construct mining and
processing facilities at a particular site. It is impossible to ensure that the
current exploration programs planned by the Corporation will result in a
profitable commercial mining operation.
Whether a mineral deposit will be commercially viable depends on a
number of factors, some of which are the particular attributes of the deposit,
such as size, grade and proximity to infrastructure, as well as metal prices
which are highly cyclical and government regulations, including regulations
relating to prices, taxes, royalties, land tenure, land use, importing and
exporting of minerals and environmental protection. The exact effect of these
factors cannot be accurately predicted, but the combination of these factors
may result in the Corporation not receiving an adequate return on invested
capital.
Mining operations generally involve a high degree of risk. The
Corporation's operations are subject to all the hazards and risks normally
encountered in the exploration, development and production of ore, including
unusual and unexpected geology formations, rock bursts, cave-ins, flooding and
other conditions involved in the drilling and removal of material, any of which
could result in damage to, or destruction of, mines and other producing
facilities, damage to life or property, environmental damage and possible legal
liability. Although adequate precautions to minimize risk will be taken,
milling operations are subject to hazards such as equipment failure or failure
of retaining dams around tailings disposal areas which may result in
environmental pollution and consequent liability.
The Corporation's activities are directed towards the search,
evaluation and development of mineral deposits. Some of the mineral properties
in which the Corporation has an interest contain no known body of commercial
ore and any exploration programs thereon are exploratory searches for ore while
other properties in which the Corporation has an interest are subject to
preliminary stages of exploration and development programs only. There is no
certainty that the expenditures to be made by the Corporation as described
herein will result in discoveries of commercial quantities of ore. There is
aggressive competition within the mining industry for the discovery and
acquisition of properties considered to have commercial potential. The
Corporation will compete with other interests, many of which have greater
financial resources than it will have for the opportunity to participate in
promising projects. Significant capital investment is required to achieve
commercial production from successful exploration efforts.
Government Regulation
The exploration activities of the Corporation are subject to various
federal, provincial and local laws governing prospecting, development,
production, taxes, labour standards and occupational health, mine safety, toxic
substance and other matters. Exploration activities are also subject to various
federal, provincial and local laws and regulations relating to the protection
of the environment. These laws mandate, among other things, the maintenance of
air and water quality standards, and land reclamation. These laws also set
forth limitations on the generation, transportation, storage and disposal of
solid and hazardous waste. Although the Corporation's exploration activities
are currently carried out in accordance with all applicable rules and
regulations, no assurance can be given that new rules and regulations will not
be enacted or that existing rules and regulations will not be applied in a
manner which could limit or curtail production or development. Amendments to
current laws and regulations governing operations and activities of
exploration, mining and milling or more stringent implementation thereof could
have a substantial adverse impact on the Corporation.
Government approvals and permits are currently, and may in the future
be, required in connection with the Corporation's operations. To the extent
such approvals are required and not obtained, the Corporation may be curtailed
or prohibited from proceeding with planned exploration or development of
mineral properties.
Failure to comply with applicable laws, regulations and permitting
requirements may result in enforcement actions thereunder, including orders
issued by regulatory or judicial authorities causing operations to cease or be
curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment, or remedial actions. Parties engaged in
mining operations may be required to compensate those suffering loss or damage
by reason of the mining activities and may have civil or criminal fines or
penalties imposed for violations of applicable laws or regulations.
Amendments to current laws, regulations and permits governing
operations and activities of mining companies, or more stringent implementation
thereof, could have a material adverse impact on the Corporation and cause
increases in exploration expenses, capital expenditures or production costs or
reduction in levels of production at producing properties or require
abandonment or delays in development of new mining properties.
Permits and Licences
The exploitation and development of mineral properties may require the
Corporation to obtain regulatory or other permits and licences from various
governmental licensing bodies. There can be no assurance that the Corporation
will be able to obtain all necessary permits and licences that may be required
to carry out exploration, development and mining operations on its properties.
Environmental Risks and Hazards
All phases of the Corporation operations are subject to environmental
regulation in the various jurisdictions in which it operates. Environmental
legislation is evolving in a manner which will require stricter standards and
enforcement, increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects and heightened degree of
responsibility for companies and their officers, directors and employees. There
is no assurance that future changes in environmental regulation, if any, will
not adversely affect the Corporation's operations. Environmental hazards may
exist on the properties on which the Corporation holds interests which are
unknown to the Corporation at present which have been caused by previous or
existing owners or operators of the properties. The Corporation may become
liable for such environmental hazards caused by previous owners and operators
of the properties even where it has attempted to contractually limit its
liability.
Production of mineral properties may involve the use of dangerous and
hazardous substances such as sodium cyanide. While all steps will be taken to
prevent discharges of pollutants into the ground water the environment, the
Corporation may become subject to liability for hazards that cannot be insured
against.
Commodity Prices
The profitability of the Corporation will be significantly affected by
changes in market price for nickel and by changes in the US:Canadian exchange
rate. See "General Development of the Business - Trends". During 2004, a US$1
per pound change in the price of nickel will generate a CDN$7 million change on
the Corporation's income statement. Each $0.05 change in exchange rates will
generate a change of $1.5 million on the Corporation's income statement.
The Corporation has not entered into any hedge agreements in respect
of metal or foreign exchange at this time. Such contracts would prevent losses
in situations when the price changed adversely and would prevent gains in
situations where the price changed favourably. The level of interest rates, the
rate of inflation, world supply of base metals and precious metals and
stability of exchange rates can all cause significant fluctuations in base
metal and precious metal prices. Such external economic factors are in turn
influenced by changes in international investment patterns and monetary systems
and political developments. The price of base metals and precious metals has
fluctuated widely in recent years, and future serious price declines could
cause continued commercial production to be impracticable. Depending on the
price of base metals and precious metals, cash flow from mining operations may
not be sufficient to cover operating costs. Any figures for reserves presented
by the Corporation will be estimates and no assurance can be given that the
anticipated tonnages and grades will be achieved or that the indicated level of
recovery will be realized. Market fluctuations and the price of base metals and
precious metals may render reserves uneconomical. Moreover, short-term
operating factors relating to the reserves, such as the need for orderly
development of the ore bodies or the processing of new or different grades of
ore, may cause a mining operation to be unprofitable in any particular
accounting period.
Uninsured Risks
The Corporation carries insurance to protect against certain risks in
such amounts as it considers adequate. Risks not insured against include
environmental pollution or other hazards against which such corporations cannot
insure or against which they may elect not to insure.
Conflicts of Interest
Certain of the directors of the Corporation also serve as directors of
other companies involved in natural resource exploration and development and
consequently there exists the possibility for such directors to be in a
position of conflict. Any decision made by such directors involving the
Corporation will be made in accordance with their duties and obligations to
deal fairly and in good faith with the Corporation and such other companies. In
addition, such directors will declare, and refrain from voting on, any matter
in which such directors may have a conflict of interest.
Land Title
Although title to the Properties has been reviewed by or on behalf of
the Corporation and title opinions were delivered to the Corporation, no
assurances can be given that there are no title defects affecting the
Properties. Title insurance generally is not available for mining claims in
Canada, and the Corporation's ability to ensure that it has obtained secure
claim to individual mineral properties or mining concessions may be severely
constrained. The Corporation has not conducted surveys of the claims in which
it holds direct or indirect interests; therefore, the precise area and location
of such claims may be in doubt. Accordingly, the Properties may be subject to
prior unregistered liens, agreements, transfers or claims, including native
land claims, and title may be affected by, among other things, undetected
defects. In addition, the Corporation may be unable to operate the Properties
as permitted or to enforce its rights with respect to its Properties.
Joint Venture
The Corporation may enter into one or more joint ventures in the
future, in addition to the Sudbury Basin Joint Venture. See "General
Development of the Business - Significant Acquisitions - Acquisition of Sudbury
Basin Properties." Any failure of Dynatec or any other joint venture partner to
meet its obligations could have a material adverse affect on such joint
ventures. In addition, the Corporation may be unable to exert influence over
strategic decisions made in respect of properties subject of such joint
ventures.
SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial information of the
Corporation for the fiscal years ended December 31, 2003, December 31, 2002 and
December 31, 2001 (comprised of six months). The Corporation's audited
financial statements for the fiscal year ended December 31, 2003 are attached
hereto as Appendix C. The following summary of selected audited financial
information (in Canadian $000's except per share numbers) is derived from, and
should be read in conjunction with, and is qualified in its entirely by
reference to the Corporation's audited financial statements, including the
notes thereto, for the fiscal years ended December 31, 2003, December 31, 2002,
December 31, 2001 (comprised of six months).
YEAR ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------ ------------------- -----------------------
2003 2002 2001
------------------ ------------------- -----------------------
Revenue $- $- $-
Interest Income 1,128 481 20
Administration Expenses 2,384 1,224 188
Exploration Expenses 1,741 19 53
Operating Loss (Before Mineral Exploration 7,789 4,027 222
Properties Written Off)
Mineral Exploration Properties Written Off 2,288 2,962 272
Gain on Sale of Securities - - 157
Net Loss 10,077 6,989 337
Loss per Share 0.24 0.23 0.03
AS AT DEC. 31, AS AT DEC. 31, AS AT DEC. 31,
------------------ ------------------- -----------------------
2003 2002 2001
------------------ ------------------- -----------------------
Cash and Short Term Deposits $53,657 $30,933 $1,036
Current Assets 59,716 31,951 1,168
Mining Properties 23,695 - -
Mineral Exploration Properties 23,816 12,880 5,470
Current Liabilities 3,041 993 169
Minority Interests 14,599 - -
Shareholders' Equity 89,778 44,090 6,474
QUARTERLY FINANCIAL INFORMATION
The following table is a summary of selected quarterly financial
information of the Corporation (in Canadian $000's except per share numbers)
for each of the eight most recently completed quarters ending at December 31,
2003.
THREE MONTHS ENDED
-----------------------------------------------------------------------------------
DEC. 31/03 SEPT. 30/03 JUNE 30/03 MARCH 31/03
---------------------- ------------------ --------------------- ------------------
Revenue from Operations $- $- $- $-
Net Loss 4,020 3,010 1,487 1,560
Loss per Share 0.08 0.08 0.04 0.04
THREE MONTHS ENDED
-----------------------------------------------------------------------------------
DEC. 31/02 SEPT. 30/02 JUNE 30/02 MARCH 31/02
---------------------- ------------------ --------------------- ------------------
Revenue from Operations $- $- $- $-
Net Loss 3,331 2,071 291 1,296
Loss per Share 0.11 0.07 0.01 0.04
DIVIDENDS
The Corporation does not currently have a policy of declaring or
paying dividends on its Common Shares and intends to retain future earnings, if
any, for use in its business and does not anticipate paying dividends on its
common shares in the foreseeable future. Any determination to pay any future
dividends will remain at the discretion of the board of directors of the
Corporation and will be made based on the financial condition and other factors
deemed relevant by the board of directors. The Corporation has not paid any
dividends since its incorporation.
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATING RESULTS
GENERAL
The Corporation is principally engaged in the acquisition,
exploration, development and mining of mineral properties with an emphasis on
the exploration of base and precious metal deposits, including
platinum-palladium and gold. The Properties are the Corporation's most
significant asset. See "General Development of the Business - Significant
Acquisitions - Acquisition of the Sudbury Basin Properties". See "Narrative
Description of the Business - Principal Properties". The Corporation intends to
seek joint venture partners to manage or fund exploration on its properties
that are not part of the Sudbury Basin Joint Venture.
The Corporation's management discussion and analysis for the year
ended December 31, 2003 is included in the Corporation's annual report for the
year ended December 31, 2003 and is incorporated by reference into this annual
information form.
DIRECTORS AND OFFICERS
The name, municipality of residence and position held by each director
and executive officer of the Corporation are set out below:
-------------------------------- ---------------------- --------------------- -------------------------------------------
NAME AND MUNICIPALITY OF POSITION WITH PERIOD OF SERVICE PRESENT OCCUPATION IF DIFFERENT FROM
RESIDENCE CORPORATION OFFICE HELD (1)
-------------------------------- ---------------------- --------------------- -------------------------------------------
A. Terrance MacGibbon President, Chief Since 1997 N/A
Oakville, Ontario Executive Officer
and Director
-------------------------------- ---------------------- --------------------- -------------------------------------------
Terrence Podolsky Director Since 1984 Consulting Geologist
Oakville, Ontario
-------------------------------- ---------------------- --------------------- -------------------------------------------
Donald M. Ross Director Since 1984 Chairman of the Board of
Toronto, Ontario Jones, Gable & Company Limited
-------------------------------- ---------------------- --------------------- -------------------------------------------
Robert D. Cudney Director Since 1993 President and Chief Executive Officer
Toronto, Ontario Northfield Capital Corporation
-------------------------------- ---------------------- --------------------- -------------------------------------------
Wayne G. Beach Director Since 1996 Barrister and Solicitor
Toronto, Ontario Beach, Hepburn LLP
-------------------------------- ---------------------- --------------------- -------------------------------------------
James Ashcroft Director Since 2001 Consulting Mining Engineer
Sudbury, Ontario
-------------------------------- ---------------------- --------------------- -------------------------------------------
Frank McKenna Director Since 2003 Counsel with McInnes Cooper
Moncton, New Brunswick
-------------------------------- ---------------------- --------------------- -------------------------------------------
John Lydall Director Since 2003 Retired Mining Engineer and Investment
Oakville, Ontario Broker
-------------------------------- ---------------------- --------------------- -------------------------------------------
J. Duncan Gibson Director Since 2003 Retired Bank Executive
Toronto, Ontario
-------------------------------- ---------------------- --------------------- -------------------------------------------
James Patterson Vice-President, Since 2002 N/A
Oakville, Ontario Exploration
-------------------------------- ---------------------- --------------------- -------------------------------------------
John Ross Chief Financial Since 2003 N/A
Scarborough, Ontario Officer
-------------------------------- ---------------------- --------------------- -------------------------------------------
David Constable Vice-President, Since 2002 N/A
Burlington, Ontario Investor Relations
and Corporate Affairs
-------------------------------- ---------------------- --------------------- -------------------------------------------
(1) All of the foregoing directors and officers have held their present
position(s) with the same or associated firms or organizations during the
past five years except as follows:
(a) prior to January 1, 2001, Mr. Beach was self-employed;
(b) during the five years prior to his appointment as a director of the
Corporation, Mr. McKenna has been and is currently Counsel with the
Atlantic law firm of McInnes Cooper and is a director of several
major corporations. Mr. McKenna served as the Premier of New
Brunswick from 1987-1997;
(c) Mr. Lydall retired as Managing Director of the Mining Investment
Banking Group at National Bank Financial during October 2003. Prior
to his appointment as Managing Director of the Mining Investment
Banking Group at National Bank Financial, he held various positions
at National Bank Financial and its predecessor company, First
Marathon ranging from mining analyst to senior investment banker;
(d) during November 2001, Mr. Gibson retired as Vice Chairman of the
Commercial Banking Group of a Canadian chartered bank, a position
which he held from 1999. From January 1997 to April 1999 Mr. Gibson
was the Vice Chairman of the Wealth Management Services Group of a
Canadian chartered bank. His career at a Canadian chartered bank
included senior executive positions in Commercial Banking, Wealth
Management, Operations and Retail Banking in Canada and in
Corporate Banking in the United States;
(e) Mr. Patterson was a consultant to the Corporation from October 2001
to April 2002 and from 1999 to 2001 was Vice-President Exploration
and a director of Crowflight Minerals Inc. and Hornby Bay
Exploration Ltd.;
(f) Mr. Constable was Vice-President Investor Relations at Normandy
Mining Limited from August 1997 to May 2002; and
(g) Mr. J. Ross was employed by IAM Gold Corp. from 1996 to 2003
initially as the Corporate Controller and from 2001 to 2003 as
Chief Financial Officer.
Each of the foregoing directors has held of the office of director
since the time indicated above, and will hold office until the next annual
meeting or until his successor is duly elected unless his office is earlier
vacated in accordance with the by-laws of the Corporation. The directors and
officers of the Corporation own, directly or indirectly, an aggregate of
2,757,997 Common Shares as at March 23, 2004, representing approximately 5.8%
of the issued and outstanding Common Shares as at such date.
Except as set forth below, no director of officer of the Corporation
has within the last ten years:
(i) either individually or through any personal holding company
of his, become bankrupt, made a proposal under any
legislation relating to bankruptcy as insolvency, or been
subject to or instituted any proceedings, arrangement or
compromise with creditors, or had a receiver,
receiver-manager or trustee appointed to hold his assets or
the assets of any personal holding company;
(ii) been a director or officer of any issuer that, while he was
acting in such capacity: (a) was the subject of a cease trade
or similar order, or an order that denied the issuer access
to any exemptions under Canadian securities legislation, for
a period of more than 30 consecutive days; or (b) became
bankrupt, made a proposal under any legislation relating to
bankruptcy or insolvency or was subject to or instituted any
proceedings, arrangement or compromise with creditors or had
a receiver, receiver manager or trustee appointed to hold his
assets;
(iii) ever been subject to any: (a) penalties or sanctions imposed
by a court relating to Canadian securities legislation or by
a Canadian securities regulatory authority, or has ever
entered into a settlement agreement with a Canadian
securities authority; or (b) other penalties or sanctions
imposed by a court or regulatory body that would be likely to
be considered important to a reasonable investor making an
investment decision in the Corporation.
1 Mr. Beach, a director of the Corporation, was a director and
officer of Newstar Resources Inc., which, in July 1999, became subject to a
cease trade order for failing to file financial statements (as a result of the
bankruptcy of its subsidiary).
2 Mr. Patterson, an officer of the Corporation, was a director
of Mispec Resources Inc. which, in January 2000 became subject to a cease trade
order for failing to file financial statements;
3 Mr. D. Ross, a director of the Corporation, paid a fine of
$7,500 in 2001 for charges of failing to file insider and early warning reports
in the province of Alberta, paid a fine of $10,000 in 1991 for charges of
failing to properly disclose certain information regarding short sales of
securities and paid a fine of $14,000 in 1982 for charges of operating an
option account without proper documentation on file.
4 Mr. McKenna, a director of the Corporation was a director of
AlphaNet Telecom Inc. which, in February 1999, was assigned into bankruptcy.
5 Mr. Cudney, a director of the Corporation, was a director of
Aspen Group Resources Corporation which in May 2003 became subject to a
management cease trade order for failing to file financial statements. The
cease trade order was lifted in July 2003.
The Corporation has established an audit committee, a corporate
governance committee, a safety, healthy and environment committee and a
compensation committee, the members of each of which are set forth below:
Audit Committee - Messrs. Gibson, D. Ross and Beach, with Mr. John
Ross as management advisor.
Corporate Governance Committee - Messrs. Lydall, Podolsky and
Ashcroft, with Mr. David Constable as management advisor.
Safety, Health and Environment Committee - Messrs. Ashcroft, Cudney
and MacGibbon, with Mr. James Patterson as management advisor.
Compensation Committee - Messrs. Beach, McKenna and Gibson, with Mr.
John Ross as management advisor.
MARKET FOR SECURITIES
The Common Shares are listed and posted for trading on the Toronto
Stock Exchange and the American Stock Exchange under the symbol "FNX".
SHARE CAPITAL
The authorized capital of the Corporation consists of an unlimited
number of Common Shares of which 47,506,169 Common Shares were issued and
outstanding as at March 23, 2004.
ADDITIONAL INFORMATION
Additional financial information is provided in the Corporation's
Financial Statements for the fiscal year ended December 31, 2003.
The Corporation will provide to any person, upon request:
(a) when the securities of the Corporation are in the course of a
distribution pursuant to a short form prospectus or a
preliminary short form prospectus has been filed in respect
of a distribution of its securities,
(i) one copy of the Annual Information Form of the
Corporation (the "AIF"), together with one copy of any
document, or the pertinent pages of any document,
incorporated by reference in the AIF,
(ii) one copy of the comparative financial statements of the
Corporation for its most recently completed financial
year together with the accompanying report of the
auditor and one copy of any interim financial
statements of the Corporation subsequent to the
financial statements for its most recently completed
financial year,
(iii) one copy of the information circular of the
Corporation in respect of its most recent annual
meeting of shareholders that involved the election of
directors or one copy of any annual filing prepared in
lieu of that information circular, as appropriate, and
(iv) one copy of any other documents that are incorporated
by reference into the preliminary prospectus or the
prospectus and are not required to be provided under
(i) to (iii) above; or
(b) at any other time, one copy of any other documents referred
to in (1)(a)(i), (ii) and (iii) above, provided the
Corporation may require the payment of a reasonable charge if
the request is made by a person who is not a security holder
of the Corporation.
Additional information including directors' and officers' remuneration
and indebtedness, principal holders of the issuer's securities, options to
purchase securities and interests of insiders in material transactions, if
applicable, is contained in the Corporation's information circular for its most
recent annual meeting of shareholders that involved the election of directors,
and additional financial information is provided in the Corporation's
comparative financial statements for its most recently completed financial
year.
For additional copies of this Annual Information Form please contact:
FNX Mining Company Inc.
7th Floor, 55 University Avenue
Toronto, Ontario M5J 2H7
Tel: (416) 628-5929
Fax: (416) 360-0550
Email: info@fnxmining.com
Schedule A
Dr. James M. Patterson, BA (Hons. Geology), Ph.D., P.Geo., DIC, ("PATTERSON")
has prepared a report (referred to as the "PROPERTY REPORT") for FNX Mining
Company ( the "CORPORATION" or "FNX") and dated 23 March, 2004, and is a
qualified person as such term is defined in NATIONAL INSTRUMENT 43-101 -
STANDARDS OF DISCLOSURE FOR EXPLORATION AND DEVELOPMENT AND MINING PROPERTIES
(NI 43-101"). This Appendix A to the annual information form of the Corporation
dated 23 March, 2004 contains a Summary of the Property Report.
1. INTRODUCTION
On 10 January, 2002, Fort Knox Gold Resources Inc., the former name of FNX,
signed an option to purchase agreement (the "AGREEMENT") with Inco Limited
("INCO") by which FNX could acquire a 100% interest in five Sudbury Basin
mineral properties ( "THE PROPERTIES") for which, Inco had no current mining or
development plans (the "OPTION").
The property package included former producing mines known as the Victoria,
McCreedy West, Levack, Whistle (Norman Property) and Kirkwood mines (Figure 1).
The Option required continuing exploration and, if warranted, development of
the subject Properties under a 52 month program within which the Corporation
must spend $30.0 million to earn its interest. Upon signing the Agreement with
Inco, the Corporation formed a joint venture ( the "SJV") with Dynatec
Corporation ("DYNATEC"). The SJV, owned as to 75% by the Corporation and as to
25% by Dynatec, will explore, develop and, if economically appropriate, mine
these properties.
The SJV, having exceeded the required $30.0 million in expenditures on the
Properties by December 1, 2003, is now vested and owns 100% interest in the
mineral rights to the five Properties.
The following Table demonstrates the mining history on the Properties acquired.
TABLE 1: SUDBURY PROJECT PROPERTIES - PRODUCTION HISTORY
------------------ ---------- -------------- -------- ------ -------- ------- ------ --------- --------
% oz/t g/t
------------------ ---------- -------------- -------- ------ -------- ------- ------ --------- --------
PROPERTY YEARS TONS CU NI PT PD AU TPM TPM
------------------ ---------- -------------- -------- ------ -------- ------- ------ --------- --------
VICTORIA 1900-23 890,000 2.99 2.12 na na na na
1973-78 650,000 1.26 0.83 na na na 0.07
Total 1,540,000 2.26 1.57 na na na +0.061 +2.0
------------------ ---------- -------------- -------- ------ -------- ------- ------ --------- --------
MCCREEDY WEST 1974-98 15,800,000 1.70 1.44 0.02 0.02 0.01 0.05 1.5
------------------ ---------- -------------- -------- ------ -------- ------- ------ --------- --------
LEVACK 1915-29 na
1937-97 66,600,000 1.31 2.00 0.02 0.02 0.01 0.05 1.5
------------------ ---------- -------------- -------- ------ -------- ------- ------ --------- --------
NORMAN2 1988-91 na
1994-97 5,710,000 0.33 0.95 na na na 0.01 0.3
------------------ ---------- -------------- -------- ------ -------- ------- ------ --------- --------
KIRKWOOD 1914-16 71,600 1.53 2.81 na na na na
1969-76 2,488,000 0.99 0.87 na na na na
OPEN PIT 1970-72 134,800 0.96 0.53 na na na na
Total 2,694,400 1.00 0.90 na na na na
------------------ ---------- -------------- -------- ------ -------- ------- ------ --------- --------
Notes: 1 Total PMs estimated in line with production data from 1973-1978 (JMP)
2 Production from the Whistle Mine.
na: Not assayed or assays unavailable for these elements
[GRAPHIC OMITTED - Sudbury Basin: Simplified Geological Map and Location of
Cu-Ni-PGM Properties]
2. THE SUDBURY AREA
2.1 GENERAL
The Properties, the mineral rights of which are now owned 100% by the SJV, are
located in close proximity to the City of Greater Sudbury, in northeastern
Ontario approximately 400 km north of Toronto. With a population of some
165,000, Sudbury is the major centre in northeastern Ontario for mining,
medicine, education, business and commerce, and government administration. All
of the Properties are located within 35 km from downtown Sudbury and adjacent
to serviced communities with a mining tradition and base.
All the Properties are accessible by wheeled vehicles on a 12-month basis and
year-round mining programs can be carried out on all the Properties.
The area of the Properties has a history of nickel and copper mining stretching
back over 100 years with two of the world's major nickel producers, Inco and
Falconbridge Limited ("FALCONBRIDGE") having been active in the area since 1902
and 1928 respectively. These companies have extensive mining, smelting and
refining operations in the area and these constitute the largest fully
integrated mining complex in the world. The nickel-copper-platinum group metals
("NI-CU-PGM") ore bodies at Sudbury constitute the world's largest known
concentration of Ni-Cu sulphides. Total reserves and historic production are
estimated at 1.66 billion tonnes of ore with production in excess of 8.5
million tonnes of nickel metal and 8.4 million tonnes of copper metal. Platinum
Group Metals, gold and cobalt are among important byproducts recovered from
these ores.
2.2 PHYSIOGRAPHY AND CLIMATE
The area is located in the Canadian Shield with a typical topography of low,
rocky hills interspersed with numerous lakes and swamps. Elevations range from
230 to 460 m above sea level with local relief in the order of 30 to 60 m. The
major topographic feature of the area is the Sudbury Basin (the "BASIN") which
forms an elliptical ring some 60 km in the northeast direction by 28 km wide.
The topographically higher outer portions of the Basin are formed by igneous
rocks of the Sudbury Igneous Complex (the "SIC"). The northern, southern and
eastern parts of the rim are referred to as the North Range, South Range and
East Range respectively. The central part of the Basin is occupied by
low-lying, flat agricultural land.
The dominant vegetation type is temperate boreal forest which, before the onset
and growth of the mining industry, supported a thriving lumber industry. The
climate is northern temperate with warm summers and cold winters. Average
temperatures range from 24.8o C in the summer to minus 8.40 C in winter and
with annual precipitation of 62.2 cm of rain and 247.5 cm of snow.
3. GEOLOGY OF THE SUDBURY AREA
The Properties lie within the confines of the Sudbury Structure (Figure 1).
This structure straddles the boundary between the Archean Superior Province and
the Early Proterozoic Southern Province. The Late Proterozoic Grenville
Province and its northern limit, the Grenville Front, lie some 10 km south of
the Sudbury Structure.
The Superior Province Archean rocks to the north of the Sudbury Structure
consist mainly of granitic plutons and gneisses and minor volcanic rocks of the
Levack Gneiss Complex which has been dated at approximately 2700 Ma and which
were deformed and exposed to peak metamorphic conditions by a 2640 Ma tectonic
event.
South of the Superior Province is the Early Proterozoic Southern Province of
metavolcanic and metasedimentary rocks deposited between 2490 and 2200 Ma.
These rocks are extensively intruded by sills and dykes of Nipissing Diabase
dated at approximately 2200 Ma.
3.1 THE SUDBURY STRUCTURE
Superimposed on the rocks of the Superior and Southern Provinces is the Sudbury
Structure. This is the geological expression of events triggered by the impact
of a giant meteorite approximately 1850 Ma ago, followed by deposition of
fallback material and Whitewater Group sediments, intrusion of the SIC, and
formation of the well known and economically important Ni-Cu-PGM deposits.
Modeling of the Sudbury Structure suggests that the original crater caused by
the meteorite was more than 150 km in diameter. Erosion has exposed the
smaller, lower portion of the crater and tectonic deformation and thrusting has
deformed the once circular structure into the elliptical shape of today.
Extensive thrusting of the South Range exposes a deeper level of the SIC
compared to the North and East Ranges.
There are three main lithological components recognizable within the Sudbury
Structure:
1) Sudbury Breccia-brecciated rocks surrounding the structure,
2) SIC, and
3) The Whitewater Group sediments occupying the centre of the Basin.
3.1.1 Sudbury Breccia
An important feature of an impact site is the extensive brecciation of the
rocks around the point of impact. This is particularly evident in the host
rocks to the Sudbury Structure that form the footwall to the SIC. This
impact-derived brecciation is commonly referred to as "Sudbury Breccia" and is
concentrated in the country rocks close to the SIC and decreases in intensity
outward for a distance of up to 80 km.
Sudbury Breccia occurs as erratic and irregular zones of brecciated country
rock, characterized by extreme variability in distribution, size and geometry.
Zones of Sudbury Breccia vary from many meters across to thin veins. Angular to
semi-rounded clasts of country rock, varying in size from minute fragments to
massive boulders, occur in a finely-comminuted, dark, locally flow-banded
matrix. The matrix is thought to have formed by the rapid injection of locally
crushed and frictionally melted material created by the passage of the shock
wave caused by impact and is referred to as pseudotachylite. Close to the SIC,
the Sudbury Breccia matrix commonly displays thermal metamorphic effects and is
locally termed meta-Sudbury Breccia.
Of vital importance for ore formation is that Sudbury Breccia, adjacent to
Ni-Cu sulphide deposits at the SIC footwall contact, has provided an
environment conducive to the migration of copper and precious metals into the
footwall to form Cu/PGM-rich orebodies.
3.1.2 Whitewater Group
Occupying the centre of the Sudbury Structure is the Whitewater Group of
sediments formed by the fallback into the crater of impact debris and the
subsequent erosion of surrounding debris fields into the Basin created by the
impact. The Whitewater Group consists of the Onaping, Onwatin and Chelmsford
formations. The Onaping and Onwatin formations show a fining upwards sequence
from very coarse debris deposits at the base to very fine muddy sediments at
the top. The Onaping formation is interpreted as representing fallback of
impact debris into the crater. Many clasts in the Onaping Formation display
shock (impact) metamorphic effects.
Overlying the Onwatin slate is the Chelmsford sandstone, a well-bedded and
gently folded turbidite sequence of greywacke sandstones.
3.1.3 Sudbury Igneous Complex (SIC)
The 1850 Ma SIC is divided into a lower unit of norite overlain by transitional
quartz gabbro and micropegmatite and was intruded between the base of the
impact crater and the overlying Onaping formation.
Many of the Ni-Cu-PGM deposits of the Sudbury Basin are hosted by the Sublayer,
a stratigraphic unit defined by the Sublayer Norite and Footwall (or Granite)
Breccia. The Sublayer Norite is a sulphide-rich, igneous-textured,
xenolith-bearing quartz norite. The Footwall Breccia matrix is
variably-textured and granodioritic. The Sublayer occurs as a discontinuous
layer up to several hundred metres thick in depressions or embayments between
the footwall and the overlying main mass norite. The xenoliths in the Sublayer
are dominantly of gabbroic, noritic, gneissic, and ultramafic composition.
Radiating from and concentric to the SIC are dyke-like bodies of quartz diorite
termed "offsets" that have been interpreted to infill major impact-derived
fracture zones. Radial offsets connect to the SIC, whereas the concentric dykes
commonly show no physical connection to the SIC. The radial offset dykes
average less than 100 m wide, and become narrower with increasing distance from
the junction with the SIC.
The offsets host Ni-Cu-PGM deposits and have spawned a number of very
productive mining operations (Copper Cliff North, Copper Cliff South, Totten).
3.2 MINERAL DEPOSITS
The orebodies associated with the Sudbury Structure constitute the largest
known concentration of nickel-copper sulphides in the world. Total reserves and
production are estimated at approximately 1.66 billion tonnes of ore. Metal
production to date from these deposits exceeds 8.5 million tonnes of nickel and
8.4 million tons of copper. By-products from this production include cobalt,
platinum, palladium, gold, silver, osmium, iridium, rhodium and ruthenium.
The bulk of sulphides in the Sudbury ores consists essentially of varying
proportions of pyrrhotite, chalcopyrite and pentlandite with varying amounts of
other Cu-, Ni-, Co-, PGM-bearing minerals and gold.
Three main types of ore deposits are recognized: Contact, Offset Dyke and
Footwall.
3.2.1 Contact Deposits
The Contact Deposits occur along the lower contact of the SIC in areas where
Sublayer is preserved in embayments in the footwall contact. The embayments are
interpreted to be the topographic expression of what were originally troughs or
rills in the wall of the impact crater (major lunar craters commonly exhibit
this feature). These troughs have acted as traps for Sublayer material and
account for the pipe-like geometry of many of the Sudbury orebodies. Terraces
in the crater wall have also acted as Sublayer traps and many ore zones occur
at sites where there is a flattening of the footwall to form ledges or terraces
where sulphides are concentrated. All the Properties within the SJV include
contact type Cu-Ni deposits.
3.2.2 Offset Deposits
The Offset Deposits are located in the radial and concentric quartz diorite
offset dykes and occur as thin, steeply dipping sheets to steeply plunging
pipes in barren to weakly mineralized quartz diorite. The deposits consist of
massive, semi-massive and stringer sulphide ore hosted by inclusion-bearing
quartz diorite and inclusion-free quartz diorite with variably disseminated
sulphide. They are typically confined within the width of the offset, which is
commonly less than 100 m. Offset-type mineralization occurs on the Norman and
Victoria project areas.
3.2.3 Footwall Deposits
Footwall deposits may be offshoots of contact deposits although the connection
is not always well-defined. Brecciated footwall rocks adjacent to contact Ni-Cu
sulphide deposits may have acted as a conduit for mineralizing fluids and as a
medium for the deposition of sulphides. Where connected there is a distinct
metal zoning between Contact Deposits and the Footwall Deposits in that the
Contact Deposits have low Cu/Ni ratios and low total PGM content compared to
the high Cu/Ni ratios and enriched total PGM content in the Footwall Deposits.
These observations can be applied in exploration.
Footwall deposits occur on the North Range in the McCreedy West and Levack
properties.
4. SOURCES, HANDLING AND VERIFICATION OF DATA
4.1 DATA SOURCES
Inco had accumulated a vast amount of data (over 8,000 boreholes) during their
exploration and mining of the subject properties. These data were made
available for examination by FNX. The information reviewed consists primarily
of diamond drillholes and associated sampling, assaying, plans and sections.
The essential details of these data are not in the public domain and originate
exclusively from Inco data files. Review of data has focused primarily on the
mineralized areas at each of the properties.
The original report prepared by Patterson (dated November, 2001) was based
solely on information generated and provided by Inco. Inco has not guaranteed
or warranted the accuracy or completeness of the data and information that it
provided to FNX and expressly disclaims any and all liabilities for any
representations, warranties or omissions in the written information or oral
communications made to FNX and any subsequent communications made by FNX
regarding the data or the Properties.
FNX and its consultants have independently verified the drill assay data
received from Inco. The Corporation has also completed comprehensive studies of
the detail assay records, has re-graded portions of the boreholes that
intersected the mineralized zones of interest and produced longitudinal cross
sections of the mineralized zones.
Since inception of the SJV exploration program a significant amount of new data
has been generated on the Properties resulting in an increasing dependence on
these new data as the project advances. During the period April 1, 2003 to
March 23, 2004, FNX completed 114 surface diamond drillholes (177,177 ft) on
four of the five Properties. In addition a further 133,021 ft were completed in
290 holes from underground locations in the reconditioned McCreedy West mine
workings.
In sections of the Patterson Report dealing with the presentation of data on
the five Properties the Imperial System is used. Activity on the project
Properties dates back to the early part of the 20th Century and a large
database relating to surveying, exploration, development and production had
been generated prior to the introduction of the metric system to Canada. To
avoid errors in translating such a vast amount of data into the Metric System
and to facilitate reference to the large existing database, it was decided to
continue with the Imperial System when presenting the data. Borehole
coordinates and intersection lengths are recorded in ft. Historic Inco assays
for precious metals (Pt, Pd, Au and Total Precious Metals) were reported in
troy ounces/short ton. Precious metal assays for the current FNX program are
reported by the laboratory in grams/metric tonne and these are maintained as
such in the database. Conversion is made to Imperial Units for consistency
during resource estimation.
4.2 DATA VERIFICATION
As previously reported, FNX and its consultants reviewed in detail the assay
records of all Inco boreholes that intersected the mineralized zones and
calculated weighted grade averages for the portions of the boreholes that
intersected the mineralized zones. Dr. Patterson conducted a detailed audit of
the Corporation's borehole grading calculations and confirmed that the results
accurately represent the graded assay intersections.
Spiteri Geological and Mining Consultants Inc. ("SGM") was retained by FNX to
review Inco's information and procedures and to conduct an independent check
sampling and assay program of Inco's assay methods and results. The SGM
reports, dated 27 July, 2001 and 1 November, 2001, have been filed on SEDAR.
Roscoe Postle Associates Inc. ("RPA"), an independent geological and mining
consulting company, was retained by FNX to undertake an independent audit of
the FNX in-house resource/reserve estimates on part of the McCreedy West
resource inventory. This audit, to National Instrument 43-101 standards, and
dated March 5, 2003, included a review of sample preparation and laboratory
practices and procedures. The March 5, 2003 report has been filed with SEDAR.
The following comments have been made by RPA on FNX Data Verification
procedures:
"The FNX staff surveyor spots the hole collars and does the final
coordinate pick up at the casings after hole completion. Some checking and
verification has been done by a registered Ontario land surveyor.
All FNX surface holes have been surveyed down-hole under contract by
Sperry-Sun Drilling Services of North Bay, ON. A gyro-based instrument is
used to take azimuth and dip measurements at nominal 50 ft. or 100 ft.
intervals with a final recording at the toe. Drilling is monitored while
in progress using Reflex EZ-Shot instrumentation at 100 ft. intervals.
FNX routinely assays for Ni, Cu, Co, Pt, Pd, Au, Fe, S, Pb, Zn and As and
has established quality assurance and quality control (QA/QC) procedures
according to best practices as established by the OSC/TSE Mining Standards
Task Force (1999). Review by RPA confirms that QA/QC is followed to ensure
good assaying quality. Repeat assays for QA/QC precision and accuracy
monitoring are kept in separate digital files but are not averaged with
original values in the database. Assay values less than detection limit
are entered at one half the detection limit.
RPA has reviewed Inco proprietary drilling, data collection and assaying
procedures and found them to be industry standard or better and is of the
opinion that the FNX drilling and assay database is adequate for resource
and reserves estimation."
4.3 SAMPLING METHOD AND APPROACH
The details of the RPA findings have been included in earlier reports filed on
SEDAR. The RPA recommendations have been implemented and some changes have
occurred.
The sampling protocols employed by FNX are as follows:
Sample material is obtained from diamond drill coring which includes NQ size
for surface drillholes and BQ size for underground drillholes. The NQ core is
sawn in half by diamond sawing whereas BQ core is sampled whole. Samples are
then tagged, packaged and shipped for preparation and assay at independent,
accredited, commercial laboratories.
Drill core is logged by FNX geologists and information is digitally recorded
using Century Systems (" DH Logger software") on individual laptop computers.
At the end of each day this information is "copied in" to the FNX central
database and the drill log on the laptop remains the editable version. When a
hole is finished and logging is completed, the drill log is "checked in" to the
central database and the version on the central database becomes the editable
version. This system allows a duplicate copy of the log to be stored
separately, while ensuring that only one of these copies remains editable.
Geological data recorded include lithology, sulphide minerals and percentage of
each, alteration minerals and abundance, veining type and orientation,
structures and assay sample intervals.
Assay sample intervals are defined by the geologist under the following
conditions: (i) the hole cuts a previously defined mineralized envelope; (ii)
the core contains notable sulphide mineralization; (iii) favourable conditions
exist for mineralization (ie. alteration, rock type) based on previous drilling
and assaying in similar environments. Sample lengths do not exceed 5 ft and are
predominantly within the 2 - 5 ft range. Wherever possible, individual assay
samples are defined by geological boundaries and/or mineralization styles.
Individual, unique sample numbers are assigned to sample intervals in sequence
and sample numbers are independent of hole numbers. Standards and blank samples
are inserted in the sample sequence at predefined intervals. Sample numbers are
marked on the core with a china marker at the start of each sample interval.
Standards are inserted at a frequency of 1 in every 40 samples; the name of the
standard is written in the tag book and entered into the central database, but
remains "blind" to the lab. Blank samples are unmineralized and unaltered
felsic norite core taken from Levack drill holes FNX2004 and 2022. The blanks
are inserted similarly to standards in the sample sequence at a frequency of 1
per 100 samples, typically within or immediately after well-mineralized
intervals. This is done to monitor "carry over" within the sample preparation
equipment. The samples, standards and blanks are recorded in the sample book
and digitally, using the DH Logger software. The entire length of the drillhole
is digitally photographed, both wet and dry.
All drillholes are recorded in a Diamond Drilling Journal, located at the
sampling station in the core logging facility. The journal is readily
accessible and it is the responsibility of all workers involved in the
processing of drill core to maintain this journal. All details related to the
processing of drill core are recorded in this journal, including assay sample
intervals, sample sequences and special instructions to the laboratory.
4.4 SAMPLE PREPARATION AND SECURITY
Core from surface holes (NQ size) which has been marked for assaying is cut in
half by the core technicians using a diamond blade rock saw. After cutting, the
core is rinsed to prevent sample contamination. One half of the core is
returned to the core box and retained, the other half is placed in sample bags
labelled with the assigned sample number. The retained half of the core is then
labelled with the corresponding sample number. The same half of the core is
consistently sampled throughout a continuous sample interval. Sample tags are
removed from the sample tag book, one is placed with the assay sample in the
shipping bag and the other is stapled inside the core box at the beginning of
the sample interval. Sample bags are stored in the secure core facility prior
to shipping to the Lakefield sample preparation facility in Sudbury. The saw
and sampling area is hosed down after each hole, and thoroughly cleaned daily.
The saw blade is sharpened/cleaned periodically (several times a day) with a
masonry brick. This reduces carry over of metals between samples.
Filled sample bags are placed in sequential order by sample number. Standards
and blanks are inserted in their sequential position. Samples are shipped, in
sequence including standards and core blanks, in large plastic shipping crates
which are secured prior to shipment and either delivered to the sample
preparation facility once or twice weekly by the core technician or shipped by
commercial carrier. Accurate waybill receipts and chain of custody reports are
maintained. Any discrepancies in received materials or security devices are
promptly reported. For each batch of samples shipped a laboratory submittal
form is completed. One copy goes with the samples and a duplicate is filed at
the FNX office for reconciliation. The submittal form identifies the
Corporation's name, samples and project name. Each sequential sample series is
entered on a single line with: the first and last sample as well as the total
number of samples together with assaying and any special instructions e.g.
instructions to freeze samples which may be required for metallurgical test
purposes.
Drillcore boxes are clearly labelled with "Dymo Tape" on the front end,
identifying drillhole number, box number and depths of the core contained in
each box. Core to be kept is stored in a secure enclosure on the property
pending assay results. After assays are received and checked, the core is kept
in either the Annex Warehouse racks or sent to the Frood-Stobie core storage
facility.
4.5 SAMPLE PREPARATION AND ANALYSES
Prior to June 2003, sample preparation was completed at ALS Chemex, Mississauga
and analyses were completed at ALS Chemex, Vancouver. Since June 2003, sample
preparation has been done by SGS Lakefield, Sudbury Operations and analyses are
completed at ALS Chemex, Vancouver. ALS Chemex holds ISO9002 accreditation and
participates in the proficiency testing that is required to achieve ISO17025
accreditation. SGS Lakefield holds ISO17025 accreditation.
On arrival at the preparation facility, samples are received, checked against
the submittal forms and weighed. Samples are entered and progress is monitored
using the Laboratory Information Management System ("LIMS").
The entire sample is crushed in a Rhino Jaw crusher to 85% passing -10 mesh
(2mm). Sieve tests are done periodically to monitor grain size. Samples are
split in a riffle splitter to achieve a 200-225 gram split. The sample splits
are pulverized using a ring mill for approximately two minutes to achieve 90%
passing -200 mesh. The pulp is sealed in paper envelopes with the affixed
digital label and shipped via courier to the ALS Chemex laboratory in
Vancouver. A confirmation of shipping, including submittal form number, number
of samples, and waybill number is faxed from the sample preparation laboratory
to the FNX exploration office.
Upon arrival at the ALS Chemex Lab in Vancouver, the pulps are once again
checked against the submittal form, weighed and entered into the ALS Chemex
LIMS. Samples are then posted to the lab's secure website where their progress
can be monitored by selected FNX staff with secure access permission. Once the
assays are finalized a digital copy of the certificate is e-mailed to FNX. The
geologist responsible for QA/QC loads the assays into the central database. A
paper copy is also mailed to the FNX exploration office and archived.
All analytical assay results are stored within FNX's central database, along
with all the logged data from the drill core. The integration of these data
with the drillhole logs allows for QA/QC monitoring and data export into
Datamine.
In the ALS Chemex Lab, Vancouver, 0.2 g of the pulp is fused with 2.6 g of
sodium peroxide at 650(0)C. The resulting melt is cooled and dissolved in 250
ml of 10% hydrochloric acid. The solution is analysed by inductively couple
plasma - atomic emission spectrometry (ICP-AES) and the results corrected for
spectral interference. Calibration solutions for the ICP-AES must be prepared
in a similar fashion to achieve matrix matching. The elements Ni, Cu, Co, Pb,
Zn, As, Fe and S are reported. Detection limits are 0.005% for Ni and Cu;
0.002% for Co.
For Pt, Pd and Au determinations, a 30 g (1 assay ton) pulp is fused by fire
assay furnace to produce a lead button and then cupelled to yield a precious
metal bead. The bead is digested in a solution of 2% hydrochloric acid and the
solution is analyzed by ICP-mass spectrometer (ICP-MS). Detection limits are
0.03 g/t (0.001 oz/ton) for Pt, Pd and Au.
For As and Ag determinations, the pulp is treated using Aqua Regia which
consists of treating a sample with a 3:1 mixture of hydrochloric and nitric
acids. The dissolved sample is then analysed using atomic absorption (AA).
Detection limits for Ag is 0.2 ppm.
FNX stores all pulps but keeps and freezes coarse rejects for selected
mineralized intervals only. The coarse rejects for mineralized intersections
are frozen to prevent oxidation and to ensure that the samples remain in good
condition for future repeat assays or metallurgical testing.
4.6 ASSAY QUALITY ASSURANCE/QUALITY CONTROL
Since the beginning of the SJV exploration program FNX has retained Analytical
Solutions Inc. (" ANALYTICAL SOLUTIONS") to review and audit FNX's sampling and
assaying programs and to make improvements to QA/QC procedures where warranted
(Bloom, 2003 & 2004). This has ensured continuous independent monitoring of
FNX's entire sample preparation and assaying procedures. Internally generated
reports (weekly and quarterly) are submitted to Analytical Solutions for
review, comment and recommendations. In addition, Analytical Solutions
personnel visit FNX's operations and the service laboratories regularly thereby
ensuring constant oversight of all analytical aspects of the exploration
program.
The quality control system employed by FNX includes the use of reference
materials, blanks and check assays. During the period April 2003 to March 2004,
a total of 23,826 samples was assayed and the QA/ QC program confirmed that the
assays are acceptable.
Control blank core samples are inserted at a rate of 1 per 100 samples.
Currently the core blanks come from Levack drillholes FNX2004 and FNX2022.
Reference standards are inserted at a rate of 1 per 40 samples for both
precious and base metals. Standards currently being used include GBM399-10 and
900-3 from Geostats, Australia, PGMS-1, 2 and 4 from CDN Resource Laboratories
B.C., SU-1a and PTC-1a both from CANMET and LDI-1, a standard from Lac des Iles
which has not undergone round robin assaying. Checks assays are being done at a
rate of 1 in per 40 samples. The checks are randomly selected during sample
preparation and analyzed at SGS Lakefield Research, Lakefield, Ontario.
ALS Chemex and SGS Lakefield Research perform standard internal QA/QC to ensure
reliable results. The QA/QC program identified some cases of sample switches
(less than 10 cases) and concerns regarding the accuracy of PGE assays.
Preparation of new pulps and/or re-assaying was done at no cost by ALS-Chemex.
There were no indications of critical systematic biases. Based on check assays
at SGS Lakefield, additional PGE check assays have been undertaken since the
approximately 400 check assays showed a minor bias towards higher values for Pt
and Pd at ALS-Chemex. The reference materials submitted to SGS Lakefield were
biased low for some sample batches which may account for the differences. These
differences are in the order of 0.01 gpt Pd and 0.03 gpt Pt (Lavigne et al.
Internal QA/QC Report, 2003).
The QA/QC program will be expanded to include tests on sub-sampling of the
crusher material (90% passing 2 mm) and the second half of the drill core. Due
to issues regarding confidence in the `expected values' for the commercial
reference materials FNX is preparing a series of reference materials made from
ore at existing operations and certified by submission to five or more
laboratories. One reference material, containing 25% Cu and 1.5% Ni, has been
prepared by TSL Inc. and additional reference materials at lower grades are
required.
4.7 SAMPLE SECURITY
RPA in a report entitled "Review of the Mineral Resources and Mineral Reserves
of the McCreedy West Mine Property, Sudbury Area" and dated August 22, 2003
describe the FNX procedures as follows:
"At the drill site core box and lids are fibre taped shut after filling
and core boxes are retrieved by FNX technicians on a timely basis and
delivered to the core logging facility.
After core processing, sulphide-mineralized intersections key to resource
estimation remain racked in the core facility buildings that are locked
when unattended by FNX personnel. Footwall and hanging wall sublayer core
is stored in outside racks enclosed within barbed wire-topped chain link
fence compounds under lock and key. Permanent core storage is at the Inco
Frood-Stobie core farm. Core for upper sections of holes intersecting
barren Upper and Middle layer SIC units (waste) is dumped at Inco's core
disposal site at Frood-Stobie.
Bagged samples, and container-packed samples tamper-proof sealed for
shipping to ALS Chemex, are kept within the core facility buildings until
loaded for commercial trucking. The high level of digital integration and
software verification for data transfer eliminates most human error and
makes tampering of sample results difficult."
4.8 DATA VERIFICATION
"RPA checked original assay certificates with a number of drill logs and
corresponding database entries and found no errors in the FNX work.
Sampled intervals of core in core boxes for resource intercepts were
checked against drill logs for seven holes and RPA's visual estimates of
Cu and Ni grades in core were in line with recorded assays. Core sampling
is well-managed to reduce sample length measurement error at the primary
data collection stage. Core recovery is generally very good with broken,
ground or lost core in sulphide sections infrequent. The sampling is
better than industry standard, in RPA's opinion. Only one error of 0.1 ft.
in a recorded sample interval was noted and this was due to a smeared
footage block".
In this report the term PGM refers to Platinum Group Metals and includes
Platinum (Pt), Palladium (Pd), which comprise the major part of the PGMs, +
Ruthenium, Rhodium, Osmium and Iridium. The term TPM refers to Total Precious
Metals and includes the PGMs + gold.
A list of abbreviations and conversion factors is included in Appendix 1.
All intersection lengths referred to in this report are lengths of drill core
and should not be interpreted as being true widths.
5. FNX MINING - SUDBURY PROJECT
INFRASTRUCTURE & STAFFING
Following the signing of the agreements with Inco and Dynatec on January 10,
2002, the Corporation very quickly mobilized the program. An office was opened
in Sudbury in March 2002 and the staff grew rapidly to the current level of 35,
comprising 22 geoscientists, 7 technicians and 6 support staff. This staff is
now dispersed between three locations. The main office, at Kelly Lake Road in
Sudbury, handles local administration together with the Norman, Victoria and
Kirkwood projects. The exploration office at Levack services the exploration at
the McCreedy Mine property and the Levack and North Range Footwall projects.
Four geologists are located at the McCreedy West minesite.
The two core logging and sampling facilities continue with the Kelly Lake Road
location in Sudbury, now dedicated to Norman and Victoria core, and the Levack
location handling the core and sample load from the McCreedy West mine
underground operations and also from the North Range exploration projects. Both
Sudbury project offices have been equipped with the necessary computer software
and hardware required to manage an aggressive exploration program such as that
being undertaken by the Corporation.
FNX's SJV partner, Dynatec has set up an office, warehouse, machine shops and
other required facilities at the McCreedy West Mine site and employs some 111
persons.
The FNX corporate head office remains at 55 University Avenue, Toronto and it
is anticipated that the current staff of seven persons will be supplemented by
several additional key appointees.
EXPLORATION STATISTICS
Since inception of the drilling programs in late March 2002, a total of 570,000
ft of surface diamond drilling has been completed in 458 drill holes. As access
has been gained to the underground workings, more of the drilling at the
McCreedy West Mine has been carried out from underground locations and to date
252 underground holes have been completed for 118,165 ft. The current rig
disposition is seven surface rigs and five underground rigs. FNX's surface
drilling operations are carried out by Major Drilling, with one rig at McCreedy
West, two at Levack, and three at Norman. FNX's underground drilling has been
contracted to Boart Longyear with four rigs drilling various deposits in the
McCreedy West Mine and one underground at the Levack Mine. In the period 1
April, 2003 to 23 March, 2004, FNX completed 114 surface diamond drillholes
(177,177 ft) on four of the five Properties. In addition a further 133,021 ft
of diamond drilling were completed in 290 holes from underground locations in
the reconditioned McCreedy West Mine workings.
TABLE 2: DRILLING PROGRAM FROM INCEPTION TO MARCH 23, 2004
--------------------- ------------------------ ---------------------- -------------------------
SURFACE UNDERGROUND TOTALS
--------------------- ---------- ------------- ---------- ----------- ------------ ------------
# HOLES FEET # HOLES FEET # HOLES FEET
--------------------- ---------- ------------- ---------- ----------- ------------ ------------
MCCREEDY WEST - S 71 115,316 252 118,165 323 233,481
--------------------- ---------- ------------- ---------- ----------- ------------ ------------
LEVACK 40 87,628 40 87,628
--------------------- ---------- ------------- ---------- ----------- ------------ ------------
NORMAN 158 220,757 158 220,757
--------------------- ---------- ------------- ---------- ----------- ------------ ------------
VICTORIA 167 101,079 167 101,079
--------------------- ---------- ------------- ---------- ----------- ------------ ------------
NORTH RANGE F/W 22 45,952 22 45,952
--------------------- ---------- ------------- ---------- ----------- ------------ ------------
TOTALS 458 570,732 252 118,165 710 688,897
--------------------- ---------- ------------- ---------- ----------- ------------ ------------
Approximately 23,800 samples were sent for assay during the period April 1,
2003 to March 23, 2004 with the total since inception being 49,500 assays.
6. SAFETY, HEALTH AND ENVIRONMENT (SH&E)
The directors, management, employees and contractors of FNX place a high
priority on ensuring that the best practices of safety, health, environment and
community relations are followed in the Corporation's activities. Together with
Dynatec, FNX constantly reviews performance in these areas and attempts to
provide a safe and healthy workplace, meeting or exceeding all regulatory
standards and maintaining open communication with the communities in which it
operates. The SJV and its contractors worked without a lost-time injury in the
period from 1 April, 2003 to 23 March, 2004. Despite this record the SJV
remains committed to providing the training and instilling best practices to
continue this record into the future.
The SJV's Joint Health and Safety Committee continued its regular workplace
inspections and meetings in order to comply with regulatory requirements and to
promote a safe and healthy workplace environment. Worker and management
representatives on the committee have completed the required certification
courses with the Mines, Aggregates Safety and Health Association (MASHA).
FNX continues its regular training of employees and holds regular meetings with
contractors in order to promote sound work practices and compliance with the
Corporation's policies. As a minimum, field staff receive general orientation
from the Northern Center for Advanced Technology (NORCAT), standard Workplace
Hazardous Materials Information System (WHMIS) training and Emergency First Aid
training. FNX is continually updating its Orientation Program and indoctrinates
new personnel and new contractors with the objective of increasing awareness of
safety, health and environmental issues. Procedures are reviewed with employees
on a monthly basis. Requirements and standard operating procedures are outlined
in the Safety, Health and Environmental Orientation Manual, which is updated on
an annual basis at a minimum, and is mandatory reading for all personnel.
FNX has implemented a Safety, Health and Environmental Management System
("MANAGEMENT SYSTEM") This clearly outlines inspection standards and their
frequency for the Properties. This document also outlines record keeping
requirements and procedures for reporting and addressing potential compliance
issues for appropriate members of upper management. The Management System is a
vehicle for monitoring the Corporation's activities and maintaining compliance
with both corporate and regulatory requirements.
FNX implemented a medical surveillance program with a third party health-care
provider to monitor the condition of employees and ensure employees are fit for
the work that they have been hired to perform. The program includes regular
examinations and testing to monitor the capabilities of employees prior to
hire, at appropriate intervals after employment commences and prior to
returning to work after an injury or illness.
7. RESOURCES & RESERVES
The report (dated May 9, 2003 prepared by Patterson and filed on SEDAR May 21,
2003) outlined resource estimates for five of the seven known deposits at the
McCreedy West Mine, which totaled 1,740,000 tons in the measured and indicated
categories and a further 376,000 tons in the inferred category. The resources
were contained within the Inter Main, Upper Main and East Main contact-type
deposits and the 700 and 950 footwall -type vein deposits. These resources were
reviewed and audited by RPA (RPA report March, 2003).
During the current reporting period, resources for the Inter Main and East Main
deposits were updated to reflect additional drilling. A change in minimum
mining width, additional drilling and raising were incorporated in the 700
Deposit resource update, Resources for four of the five deposits were converted
to probable reserves (RPA report, August 2003). An additional 505,000 tons in
the inferred resource category were added to the southwest extension of the
Inter Main Deposit and announced in a news release dated February 23, 2004.
These additional resources were also reviewed by RPA.
In addition, at the Levack Mine, FNX estimated a total of 4.6 million tons in
the measured and indicated resource categories and further 981,000 tons in the
inferred resource category.
RPA was retained to review the Corporation's internally generated resource and
reserve estimates for the McCreedy West Mine and Levack Mine. The report for
the McCreedy West Mine is entitled "Review of the Mineral Resources and Mineral
Reserves of the McCreedy West Mine Property, Sudbury Area, Ontario", and dated
August 22, 2003. The report covering the Levack Mine is entitled "Review of the
Mineral Resources of the Levack Mine Property, Sudbury Area, Ontario", and
dated October 3, 2003. Both of these reports were authored by Richard
Routledge, M.Sc (Appl.), P.Geol. The complete reports were filed with SEDAR on
August 29, 2003 and October 9, 2003, respectively.
Where possible, FNX's mineral resource estimates are completed in-house using
3-dimensional computer block modeling and inverse distance (IDX) grade
interpolation using Datamine software. Resource estimation summary reports are
produced describing the model parameters used, including the number of drill
holes, assay and composite statistics, estimate methodology and interpolation
parameters, volume-tonnage validation and nearest neighbour interpolation
validation of the model. The McCreedy West Inter Main, East Main, Upper Main,
and 950 Footwall Vein deposits were estimated using this methodology. The 700
Footwall Vein resource estimation was based on updating and modifying an
earlier Inco estimate using the cross sectional polygon method. At the Levack
Mine resources for the 1300, 1900 and No. 7 deposits were completed using the
IDX. The remaining mineral resources at Levack were prepared using the Inco
Levack Mine Mineral Resource Inventory (MRI). The deposits within the MRI were
modeled on cross sections spaced at 70 ft, intervals and resource estimates
were completed using the cross sectional polygonal method. Reference should be
made to the Levack Mineral Resource report by RPA for more detailed
methodology. The following Tables present the current status of
resources/reserves at the Corporation's Properties:
TABLE 3: SUMMARY OF MINERAL RESERVES (AS AT DECEMBER 31, 2003)
----------------------------------------------------------------------------------------------------------------
MCCREEDY WEST MINE (SUDBURY JOINT VENTURE)
---------------- ---------------------------- ----------- ------- -------- -------- -------- ------ ------------
TONS NI CU PT PD AU TPM
---------------- ---------------------------- ----------- ---------------- -------------------------------------
CATEGORY (000S) % OZ/TON
---------------- ---------------------------- ----------- ------- -------- -------- -------- ------ ------------
PROBABLE CONTACT DEPOSITS 1,237.1 1.91 0.23
---------------- ---------------------------- ----------- ------- -------- -------- -------- ------ ------------
FOOTWALL DEPOSITS 119.0 0.75 6.83 0.05 0.08 0.04 0.17
---------------- ---------------------------- ----------- ------- -------- -------- -------- ------ ------------
TOTAL 1,356.1
---------------- ---------------------------- ----------- ------- -------- -------- -------- ------ ------------
TABLE 4: SUMMARY OF MINERAL RESOURCES (AS AT MARCH 23, 2004)
---------------------------------------------------------------------------------------------------------------
MCCREEDY WEST MINE
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
TONS NI CU PT PD AU TPM
---------------- ---------------------------- ----------- ---------------- ------------------------------------
(000S) % OZ/TON
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
INDICATED CONTACT DEPOSITS - - - - - - -
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
FOOTWALL DEPOSITS 520.0 0.27 1.44 0.07 0.07 0.02 0.16
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
TOTAL 520.0 0.27 1.44 0.07 0.07 0.02 0.16
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
INFERRED CONTACT DEPOSITS 821.3 1.67 0.31 - -
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
FOOTWALL DEPOSITS 8.2 0.85 7.44 0.08 0.12 0.06 0.26
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
TOTAL 829.5
---------------------------------------------------------------------------------------------------------------
LEVACK MINE
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
TONS NI CU PT PD AU TPM
---------------- ---------------------------- ----------- ---------------- ------------------------------------
(000S) % OZ/TON
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
MEASURED CONTACT DEPOSITS 2,415.0 2.11 1.07 - - - -
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
INDICATED CONTACT DEPOSITS 2,182.8 1.99 0.90 - - - -
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
TOTAL CONTACT DEPOSITS 4,596.8 2.06 1.03 - - - -
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
INFERRED CONTACT DEPOSITS 981.3 1.97 0.86 - - - -
---------------- ---------------------------- ----------- -------- ------- -------- -------- -------- ---------
All reserve/resource estimates, cut-off grades and nickel equivalency are based
on estimates of long-term metal prices of ($US): Cu=$0.90 per pound (/lb.),
Ni=$3.50/lb.,Pt=$525 per ounce (/oz.), Pd=$350/oz., Au=$350/oz. and a Canadian
dollar of U.S.$0.67.
A number of resource estimations are in progress for several other deposits
within the Properties. A geologically-conditioned simulation investigation is
in progress on the PM Deposit at the McCreedy West Mine and on the 2000 Deposit
on the Norman Property. These deposits are Cu-Ni-PGM vein systems which can be
difficult to model using conventional inverse distance interpolation methods.
The geologically based simulations on these deposits should provide a more
robust resource model on which to base future advanced exploration and
production decisions. It should be noted that the exploration ramp advancing
into the PM Deposit will provide additional information as to the controls on
mineralization thereby permitting a better understanding and application of the
model. Plans also include resource estimation for the Powerline and No. 2 West
Deposits at the Victoria Mine property using computer generated block modeling.
8.0 FNX MINING SUDBURY JOINT VENTURE PROJECT - PROPERTIES
All of the Properties are located within 35 km of Sudbury (Figure 1), and the
mineral rights are 100% owned by the SJV (Table 2). Ownership is primarily by
patent but two are mining leases renewable in 2007. The information pertaining
to activity on the various Properties presented in the Property Report is
current as of 23 March, 2004. As this is a dynamic program new information is
being generated daily and is disseminated by the Corporation through periodic
news releases.
8.1 MCCREEDY WEST MINE PROPERTY
8.1.1 Location, History, Infrastructure & Environment
The McCreedy West Mine project area, (Figure 1), comprising 804.24 acres (325.4
ha) of mining rights contained in seven mining patents, is located 34 km
northwest of Sudbury in Levack Township. Road access is excellent and the site
is served by an active rail spur.
The Mond Nickel Corporation ("Mond") purchased the McCreedy West Mine (formerly
Levack West) property in 1913 and Inco acquired the property in 1929 following
the merger with Mond. In 1939 surface diamond drilling discovered the Main
zone. In 1970 development of the access ramp from surface and the haulage drift
from Levack 1600 Level was initiated. Mining of the orebodies commenced in
1974, and production came from the Upper Main, Middle Main, Lower Main and
Footwall orebodies. Production to mine closing in 1998 totaled 15,758,000 TONS
averaging 1.70% CU, 1.44% NI, 1.3 G/T TPM.
During the last two years of this historic production, mining of the high grade
Cu-PGM-Au-Ni veins of the 700 Footwall Vein Complex was initiated, yielding
40,965 tons grading 5.35% Cu, 0.56% Ni and 4.0 g/ton TPM. This operation was
used as a test site for narrow vein mining techniques.
The infrastructure at the McCreedy West Mine includes a -20% grade 20 ft x 16
ft ramp decline to the 1,600 ft Level with average level development spaced at
150 ft intervals. Since the inception of the SJV in January 2002, this ramp has
been reconditioned and made safe to the 1600 Level. In addition the 6,900 ft.
of the 1600 Level track haulage drift to Levack Mine has also been
reconditioned. The 950 L has been reconditioned and a drill cross cut
excavated. A ramp to access the Inter Main Deposit is nearing completion
between the 950 and 1400 levels of the mine and an exploration ramp into the PM
Deposit has progressed 700 ft. Mining development and stope mining is
continuing at various levels of the mine into the 700 Vein Complex, Upper Main,
East Main and Inter Main deposits. Water, electricity and air systems in the
mine have been reconditioned and are operating efficiently. At the present
time, five underground drill rigs are in operation and all underground
activities are supported by the required surface facilities. Mine water is
being drained to the Levack Mine along the 1600 Level drift and pumped through
the McCreedy East/Coleman Mine shaft.
The property is covered by a joint Inco-Falconbridge environmental closure plan
which is being continually updated. The SJV has posted an environmental bond
with Inco to cover any incremental environmental liabilities over and above
those identified in the Inco Closure Plan for the McCreedy West/Levack
Properties.
As infrastructure has been refurbished and production has resumed at the
McCreedy West Mine monitoring at the site is now structured to meet compliance
and due diligence requirements rather than to provide baseline data. Existing
liabilities (i.e. metal concentrations in soil) that could be impacted by the
SJV's activities were characterized prior to resuming production.
Monitoring of local air and surface water quality is performed to supplement
the existing monitoring programs being carried out by Inco and Falconbridge as
part of their approvals for neighbouring mines.
The temporary pile of non-reactive rock is monitored by site personnel, as per
the Certified Waste Rock Monitoring Program. The pile and its management will
be audited by a third party consultant on a semi-annual basis until the rock is
backhauled underground.
Preliminary engineering for the crusher building and backfill plant have been
completed. An amendment to the Levack-Onaping Closure Plan has been submitted
to the Ministry of Northern Development and Mines (MNDM) to approve these
additional site features. An application for a site-wide Certificate of
Approval (Air) will be updated to reflect these additional emission sources.
Approval of the amendment and the Certificate of Approval are anticipated in
the 2nd Quarter 2004.
The annual Public Information Session regarding the McCreedy West Mine
operations is planned for second quarter 2004 in the community of Levack.
8.1.2 Property Geology & Mineralization
The McCreedy West Mine occurs at the western limit of an extensively
mineralized 8.5 km long portion of the North Range of the SIC. This part of the
North Range encompasses all of the major Inco and Falconbridge past and current
producing mines of the North Range (Strathcona, Coleman, Levack, McCreedy East,
Onaping, McCreedy West, Hardy). At the McCreedy West Mine, mineralization
occurs as Contact and Footwall Deposits. Previous operations exploited both
CONTACT CU-NI mineralization along the base of SIC within Sublayer Norite and
granite breccia-filled embayments, and FOOTWALL CU-NI-PGM mineralization in the
footwall Sudbury Breccia environment.
The CONTACT DEPOSITS on the property (Inter Main, Upper Main, East Main and
Boundary, (Figure 2), are related to a suite of sulphide and inclusion-rich
sublayer norites and leucocratic granitic breccias. The orebodies occupy
embayment structures that penetrate into the footwall of the SIC. These
embayment structures are characterized by significant thickening of the mafic
norite and sublayer units accompanied by thicker zones of footwall breccia.
Hangingwall rocks composed of basal mafic norite and felsic norite of the main
SIC overlie the contact mineralized zones. Brecciated rocks of the Levack
complex consisting of granodiorite, granodiorite gneiss and migmatites form the
footwall to the deposits.
These contact deposits are typified by Ni contents much higher than the Cu
content, and contain negligible precious metal values. The depletion in Cu and
PGMs in these zones is reflected in the high Cu and PGM values in the adjacent
Footwall Deposits.
The FOOTWALL TYPE Cu-Ni- PGM vein deposits are represented by three deposits
known as 700, 950 and the PM Deposits.
[GRAPHIC OMITTED - McCreedy Deposits Vertical Section]
8.1.3 Contact-Type Deposits
The UPPER MAIN DEPOSIT ( Figure 2) comprises two mineralized lenses; a contact
and a hanging wall lens. Both lenses consist of disseminated to massive
pyrrohotite-pentlandite-chalcopyrite-pyrite predominately hosted within granite
breccia. The higher grade contact lens is between 8 and 18 ft in width, and
occurs over a strike extent of 300 ft and a down dip extent of 250 ft within
sublayer norite and granite breccia. The volumetrically larger, but lower
grade, hanging-wall lens ranges from 10 to 25 ft in width, and occurs over a
strike extent of 650 ft and a down dip extent of 180 ft. This latter lens is
strictly contained within a narrow granite breccia package. Unlike other known
contact zones at the McCreedy West Mine, the location of the mineralization
does not appear to be controlled by the morphology of the lower contact. The
contact lens occurs along a topographically unremarkable hanging-wall -
footwall contact at a dip of approximately 38o, whereas the hanging-wall lens
occurs up to 130 ft away from the contact at a sub-horizontal orientation
Prior to FNX's involvement at the McCreedy West Property, Inco mined the Upper
Main Zone, between the 250 ft Level and the 600 ft Level, and completed 5 holes
in the un-mined section of the hanging-wall lens and 13 holes in the contact
lens. FNX has completed a further 14 holes on the Upper Main from both surface
(2,018 ft) and underground (2,782 ft). These holes have helped to define the
limits of the contact lens, as well as to provide additional internal and
extensional data for the hanging-wall lens. A typical intersection on the
contact lens is represented by borehole FNX0008 (0.5% CU, 2.1% NI OVER 17.7
FT), whereas a typical intersection on the hanging-wall lens is contained in
FNX 3000 (0.55% CU, 1.73% NI OVER 25.0 FT).
In February 2003, FNX estimated an indicated resource of 48,000 TONS in the
Upper Main contact lens which graded 0.46% CU, 1.87% NI. An inferred resource
of 128,000 TONS in the hanging-wall lens graded 0.31% CU, 1.44% NI. In July
2003, 36,100 TONS of the indicated resource on the contact lens was upgraded to
a probable reserve grading 0.36% CU, 1.61% NI. These figures have been
independently verified and audited by consultants Roscoe Postle Associates,
(March, 2003). With the completion of the 2003 drilling program and reserve
estimation, mining was initiated at the Upper Main Deposit in May 2003. To
March 23, 2004, approximately 23,000 TONS of ore grading 0.3% CU AND 1.2% NI
were mined.
There are no current plans to carry out any further drilling on the Upper Main
Deposit during 2004.
The INTER MAIN DEPOSIT (Figure 2), a new discovery by FNX, consists of
nickel-rich, Sudbury Basin contact-type and hanging-wall mineralization. The
main body of mineralization is controlled by footwall irregularities, and
gneissic blocks and fragments in the hanging-wall at or near the contact of the
SIC with the underlying footwall. The reserve model of the Inter Main suggests
that mineralization occurs over a strike direction of at least 1100 ft and down
dip for 800 ft. Recent drilling has shown the potential for significant
additions to the reserve tonnage (Figure 3). The dominant mineralization is
associated with physical traps at the base of the SIC however, mineable
hanging-wall lenses occur throughout the ore body. The dominant host rock for
both contact and hanging-wall environments is granite breccia.
The contact and hanging-wall style sulphides consist of
pyrrhotite-pentlandite-chalcopyrite-pyrite, and are characterized by various
textural styles; the most common include: inter granular disseminations, blebs,
blocks, fragments, laminated semi-massive and massive sulphides, and uniform
massive sulphides with net textured pentlandite. The style of mineralization is
highly dependent upon rock type association, as well as proximity to traps
along the contact.
In March 2002, FNX completed its first hole into this previously undefined
deposit, and intersected 52.3 FT OF 3.17% NI AND 0.37% CU. This intersection
hastened the pace of exploration at the Inter Main, resulting in the completion
of 38 surface holes in 2002 at a spacing of 50 to 200 ft. In 2003, the
rehabilitated 1600 level drift at the McCreedy West Mine provided an ideal
platform from which to complete infill and expansion drilling of the Inter
Main. In addition, initiation of Inter Main access ramps from the 950 Level and
the 1400 Level have also provided critical drilling platforms. In total, 135
holes were completed at the Inter Main from April 1, 2003 to March 23, 2004,
for a total of 59,200 ft and the results of this drilling are presented in
Table 5.
[GRAPHIC OMITTED - Sudbury Joint Venture McCreedy West Property Inter Main
Deposit]
These holes have helped to define the Inter Main Deposit at 50 ft centres over
half of the deposit, as currently known, and 80 to 100 ft centres over the
remainder of the deposit.
In February 2003, an indicated resource of 866,000 TONS GRADING 0.24% CU AND
2.02% NI was announced for the Inter Main Deposit. In July, 2003, following
additional in-fill drilling, this resource was upgraded to a reserve of
1,070,000 TONS GRADING 0.21 % CU AND 1.88 % NI. An additional inferred resource
of 112,000 tons at 0.53% Cu and 2.31% Ni was also identified at this time along
the western extents of the Inter Main. These figures have been verified and
audited by independent consultants, RPA.
Mining has now commenced on the Inter Main Deposit in sills leading from the
950 and 1400 level Inter Main access ramps. By the second Quarter of 2004,
these ramps should connect, and mining of the Inter Main Deposit can begin in
earnest. To date some 47,000 TONS of ore have been mined in the Inter Main at a
grade of 0.3% CU AND 1.8% NI.
TABLE 5: MCCREEDY WEST: INTER MAIN DEPOSIT - RESERVE AREA:
ASSAY INTERVALS 2003/2004 REPORT PERIOD DRILLING
---------------- -------------------------------- ---------------------
BOREHOLE FEET %
---------------- -------------------------------- ---------------------
FROM TO LENGTH CU NI
---------------- ---------- ---------- ---------- ---------- ----------
FNX0085 576.0 611.5 35.5 0.2 1.3
---------------- ---------- ---------- ---------- ---------- ----------
FNX0086 545.0 547.4 2.4 0.1 1.8
---------------- ---------- ---------- ---------- ---------- ----------
FNX0087 468.5 505.0 36.5 0.2 2.2
---------------- ---------- ---------- ---------- ---------- ----------
FNX0091 380.0 395.0 15.0 0.3 1.5
---------------- ---------- ---------- ---------- ---------- ----------
FNX0098 551.8 568.8 17.0 0.3 2.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0104 546.0 568.0 22.0 0.3 2.6
---------------- ---------- ---------- ---------- ---------- ----------
FNX0112 489.7 512.6 22.9 0.1 1.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0122 501.2 516.5 15.3 0.2 3.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0123 461.2 495.0 33.8 0.2 3.2
---------------- ---------- ---------- ---------- ---------- ----------
FNX0124 477.7 506.3 28.6 0.2 3.5
---------------- ---------- ---------- ---------- ---------- ----------
FNX0125 467.0 502.0 35.0 0.2 3.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0126 456.8 497.4 40.6 0.3 2.8
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 465.4 487.3 21.9 0.2 3.8
---------------- ---------- ---------- ---------- ---------- ----------
FNX0127 453.3 460.0 6.7 0.2 3.6
---------------- ---------- ---------- ---------- ---------- ----------
FNX0128 467.1 535.0 67.9 0.3 1.8
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 467.1 495.0 27.9 0.3 2.7
---------------- ---------- ---------- ---------- ---------- ----------
AND 514.0 535.0 21.0 0.4 1.5
---------------- ---------- ---------- ---------- ---------- ----------
FNX0138 567.6 572.7 5.1 0.3 1.7
---------------- ---------- ---------- ---------- ---------- ----------
FNX0148 379.0 425.0 46.0 0.3 2.9
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 399.5 420.5 21.0 0.3 3.9
---------------- ---------- ---------- ---------- ---------- ----------
FNX0149 444.0 447.5 3.5 0.2 1.3
---------------- ---------- ---------- ---------- ---------- ----------
FNX0156 484.4 548.3 65.9 0.1 1.7
---------------- ---------- ---------- ---------- ---------- ----------
FNX0157 494.4 523.3 28.9 0.1 0.9
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 494.4 501.7 7.3 0.2 1.5
---------------- ---------- ---------- ---------- ---------- ----------
AND 513.6 523.3 9.7 0.2 1.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0174 466.8 490.9 24.1 0.3 2.2
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 478.3 487.9 9.6 0.3 3.7
---------------- ---------- ---------- ---------- ---------- ----------
FNX0176 408.8 414.7 5.9 0.4 2.8
---------------- ---------- ---------- ---------- ---------- ----------
FNX0177 403.7 418.1 14.4 0.4 4.4
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 403.7 413.4 9.7 0.4 5.2
---------------- ---------- ---------- ---------- ---------- ----------
FNX0182 501.6 535.0 33.4 0.2 3.2
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 509.8 529.5 19.7 0.3 4.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0183 480.7 525.0 44.3 0.2 3.2
---------------- ---------- ---------- ---------- ---------- ----------
FNX0184 434.3 458.6 24.3 0.2 1.4
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 434.3 446.7 12.4 0.2 2.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0185 461.4 530.0 68.6 0.4 1.4
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 477.0 500.0 23.0 0.5 2.5
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 477.0 487.5 10.5 0.6 4.3
---------------- ---------- ---------- ---------- ---------- ----------
FNX0186 NSV
---------------- ---------- ---------- ---------- ---------------------
FNX0187 526.5 544.2 17.7 0.2 4.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0188 441.4 495.3 53.9 0.4 1.9
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 441.4 454.3 12.9 0.6 4.2
---------------- ---------- ---------- ---------- ---------- ----------
FNX0206 546.3 571.9 25.6 0.3 2.1
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 546.3 558.9 12.6 0.4 3.6
---------------- ---------- ---------- ---------- ---------- ----------
FNX0207 501.6 519.6 18.0 0.2 1.8
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 501.6 513.3 11.7 0.2 2.4
---------------- ---------- ---------- ---------- ---------- ----------
FNX0215 500.9 519.2 18.3 0.1 2.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0216 532.8 548.7 15.9 0.4 1.3
---------------- ---------- ---------- ---------- ---------- ----------
FNX0217 500.8 536.4 35.6 0.4 1.8
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 500.8 520.8 20.0 0.5 2.6
---------------- ---------- ---------- ---------- ---------- ----------
FNX0218 505.1 521.4 16.3 0.3 2.6
---------------- ---------- ---------- ---------- ---------- ----------
FNX0219 526.2 542.3 16.1 0.3 1.6
---------------- ---------- ---------- ---------- ---------- ----------
FNX0228 498.0 532.5 34.5 0.2 2.6
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 498.0 511.9 13.9 0.2 3.4
---------------- ---------- ---------- ---------- ---------- ----------
FNX0229 490.0 496.0 6.0 0.3 1.2
---------------- ---------- ---------- ---------- ---------- ----------
AND 514.0 532.2 18.2 0.1 1.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0230 516.0 527.5 11.5 0.4 1.6
---------------- ---------- ---------- ---------- ---------- ----------
AND 611.5 619.8 8.3 0.3 0.9
---------------- ---------- ---------- ---------- ---------- ----------
FNX0231 NSV
---------------- ---------- ---------- ---------- ---------------------
FNX0233 444.6 488.0 43.4 0.2 1.5
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 446.7 454.9 8.2 0.3 3.1
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 477.0 488.0 11.0 0.2 3.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0234 425.2 442.8 17.6 0.6 2.6
---------------- ---------- ---------- ---------- ---------- ----------
FNX0236 564.1 568.6 4.5 0.3 1.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0244 395.7 416.2 20.5 0.3 2.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0263 NSV
---------------- ---------- ---------- ---------- ---------------------
FNX0264 132.5 136.5 4.0 0.3 1.8
---------------- ---------- ---------- ---------- ---------- ----------
AND 153.5 159.4 5.9 0.6 4.3
---------------- ---------- ---------- ---------- ---------- ----------
FNX0265 NSV
---------------- ---------- ---------- ---------- ---------------------
FNX0266 62.1 63.2 1.1 0.2 3.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0267 81.8 88.6 6.8 0.2 4.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0294 67.4 92.0 24.6 0.3 4.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0295 NSV
---------------- ---------- ---------- ---------- ---------------------
FNX0297 147.5 156.0 8.5 0.2 1.9
---------------- ---------- ---------- ---------- ---------- ----------
FNX0325 212.3 213.0 0.7 0.4 3.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0327 52.8 95.9 43.1 0.4 2.0
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 52.8 67.0 14.2 0.6 3.8
---------------- ---------- ---------- ---------- ---------- ----------
FNX0329 78.0 176.5 98.5 0.2 1.6
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 78.0 108.0 30.0 0.4 2.7
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 169.1 176.5 7.4 0.3 3.8
---------------- ---------- ---------- ---------- ---------- ----------
FNX0330 190.7 205.2 14.5 0.2 2.8
---------------- ---------- ---------- ---------- ---------- ----------
FNX0331 87.7 128.3 40.6 0.2 1.1
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 87.7 106.5 18.8 0.2 1.7
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 120.6 128.3 7.7 0.1 1.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0332 107.6 110.5 2.9 0.1 1.7
---------------- ---------- ---------- ---------- ---------- ----------
AND 147.4 154.2 6.8 0.2 1.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0333 141.8 158.9 17.1 0.5 2.6
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 142.6 151.4 8.8 0.4 3.3
---------------- ---------- ---------- ---------- ---------- ----------
AND 259.3 279.0 19.7 0.3 1.3
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 271.5 279.0 7.5 0.4 2.3
---------------- ---------- ---------- ---------- ---------- ----------
FNX0334 103.7 132.8 29.1 0.4 1.2
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 103.7 110.0 6.3 1.1 1.8
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 120.4 132.8 12.4 0.3 1.7
---------------- ---------- ---------- ---------- ---------- ----------
FNX0335 139.1 152.0 12.9 0.5 3.3
---------------- ---------- ---------- ---------- ---------- ----------
AND 196.7 212.9 16.2 0.6 3.2
---------------- ---------- ---------- ---------- ---------- ----------
AND 276.5 280.0 3.5 0.5 3.6
---------------- ---------- ---------- ---------- ---------- ----------
FNX0338 95.9 123.9 28.0 0.8 2.7
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 97.3 106.5 9.2 0.8 4.0
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 111.7 121.6 9.9 0.8 3.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0375 NSV
---------------- ---------- ---------- ---------- ---------------------
FNX0376 187.0 191.2 4.2 0.1 0.8
---------------- ---------- ---------- ---------- ---------- ----------
FNX0380 613.1 637.8 24.7 0.2 0.9
---------------- ---------- ---------- ---------- ---------- ----------
FNX0427 137.0 152.7 15.7 0.2 2.7
---------------- ---------- ---------- ---------- ---------- ----------
FNX0429 245.4 253.9 8.5 0.1 1.8
---------------- ---------- ---------- ---------- ---------- ----------
FNX0430 NSV
---------------- ---------- ---------- ---------- ---------------------
FNX0431 154.2 167.7 13.5 0.2 2.7
---------------- ---------- ---------- ---------- ---------- ----------
FNX0432 133.8 145.6 11.8 0.4 1.8
---------------- ---------- ---------- ---------- ---------- ----------
FNX0433 78.7 88.8 10.1 0.2 2.7
---------------- ---------- ---------- ---------- ---------- ----------
FNX0434 104.2 144.5 40.3 0.3 2.3
---------------- ---------- ---------- ---------- ---------- ----------
FNX0439 180.7 199.7 19.0 0.1 2.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0440 244.1 303.3 59.2 0.1 1.5
---------------- ---------- ---------- ---------- ---------- ----------
FNX0441 NSV
---------------- ---------- ---------- ---------- ---------------------
FNX0442 230.9 283.9 53.0 0.1 2.6
---------------- ---------- ---------- ---------- ---------- ----------
FNX0443 173.0 188.0 15.0 0.2 2.4
---------------- ---------- ---------- ---------- ---------- ----------
FNX0444 143.1 150.0 6.9 0.1 2.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0444B 160.6 163.6 3.0 0.2 4.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0600 109.2 120.2 11.0 0.1 2.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0602 124.0 126.5 2.5 0.3 3.1
---------------- ---------- ---------- ---------- ---------- ----------
FNX0603 141.6 251.4 109.8 0.2 1.3
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 141.6 210.0 68.4 0.2 1.6
---------------- ---------- ---------- ---------- ---------- ----------
FNX0604 93.1 116.1 23.0 0.2 3.6
---------------- ---------- ---------- ---------- ---------- ----------
FNX0605 135.0 204.2 69.2 0.1 1.4
---------------- ---------- ---------- ---------- ---------- ----------
INCL. 135.0 169.5 34.5 0.1 2.0
---------------- ---------- ---------- ---------- ---------- ----------
FNX0607 150.6 155.0 4.4 0.5 1.9
---------------- ---------- ---------- ---------- ---------- ----------
nsv = no significant values
The objective of the 2004 exploration program on the Inter Main Deposit, is to
continue with required production drilling within the reserve area, and to test
for extensions by completing 33,200 ft of proximal and distal exploration
drilling outside of the reserve. The proximal targets will include the
extension of the Inter Main towards the South West (Fig. 3) where previous
drilling and mining on the 1450 Level by Inco had suggested the potential for
this area to host a significant Ni resource. Surface drilling (FNX3066: 0.2%
CU, 1.3% NI OVER 97.5 FT, and FNX3067: 0.2% CU ,1.3% NI OVER 62.0 FT ) by FNX
has confirmed this potential.
Increased definition of the Inter Main towards the South West (originally part
of the Boundary Deposit) became possible late in 2003 as development of
suitable underground drilling platforms progressed. The data derived from this
drilling allowed for the completion of both a geological model and a resource
model for that portion of the mineralization which occurs between 1300 and 1700
Levels. This modeling has defined an inferred resource (reviewed by RPA)
estimated at 505,000 TONS grading 1.7% NI. In 2004, increased definition of
this part of the Inter Main Deposit will be accomplished with the completion of
20 holes for 12,000 ft. This drilling should provide the confidence required
for the completion of an upgraded resource model leading ultimately to a
reserve estimation. Selected intersections reported from the 2003 underground
exploration program include FNX0067: 0.41% CU, 1.65% NI OVER 49.3 FT FNX0253:
0.25% CU, 2.25% NI OVER 32.8 FT, FNX0250: 0.11% CU, 1.80% NI OVER 37.6 FT. It
now appears that the South West Inter Main may continue as part of the upper
portion of the previously designated Boundary Deposit.
The WESTERN EXTENSION is an area of sparse drilling south of the 950 level and
along the western margins of the Reserve Area of the Inter Main Deposit. The
area is situated very close to infrastructure, but remains a challenge to
define with drilling from underground platforms. In 2003, only three holes were
drilled into the western extensions of the Inter Main Deposit. The best
intersections from these holes include: FNX0155: 0.35% CU, 1.73% NI OVER 13.3
FT, and FNX0173: 0.66% CU, 3.78% NI OVER 21.7 FT
In 2004, 6,500 ft of drilling is planned in 5 holes from surface into the
western extensions. These holes will complement historical Inco drilling and
should allow for the completion of an upgraded resource model. Currently an
inferred resource of 112,000 TONS AT 0.53% CU AND 2.31% NI is defined for this
portion of the Inter Main Deposit. Two typical historical intersections are:
0.28% CU, 3.74% NI OVER 20.3 FT and 0.25% CU, 2.26% NI OVER 18.0 FT.
The EASTERN EXTENSION lies east of the Inter Main Reserve area and the
objective is to complete sufficient exploration drilling to extend the
reserve/resource area to the east. In 2003, seven holes were drilled in this
area, intersecting narrow higher grade values (4.2% Ni over 1.7 ft) and wider
intersections of lower values (1.1% Ni over 12.5 ft). Distal targets include
poorly drilled areas well to the east of the current known limits of the Inter
Main, that have near term potential for adding additional resources. These
targets will be drilled from the 1600 Level.
The EAST MAIN DEPOSIT (Figure 2) occurs to the east of the main ramp between
surface and the 920 Level, and consists of semi-massive to massive
pyrrhotite-pentlandite-chalcopyrite-pyrite contact-style mineralization. The
central portion of the deposit occupies a south easterly trending embayment
that extends from surface, down dip to a depth of at least 600 ft below surface
The mineralized zone is typically between 8 and 25 ft thick and predominantly
occurs near the base of the granite breccia horizon adjacent to the gneissic
footwall rocks. In the southern, down dip extension of the East Main, the
mineralization splays into two narrow zones, each between eight and 15 ft wide,
and separated by 12 - 30 ft of weakly mineralized granite breccia and sublayer.
In mid April 2003, a near term surface production drilling program was
completed. This program consisted of 6,803 ft of drilling in 11 holes, at 50 to
80 ft centres. In February 2003, FNX estimated an indicated resource for the
East Main of 167,000 TONS AT 0.35% CU, 2.54% NI. In July, 2003, a subset of
this resource was upgraded to a probable reserve of 131,000 TONS GRADING 0.35%
CU, 2.27% NI. This estimate was verified by RPA (August, 2003).
No drilling is scheduled for the East Main Deposit in 2004, as the 2003 program
was sufficient to define the mineral reserve. Mining has commenced on the 420
and 450 Levels and to date approximately 29,500 TONS GRADING 0.4% CU AND 2.1%
NI have been mined from the East Main.
8.1.4 Footwall-type Deposits
The FOOTWALL TYPE Cu-Ni- PGM vein deposits are represented by three deposits
known as 700 Deposit; 950 Deposit and the PM Deposit (Figure 2).
The 700 DEPOSIT, located between the 500 and 700 Levels, is part of an
eastward-plunging and south-dipping structural zone contained within an area of
footwall Sudbury Breccia that extends from surface to a depth of at least 3000
ft. Mineralization within the 700 Deposit is restricted to sharp walled veins
which cross cut both the Sudbury Breccia matrix and clasts. Individual veins,
ranging in thickness from several inches up to 13 ft, are composed of massive
chalcopyrite with accessory pentlandite, millerite and pyrrhotite, and have
strike and dip lengths ranging from 25 to 350 ft. Prior to the mine closing in
1997, 41,000 tons of ore were produced from the narrow veins and averaged 5.35%
CU, 0.56% NI, 4.0 G/T TPM.
One hundred-ninety three historic drillholes with 437 significant intersections
have been reported from this zone. One hundred-twenty eight of the
intersections are in excess of 15.0 g/t TPM, with the highest being 110.0 g/t
over 0.4 ft. In February 2003, FNX estimated an indicated and measured resource
in the 700 Deposit of 139,000 TONS at a grade of 6.1% CU, 0.81% NI, 0.18 OZ/TON
(5.6 G/T) TPM. In July, 2003, a subset of this resource was upgraded to a
probable reserve of 119,000 tons grading 6.83% CU, 0.75% NI, 0.17 OZ/TON (5.3
G/T) TPM. This estimate was verified by independent consultants RPA (August,
2003).
In 2003, 22 holes were completed at the 700 Vein Deposit for a total of 3,600
ft. This drilling was designed mostly to assist production, as the exploration
potential proximal to the vein system is limited by extensive historical
drilling. Mining of the veins by narrow vein mining methods commenced early in
2003 with production to 23 March, 2004 amounting to 10,300 TONS GRADING 6.53%
CU, 0.7% NI, 4.1 G/T TPM. Drilling in the 700 Deposit in 2004 will be for
production purposes.
The 950 DEPOSIT is located to the east and down plunge from the 700 Deposit.
This deposit comprises two distinct styles of mineralization: massive
chalcopyrite, pentlandite and millerite veins ranging in thickness from 3
inches to 3.0 ft, and a broader zone of irregular stringers and disseminated
chalcopyrite blebs. The veins exhibit a steep southerly apparent dip on
geological cross-sections, while the broader package of mineralization appears
to dip more shallowly to the south, sub-parallel to and within a wide zone of
footwall Sudbury Breccia. Twenty-one historic drillholes yielded 54 significant
intersections, 22 of which were greater than 10 ft.
Fifteen diamond drill holes (10,832 ft) drilled by FNX in late 2002 and early
2003 helped to define the 950 Deposit (on 50 to 80 ft centres ) over a strike
length of 200 ft with a down dip extent of 600 ft. Intersections demonstrating
potential (previously reported) from the 950 Deposit drilling include 2.4% CU,
0.3% NI, 5.1 G/T TPM OVER 24.0 FT, and 5.1% CU, 0.1% NI, 6.8 G/T TPM OVER 37.1
FT.
In February, 2003, an indicated resource of 520,000 TONS, grading 1.44% CU,
0.27% NI AND 5.28 G/T TPM, was estimated for the 950 Deposit. This estimation,
by FNX, was verified by independent consultants RPA.
In 2004, a short exploration ramp is planned into the 950 Deposit and the
information generated from this ramping together with the associated drilling
program will permit completion of a reserve estimation later in the year.
The PM DEPOSIT (Figures 2 & 4) is located below the 1450 Level at the McCreedy
West Mine within a broad package of footwall Sudbury Breccia. Mineralization
typically consists of chalcopyrite +/- millerite +/- pendlandite + PGM (Pt+Pd
Bismuth Tellurides) within a mineralized envelope which generally dips
38(degree) to the southeast. The mineralization style varies throughout the
deposit but in general terms it consists of (i) Discontinuous narrow veins and
stringers of chalcopyrite +/- millerite. Although discontinuous, the veins
maintain a general trend which dip shallowly to the South East. The sulphides
tend to wrap around clasts in the Sudbury Breccia rather than cross cut; (ii)
Disseminated chalcopyrite within the matrix of Sudbury Breccia; (iii) Blebs of
chalcopyrite which have replaced the mafic components of some clasts.; (iv)
Extreme low sulphide zones (0.1 to 0.2% S) with high precious metals that are
associated with narrow sulphide veinlets and disseminated chalcopyrite and
millerite.
This style of mineralization makes this deposit potentially amenable to bulk
mining.
Prior to FNX's involvement at the McCreedy West Mine, Inco had completed 44
drillholes in the PM Deposit. These drillholes yielded 44 significant
intersections, 34 of which are greater than 20 ft thick.
The first hole drilled on the property by FNX (FNX3000) intersected 250.7 FT
(150 FT TRUE WIDTH) OF 1.17% CU, 0.22% NI AND 6.24 G/T TPM. This hole
transected the heart of the PM Deposit, with the mineralization style
consisting of narrow fracture fill and replacement veins and disseminations.
Other holes drilled closer to the eastern margins of the deposit encountered
indistinguishable low sulphide type mineralization consisting of veinlets and
disseminations. One of these holes (FNX3022), intersected 64.10 FT. GRADING
0.07% CU, 0.05% NI, AND 15.15 G/T TPM.
From April 1, 2003 to March 23, 2004, FNX completed 85 underground holes at the
PM Deposit for a total of 51,039 ft, and a grand total of 118 drillholes for
88,298 ft since inception of the program. Most of this drilling was completed
from the 1600 and 950 Levels with the objective of testing the continuity of
the mineralization; increase confidence levels and add to the understanding of
the geologic controls to mineralization. The results of this drilling are
presented in Table 6.
[GRAPHIC OMITTED - PM Deposit: Inclined Section (Looking NW, Dip: - 35 degrees)]
TABLE 6: MCCREEDY WEST: PM DEPOSIT - 2003 / 2004 DRILLING: ASSAY INTERVALS
--------------- -------------------------------- ------------------- ----------------------------------------
BOREHOLE FEET % G/T
--------------- -------------------------------- ------------------- ----------------------------------------
FROM TO LENGTH CU NI PT PD AU TPM
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0056 684.6 751.1 66.5 1.1 0.1 1.3 2.0 1.1 4.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 684.6 693.9 9.3 1.2 0.3 1.6 3.3 5 9.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 703.3 715.4 12.1 1.4 0.1 2.1 3.9 1.3 7.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 743.6 751.1 7.5 2.4 0.1 3.5 3.8 0.3 7.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0057 630.5 720.3 89.8 1.9 0.4 2.8 3.3 1.2 7.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 686.6 720.3 33.7 3.5 0.5 5.4 6.4 2.3 14.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 712.8 720.3 7.5 8.5 1.3 13.8 14.5 7.9 36.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0058 544.8 553.3 8.5 1.6 1.1 1.5 2.6 0.9 5.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 605.7 642.6 36.9 1.4 0.4 1.5 2.0 0.8 4.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 664.8 666.0 1.2 6.9 1.6 16.8 16.6 3.1 36.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0059 616.4 625.5 9.1 4.2 0.4 2.1 3.1 1.7 6.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 653.4 675.0 21.6 0.4 0.1 1.2 1.0 0.4 2.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0060 690.0 694.8 4.8 1.8 0.2 1.9 4.0 0.5 6.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 728.0 774.8 46.8 0.4 0.1 1.1 1.2 0.2 2.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 761.3 774.8 13.5 0.2 0.1 1.9 2.3 0.2 4.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 821.2 829.0 7.8 0.1 0.1 3.3 3.0 0.2 6.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0061 613.7 645.5 31.8 1.2 0.4 1.4 1.9 0.4 3.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 637.0 645.5 8.5 2.1 1.0 2.8 2.9 0.3 5.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0062 527.0 670.3 143.3 0.8 0.2 1.4 1.8 0.5 3.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 527.0 579.8 52.8 1.0 0.2 0.9 1.5 0.4 2.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 609.4 670.3 60.9 0.9 0.2 2.4 2.6 0.7 5.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 648.7 670.3 21.6 0.9 0.2 3.8 3.3 0.7 7.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0063 490.2 497.1 6.9 2.7 0.5 1.1 1.4 1.8 4.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 598.8 608.1 9.3 0.4 0.1 0.9 0.9 2.2 4.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0064 399.9 405.0 5.1 5.1 0.3 0.4 1.2 0.5 2.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 509.8 518.7 8.9 9.0 1.1 4.9 7.1 7.0 19.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0065 535.2 551.6 16.4 1.3 0.2 1.5 1.7 0.3 3.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0092 347.5 510.0 162.5 0.2 <0.1 1.1 1.9 0.2 3.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 356.5 371.5 15.0 0.4 0.3 3.6 9.1 0.2 12.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 391.0 406.0 15.0 0.9 0.1 1.9 3.5 1.7 7.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 470.0 510.0 40.0 0.1 0.1 2.3 2.8 0.1 5.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 495.0 510.0 15.0 <0.1 <0.1 4.0 3.6 <0.1 7.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0093 255.0 355.0 100.0 0.8 0.3 2.3 5.7 1.1 9.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 335.0 355.0 20.0 2.5 1.2 7.4 23.3 4.7 35.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0094 235.0 245.0 10.0 0.6 0.5 3.0 4.8 0.7 8.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 314.0 317.0 3.0 15.7 1.3 26.3 52.5 22.4 101.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0095 264.0 355.0 91.0 0.5 0.4 3.0 3.9 1.3 8.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 264.0 318.0 54.0 0.8 0.6 4.6 6.0 1.0 11.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 345.0 355.0 10.0 0.1 0.1 1.8 2.8 6.9 11.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0096 200.0 320.0 120.0 0.2 <0.1 1.8 2.0 0.2 4.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 200.0 225.0 25.0 0.5 0.1 5.5 5.2 0.4 11.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 275.0 295.0 20.0 0.4 0.1 1.7 3.0 0.4 5.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 365.0 375.0 10.0 0.3 0.7 4.2 5.3 1.5 10.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0097 316.5 335.0 18.5 0.8 0.3 5.8 4.2 0.4 10.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0105 260.0 404.8 144.8 0.4 0.1 1.8 2.8 0.8 5.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 260.0 305.0 45.0 0.5 0.1 2.5 2.8 1.7 6.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 345.0 368.0 23.0 1.2 0.3 3.4 7.1 1.4 11.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 398.4 404.8 6.4 0.5 0.7 7.2 13 0.2 20.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0106 262.7 426.6 163.9 0.3 0.1 1.0 1.4 0.2 2.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 262.7 275.7 13.0 1.2 0.2 1.5 4.5 0.7 6.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0106 343.8 360.8 17.0 0.9 0.4 3.9 6.4 1.0 11.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 407.4 426.6 19.2 0.1 0.1 2.3 1.9 0.2 4.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0107 254.3 340.5 86.2 0.4 0.1 1.2 1.9 0.4 3.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 254.3 256.6 2.3 0.6 0.1 3.6 6.3 3.4 13.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 286.7 298.5 11.8 1.0 0.2 3.1 4.5 0.6 8.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0108 239.3 323.7 84.4 0.9 0.3 2.4 3.1 1.2 6.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 239.3 240.2 0.9 11.0 0.2 21.8 33.4 6.9 62.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 292.7 323.7 31.0 2.0 0.9 5.0 6.6 2.9 14.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0109 218.0 350.8 132.8 0.2 0.1 1.4 2.3 0.2 3.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 218.0 242.0 24.0 0.3 0.3 2.9 5.7 0.7 9.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 325.8 350.8 25.0 0.8 0.3 3.6 5.4 0.5 9.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0110 291.0 370.0 79.0 0.6 0.1 3.2 4.4 0.7 8.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 300.0 335.0 35.0 1.0 0.2 6.0 7.7 1.4 15.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0114 595.0 600.0 5.0 0.7 0.1 3.2 1.7 1.9 6.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 625.0 635.0 10.0 0.9 0.1 1.3 1.9 0.4 3.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0115 610.7 701.3 90.6 1.4 0.2 2.0 2.4 0.9 5.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 610.7 615.2 4.5 3.6 0.6 4.9 5.8 1.7 12.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 655.7 701.3 45.6 1.8 0.1 2.6 3.3 1.2 7.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0116 544.4 560 15.6 0.3 0.1 1.2 1.4 0.3 2.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0117 362.2 370.6 8.4 2.0 0.5 0.4 0.9 0.9 2.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 474.6 501 26.4 0.6 0.2 1.5 1.3 0.7 3.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 524.0 529.1 5.1 2.8 0.6 1.6 4.9 0.5 7.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0118 345.9 348.1 2.2 6.2 0.4 0.4 1.0 0.3 1.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 587.2 628.3 41.1 0.4 <0.1 0.7 0.6 0.2 1.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0119 482.4 491.5 9.1 1.5 0.5 1.2 2.1 0.9 4.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0120 413.7 415.0 1.3 14.1 0.0 1.2 7.6 0.2 9.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 435.0 436.4 1.4 11.2 3.0 2.5 3.9 0.6 6.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0121 474.0 479.4 5.4 10 0.3 1.6 3.9 0.8 6.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0131 314.5 355.0 40.5 1.8 0.2 3.2 4.0 0.9 8.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 314.5 326.0 11.5 6.0 0.5 9.0 11.9 2.4 23.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 350.0 355.0 5.0 0.6 0.3 4.5 4.6 1.9 11.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0132 320.8 325.0 4.2 20.5 8.2 36.9 91.6 11.9 140.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0133 323.5 327.5 4.0 4.3 0.9 7.1 16.5 3.3 26.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0134 295.6 304.6 9.0 0.4 0.1 1.3 2.1 0.5 3.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0135 350.0 357.7 7.7 1.3 2.4 9.8 3.0 0.2 12.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0139 397.6 403.6 6.0 0.5 0.4 10.9 12.4 0.6 23.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0140 390.0 420.8 30.8 0.2 <0.1 2.3 3.0 0.3 5.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 410.0 420.8 10.8 0.3 0.1 5.0 5.2 0.6 10.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 451.6 456.6 5.0 0.0 0.0 4.0 2.7 <0.1 6.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0151 237.5 344.5 107.0 0.8 0.1 1.8 2.1 2.7 6.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 311.5 313.0 1.5 17.3 0.5 19.3 24.1 161 204.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 332 344.5 12.5 2.2 0.7 4.4 7.3 1.9 13.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 332 335.0 3.0 9.1 2.7 18.1 30.3 3.6 52
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0152 220 380.0 160 0.5 0.2 1.4 2 0.3 3.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 220 255.0 35.0 1.4 0.8 3 5.4 0.7 9.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 277.5 281.8 4.3 2.9 0.7 6.8 11.3 1.8 19.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 355 380.0 25.0 0.1 0 2.9 2 0.4 5.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 405 410.0 5.0 0.2 <0.1 3.3 2.5 0.4 6.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0154 249.6 349.1 99.5 0.9 0.1 2.1 2.8 0.3 5.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 281.1 308.6 27.5 1.3 0.1 2.7 4.1 0.5 7.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0158 80.0 83.8 3.8 0.6 0.2 1.6 2.4 0.8 4.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0159 132.9 144.3 11.9 0.3 0.2 1.6 2.1 0.3 4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0160 142.5 148.9 6.4 2.2 0.1 4.1 4.3 0.7 9.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0179 130.4 171 40.6 0.8 0.1 1.1 1.0 0.2 2.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 130.4 139.3 8.9 1.8 0.5 2.8 1.6 0.3 4.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0180 78.0 86.1 8.1 4 0.3 3.8 4.3 1.4 9.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0181 104.3 128.8 24.5 0.7 0.1 1.2 1.5 0.2 2.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0189 245 327.5 82.5 0.8 0.1 1.9 2.2 0.7 4.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 300 327.5 27.5 1.3 0.2 3.5 4.1 0.8 8.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0190 205 290.0 85.0 1.4 0.1 2.8 4.1 1.6 8.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 244 277.5 33.5 2.7 0.2 5.4 8.3 3.6 17.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0191 177.5 280.0 102.5 0.9 0.1 1.9 2.4 0.5 4.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 177.5 200.0 22.5 1.9 0.1 1.9 3.7 0.3 5.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 225 237.5 12.5 1.4 0.3 3.3 3.9 1.7 8.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 267.5 280.0 12.5 1.4 0.2 4.1 5 0.7 9.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0196 210.0 307.9 97.9 0.9 0.1 1.3 1.8 0.3 3.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 333.5 340.5 7.0 2.3 0.7 5.7 6.2 1.9 13.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0197 186.1 335.1 149.0 1 0.2 2.6 3.4 0.5 6.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 280.4 306.6 26.2 3.4 0.9 9.4 12 1.5 22.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0198 209.4 221.4 12.0 1.9 0.5 15.5 10.3 2.9 28.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 254.4 301.4 47.0 0.7 0.2 2.2 2.7 1.5 6.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0199 226.8 231.8 5.0 1.1 0.2 3.6 4.9 2.3 10.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 292.3 298.3 6.0 0.3 0.2 6.6 5.6 0.4 12.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0201 167.2 292.2 125.0 0.6 0.1 2.1 2.4 0.6 5.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 167.2 185.2 18.0 1.2 0.2 5.7 4.9 0.7 11.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 232.7 250.7 18.0 1.1 0.3 4.0 4.7 1.1 9.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 269.2 292.2 23.0 0.6 0.2 2.2 3.0 1.0 6.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0203 195.1 202.3 7.2 4.2 1.0 7.3 9 5.1 21.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0204 138.5 188.4 49.9 0.7 0.3 1.5 1.5 0.4 3.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 138.5 155.5 17.0 1.6 0.8 3.5 3.1 1.0 7.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0205 282.3 449.8 167.5 0.8 0.2 1.4 1.8 0.7 3.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 351.3 365.3 14.0 1.5 0.2 2.4 3.8 1.0 7.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 391.8 416.3 24.5 1.5 0.6 3.1 3.4 2.5 9.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0208 nsv
--------------- --------- --------- ------------ ------------------------------------------------------------
FNX0220 175.0 255.0 80.0 1.1 0.2 2.2 2.3 0.7 5.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 221.8 255.0 33.2 1.9 0.3 3.9 4.0 1.2 9.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0221 166.1 210.9 44.8 0.8 0.2 1.9 2.1 0.3 4.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 198.3 210.9 12.6 1.3 0.3 3.5 3.6 0.3 7.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0222 157.7 221.5 63.8 1.1 0.2 2.1 2.9 0.7 5.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0223 157.5 260.0 102.5 1.2 0.4 2.3 3.4 0.7 6.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 235.0 260.0 35.0 2.0 0.4 3.8 5.8 1.4 11
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0224 215.4 289.5 74.1 1.1 0.3 2.7 3.2 0.9 6.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 248.1 263.1 15.0 2.3 0.6 4.2 6.3 2.1 12.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 280.2 289.5 9.3 1.9 0.2 8.1 7.3 1.5 16.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0225 170.0 322.5 152.5 0.8 0.2 2.2 1.9 1.8 5.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 170.0 180.0 10.0 0.8 0.2 6.7 3.4 1.8 11.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 200.0 225.0 25.0 1.2 0.2 1.7 2.0 2.0 5.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 245.0 322.5 77.5 1.0 0.3 2.9 2.5 2.6 7.9
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 260.0 275.0 15.0 2.0 0.4 4.0 4.6 1.1 9.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 310.0 322.5 12.5 2.8 0.9 10.6 6.8 13.8 31.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 405.0 415.0 10.0 0.1 0.1 3.5 2.7 0.2 6.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 485.0 495.0 10.0 0.2 0.0 3.2 2.5 0.5 6.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0226 140.0 285.0 145.0 0.6 0.2 1.7 1.8 0.6 4.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 185.0 255.0 70.0 0.7 0.3 2.2 2.5 0.7 5.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0227 160 325.0 165.0 0.8 0.1 1.6 1.8 1.1 4.6
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 160 180.0 20.0 1.5 0.6 2.6 3.7 1.3 7.5
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 285 325.0 40.0 1.3 0.1 3.5 3.2 3.3 10.0
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0241 251.8 256.8 5.0 2.0 0.1 4.9 6.6 2.8 14.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 319.8 327.2 7.4 8.3 1.8 13.6 24.8 3.3 41.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0242 nsv : outside deposit
--------------- --------- --------- ------------ ------------------------------------------------------------
FNX0243 215 225.0 10.0 0.5 0.2 1.7 1.4 0.3 3.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 305 335.0 30.0 1.4 0.2 6.8 5.1 0.4 12.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 322.5 330.0 7.5 4.8 0.8 21.4 15.4 0.4 37.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0247 417.8 423.8 6.0 2.7 0.5 8.6 11.8 2.8 23.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 538.8 548.8 10.0 <0.1 <0.1 9.2 34.2 0.0 43.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0254 254.9 257.9 3.0 4.2 4.3 12.6 32.4 2.7 47.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 304.7 381.2 76.5 2.2 0.3 3.5 4.7 0.5 8.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 304.7 334.7 30.0 1.8 0.2 3.9 6 0.9 10.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 368.7 376.2 7.5 13.8 2.3 16.7 20.1 0.5 37.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0255 330.0 400.0 70.0 0.5 0.1 2.6 3.1 0.5 6.2
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 355.0 362.5 7.5 1.6 0.2 11.2 10.9 1.3 23.4
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
incl. 375.0 390.0 15.0 0.8 0.1 3.4 5.2 1.0 9.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0256 365.0 375.0 10.0 0.3 0.1 1.8 2.8 0.2 4.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 391.8 395.6 3.8 0.5 0.1 3.1 3.6 0.4 7.1
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 431.6 432.1 0.5 19.8 0.7 40.6 83.2 0.5 124.3
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
and 470.0 475.0 5.0 <0.1 <0.1 1.6 5.0 0.0 6.7
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
FNX0271 148.7 159.0 10.3 1.5 0.2 2.4 1.8 0.6 4.8
--------------- --------- --------- ------------ ------- ----------- ---------- ---------- -------- ---------
Note: nsv = no significant values
In 2004, an additional 60,000 ft of drilling is planned for the PM Deposit.
This drilling will provide increased definition of most of the deposit at 50 to
80 foot centres, and attempt to expand the limits of the known deposit.
The success of the 2003 and previous drilling programs, led the SJV to initiate
an advanced exploration and bulk sampling program in mid - 2003. A PM access
ramp was collared on the 1500 Level of the main ramp, and by 23, March 2004,
700 ft of this ramp had been completed. In 2004, the access ramp will continue
across the main portion of the PM Deposit, remaining in mineralization
throughout. Cross cuts will be driven at various intervals along the access
ramp to permit larger bulk samples to be collected. The increased geologic
knowledge derived from the bulk sample and drilling data, will provide the
basis for a mineral resource estimate, which, when combined with the
metallurgical information generated, will lead to the completion of a final
feasibility study by summer 2004.
8.1.5 RESOURCES AND RESERVES
Patterson's report dated May 9, 2003 and filed on SEDAR May 21, 2003 outlined
resource estimates for five of the seven known deposits at the McCreedy West
Mine, which totaled 1,740,000 TONS in the measured and indicated categories and
a further 376,000 TONS in the inferred category. The resources were contained
within the Inter Main, Upper Main and East Main contact-type deposits and the
700 and 950 footwall -type vein deposits. These resources were reviewed and
audited by RPA (RPA March, 2003).
During the current reporting period, resources for the Inter Main and East Main
deposits were updated to reflect additional drilling. A change in minimum
mining width, additional drilling and raising were incorporated in the 700
Deposit resource update. Resources for four of the five Properties were
converted to probable reserves (RPA report, entitled " Review of the Mineral
Resources and Mineral Reserves of the McCreedy West Mine Property, Sudbury
Area, Ontario", and dated August 22, 2003 was authored by Richard Routledge,
M.Sc (Appl.), P.Geol., and Graham G. Clow B.Sc., P.Eng). As announced in a news
release dated February 23, 2004 an additional 505,000 TONS of resource in the
inferred category were added to the Southwest Extension of the Inter Main
Deposit These additional resources were also reviewed by RPA.
TABLE 7: MCCREEDY WEST MINE - RESERVES
---------------- ---------------------------- ----------- -------- -------- ------- -------- ------- -----------
CATEGORY TONS NI CU PT PD AU TPM
---------------- ---------------------------- ----------- ----------------- ------------------------------------
(000S) % OZ/TON
---------------- ---------------------------- ----------- -------- -------- ------- -------- ------- -----------
PROBABLE CONTACT DEPOSITS 1,237.1 1.91 0.23
---------------- ---------------------------- ----------- -------- -------- ------- -------- ------- -----------
FOOTWALL DEPOSITS 119.0 0.75 6.83 0.05 0.08 0.04 0.17
---------------- ---------------------------- ----------- -------- -------- ------- -------- ------- -----------
TOTAL 1,356.1
---------------- ---------------------------- ----------- -------- -------- ------- -------- ------- -----------
TABLE 8: MCCREEDY WEST MINE - RESOURCES (IN ADDITION TO RESERVES)
---------------- ---------------------------- ----------- -------- -------- ------- -------- -------- ----------
CATEGORY TONS NI CU PT PD AU TPM
---------------- ---------------------------- ----------- -------- -------- ------- -------- -------- ----------
(000S) % OZ/TON
---------------- ---------------------------- ----------- ----------------- ------------------------------------
INDICATED CONTACT DEPOSITS - - - - - - -
---------------- ---------------------------- ----------- -------- -------- ------- -------- -------- ----------
FOOTWALL DEPOSITS 520.0 0.27 1.44 0.07 0.07 0.02 0.16
---------------- ---------------------------- ----------- -------- -------- ------- -------- -------- ----------
TOTAL 520.0 0.27 1.44 0.07 0.07 0.02 0.16
---------------- ---------------------------- ----------- -------- -------- ------- -------- -------- ----------
INFERRED CONTACT DEPOSITS 821.3 1.67 0.31 - - - -
---------------- ---------------------------- ----------- -------- -------- ------- -------- -------- ----------
FOOTWALL DEPOSITS 8.2 0.85 7.44 0.08 0.12 0.06 0.26
---------------- ---------------------------- ----------- -------- -------- ------- -------- -------- ----------
TOTAL 829.5
---------------- ---------------------------- ----------- -------- -------- ------- -------- -------- ----------
8.1.6 MINING
The underground mine operations are accessed via a decline extending from
surface to the 1600 Level. Men and material are transported via the -20% grade
ramp to the mine working levels. Emergency egress from the mine is via a raise
ladderway system extending from surface to the 1600 Level.
Ventilation is supplied to the mine using the existing #1 and #2 Fresh Air
Raises. Fresh air enters the mine through the #1 Raise, which is equipped with
two 150 HP 72 inch fans located on surface. Fresh air is also drawn into the
mine through the #2 Raise by a 150 HP 72 inch fan located on the 1080 foot
level underground. The majority of the exhaust air travels up the main access
ramp to surface, with a smaller quantity leaving the mine via the Return Air
Raise to surface. Mine air is heated during the winter months by the existing
burner units installed atop the #1 and #2 Raises.
Production from the mine by the SJV commenced in May 2003 from the 700 Complex
and Upper Main Deposits. The production rate at the mine and shipments to the
Inco mill steadily increased throughout the year as access development
progressed for the Inter Main and East Main Deposits. Daily shipped tonnage
averaged 840 tons for the month to March 23, 2004. Once additional mining faces
become available in the Inter Main it is expected that mine production and
shipments will attain the targeted 1,000 tons per mine operating day by mid
2004.
Mining methods are dictated mainly by ore geometry and the need to minimize
dilution. In the footwall 700 VEIN DEPOSIT shrinkage mining is utilized in the
steeper veins while conventional up-dip panel mining is used in the flatter
veins. The UPPER MAIN CONTACT DEPOSIT utilizes mechanized cut and fill stoping
and a combination of mechanized and conventional (captive) cut and fill stoping
is being used on the EAST MAIN DEPOSIT. For the INTER MAIN DEPOSIT, initial ore
production was from sill development required to outline the extent of the zone
followed by production from both longhole and mechanized cut and fill stoping.
An internal ramp system has been driven to provide access to the Inter Main
Deposit from the 950 and the 1450 Levels at the eastern end of the mine.
Backfilling consists of unconsolidated waste produced from the mine
development. Waste backfill will be placed in the mined stopes and various
identified unfilled stopes and redundant levels in the mine from previous
operations. A deferred fill program is planned for the 700 Deposit due to the
stoping methods used, namely sequenced panel and shrinkage. Backfill will be
selectively placed once stopes have been completed and mucked out.
Ore is mucked to temporary storage bays where, following loading into trucks
with 8yd3 and 9yd3 diesel LHD units, it is transported to surface in 36 and 55
ton underground haulage trucks. Development waste is dumped directly into
previously mined out areas or hauled to surface for temporary storage prior to
returning underground as backfill.
The ore hauled from the mine is placed on a surface coarse-ore stockpile within
a Process Containment pad which contains the crushing and sampling systems and
the associated stockpiles and collects and diverts to treatment any surface
water runoff from the stockpile pad. The design and construction of the
stockpile pad has been completed by a third party engineering consultant The
ore is reduced to a nominal -1" size through a 2-stage crushing circuit and
then passed through a sampling tower for grade determination. Samples are sent
to a third party laboratory for grade determination. A radial stacker is
employed to stack segregated fine ore piles on a batch basis. The crushed and
sampled ore is then loaded and trucked to Inco's weigh scale and then dumped at
the Clarabelle Mill for processing. The only processing undertaken by the Joint
Venture at the McCreedy West site is primary crushing of the ore. This reduces
any environmental liability to the minimum. Milling and refining of the ore is
subject to the terms of a processing Off-Take Agreement with Inco.
Compressed air is supplied to the mine at 100 psi by 1600 cfm and 1000 cfm
screw compressors installed on surface. Air is distributed underground by an 8
inch diameter pipe located in the Emergency Manway. A 69 kV power line extends
to the McCreedy West Mine substation located on the site. Electrical power for
the mine is provided to the mine from the main substation. Power is fed at 4160
volts to the mine by two 2/0 main feeder cables.
Underground communications are supplied through a Femco phone system at fixed
locations, and through the leaky-feeder radio system. The fleet of mobile
equipment for the mine production operations was purchased in 2003.
The McCreedy West Mine operations are committed to a high standard of
environmental stewardship. Sustainability is an important issue for every
department, and involves protecting human health, reducing the impact of mining
on the ecosystem, and returning the site to a state compatible with a healthy
environment. A series of management systems for maintenance, environmental
activities and occupational health and safety have been implemented. Currently,
operations at the McCreedy West Mine are in compliance with applicable
corporate standards and environmental regulations.
As part of the environmental program established at the mine to ensure the
mining activities do not impact the site conditions, the collection and
diversion of any potentially impacted surface water runoff is done. The Process
Containment and Stockpile pad collects and diverts any surface water runoff
from the stockpile pad to treatment. This engineered pad includes adequate
storm water storage capacity, an impermeable liner, and proper drainage; all of
which conform to environmental standards. Effluent water runoff is collected
and diverted to the underground mine drainage system to the 1600 Level, then
over to the Levack Mine and is eventually pumped to surface by Inco from the
Coleman/McCreedy East Mine and treated at the Strathcona water treatment plant
Depending on backfill requirements, waste produced from the mine development
may be hauled and temporarily stored on surface on the containment pad.
The closure plan developed for the McCreedy West Mine provides for "walk away"
closure. The potential for acid rock drainage from the mine activity is limited
to materials placed and processed on the stockpile pad. At closure, the
stockpile pad will be transported underground to fill the remaining mine
workings. There is no water discharge from the site. There are presently no
tailings ponds or waste treatment facilities on the McCreedy West Mine site and
none is planned.
Public information sessions are held with the local communities and issues
raised are documented, and addressed, resulting in periodic review and analysis
of the mine closure plans
8.1.7 RECOMMENDED WORK PROGRAM AND BUDGET
The primary objective of the 2004 program is to increase the resource and
reserve base at the McCreedy West Mine by completing a program of detailed
evaluation of historical FNX and Inco data, in collaboration with a program of
collecting new data through diamond drilling, exploration drifting and
associated underground mapping and sampling.
During 2004, the diamond drill program will mostly originate from underground
platforms on the 950, 1400 and 1600 Levels, and will consist of 88,000 ft of
near term production and advanced exploration drilling, and 10,000 ft of
pre-development drilling. Most of this drilling will be focused towards
providing increased confidence at the Inter Main and PM Deposits, as well as
exploring for additional mineralization beyond their currently known limits. In
addition, 5,200 ft of surface drilling have been allotted for near term
production drilling in the western extensions of the Inter Main Deposit. This
drilling should provide the required level of confidence to elevate the
inferred resource to an indicated or measured category.
The initiation of the PM Ramp in 2003 provides FNX the opportunity to gain a
better understanding of the PM Deposit through a program of detailed mapping
and sampling. This program will continue during 2004 as the ramp continues
through the heart of the deposit. The information gathered from this program,
will assist FNX's understanding of the controls of this important deposit and
facilitate decision making as FNX moves towards feasibility.
The planned 2004 exploration budget for the McCreedy West property is estimated
at $4.6 million, with an additional $2.0 million estimated for the PM Deposit
advanced exploration ramp.
8.2 LEVACK MINE PROPERTY
8.2.1 LOCATION, HISTORY, INFRASTRUCTURE & ENVIRONMENT
The Levack Mine property, comprising 811.37 acres (328.4 ha) in six mining
patents, is located 34 km northwest of downtown Sudbury (Figures 1 & 5 ) in
Levack Township and immediately adjacent to the McCreedy West property
described above. Access is via a year round highway and a rail spur passes
within 1 km of the property site.
The Levack Mine, the first deposit discovered on the North Range, was
discovered in 1887 and patented in 1889. Mond acquired the property in 1912 and
production started from the No.1 inclined shaft in 1915. Following the merger
with Inco in 1929 the surface plants were destroyed by fire and the mine was
closed. Following reopening in 1937 the three-compartment No. 2 Shaft was sunk
to a depth of 4,050 ft. In 1939 the No. 1 and No. 2 East Orebodies were
discovered and the No. 3 and No. 4 Orebodies were discovered by diamond
drilling in 1947. The No. 3 internal shaft was collared in 1950.
The Levack Mine operated continuously from 1937 until closing in 1997. The
total ore production was 66,600,000 TONS GRADING 1.31% CU, 2.00% NI, 1.5 G/T
TPM.
FNX began exploration on the Levack property in March, 2002. During 2003, FNX
focused on targeting under-explored contact and footwall zones near the #3 and
#7 Orebodies. In the first quarter of 2004, FNX initiated an underground and
surface drilling program at Levack designed to better define the 1300 and 1900
Deposits. UTEM surveys were completed on most of the 2003 holes.
A major development at the Levack Mine in 2003 was the evaluation of the Inco
MRI and confirmation of resources. Integration of these data with those defined
by FNX modeling of the 1300, 1900 and No. 7 Extension Deposits resulted in a
total indicated and measured resource of 4.6 MILLION TONS AT 1.03% CU, AND
2.06% NI. The total inferred resources are 1.0 MILLION TONS AT 0.9% CU, AND
2.0% NI. These resource estimates were completed in-house by FNX personnel and
consultants and released in a news release dated September 4, 2003. The
estimates were reviewed and audited by independent consultants RPA. The RPA
report, by Richard Routledge M.Sc., P. Geol., dated October 3, 2003, and
entitled " Review of the Mineral Resources of the Levack Mine Property, Sudbury
Area, Ontario", was filed on SEDAR. The identification of these resources has
provided the motivation for advancing surface and underground exploration in
anticipation of a mine re-opening in 2004.
Much of the infrastructure at Levack Mine remains accessible. The No. 2 Shaft
is usable, subject to refurbishing, to approximately the 3,600 ft Level. A
ventilation system using the available raises, drifts and shafts is in use to
service the McCreedy East Mine (Inco) return air. For the purposes of access
and drilling, the 1600 Level has been rehabilitated from the McCreedy West Mine
main ramp to the Intermediate - 1300 Deposit area at the Levack Mine (Figure
5).
The surface infrastructure includes the collar house, hoist room with hoist and
miscellaneous surface buildings including the sand plant. Hydroelectric power
is currently available to the project site. The surface load out and rail car
loading area are functional. Re-entry to the Levack workings will not conflict
with the current McCreedy East operations of Inco.
This property is covered by the joint Inco-Falconbridge environmental closure
plan, which also covers the McCreedy West Mine. As activity at Levack
accelerates the environmental considerations are becoming increasingly
important.
A Certificate of Approval (Sewage) is in place to handle sanitary sewage and
all mine water reports to the Strathcona effluent treatment facility. It is
planned that an amendment to the Levack-Onaping Closure Plan will be submitted
in second quarter 2004 to allow the SJV work program, which includes the
probability of the resumption of commercial production at Levack, to proceed.
In order to supplement the information that is provided in the amendment, a
site characterization will be completed by a third party consultant in April
2004. This will serve to define existing mining disturbances at the Levack
property, delineate watershed boundaries and establish upstream and downstream
monitoring stations in the nearby receiving waters.
8.2.2 PROPERTY GEOLOGY & MINERALIZATION
The Levack Mine is located on the northwest margin of the SIC. It is situated
within the Levack trough, an 8.5 km long structure that generally strikes
northeast, dips at 40-45(degree) southeast and contains all of the major North
Range deposits.
The Contact-type orebodies at the Levack Mine are contained within terrace
structures that have acted as traps for the sublayer material that hosts
sulphide mineralization. In these terrace environments the thickened sequence
of sublayer, consists dominantly of granite breccia with sublayer norite
containing sulphide mineralization. The orebodies comprise thick lenses and
stringers of massive Cu-Ni sulphide situated at or near the contact between
granite breccia and the Levack footwall complex. The sulphides in the granite
breccia are typically disseminated, blebby or inclusion massive sulphides
consisting of pyrrhotite, pentlandite, chalcopyrite and minor pyrite. In
addition each of the contact-type deposits (including the Levack Main, No. 1,
No. 2, No. 3 and No. 4 Deposits) has an area of associated Cu-PGM-rich
sulphides, occuring as a stockwork of massive stringers in the footwall Sudbury
Breccia.
Hangingwall rocks consist of a basal mafic norite overlain by felsic norite of
the SIC. Brecciated granodiorite, granodiorite gneiss and migmatites of the
Levack complex form the footwall to the deposits and are referred to as
megabreccia. The sulphide mineralization and the host rocks have been disrupted
by northwest-trending faults.
8.2.3 DEPOSIT TYPES
The CONTACT TYPE deposits of interest at Levack Mine are represented by the
1300, No. 7 and the No. 3 Deposits. The 1900 Deposit can be regarded as a
hybrid-type exhibiting features of both Ni-rich and Cu-Ni-PGE - rich types. As
previously noted, mineralization within the deposits may be transitional from
Ni-rich sections to more Cu-enriched zones.
The 1300 DEPOSIT is more or less typical of the contact-style mineralization
observed on the North Range. This 250 ft x 650 ft deposit extends from the 1000
Level to the 1500 Level of the Levack Mine, and is defined by a sub-horizontal
lower portion and a sub vertical upper portion. The lower portion occurs at the
contact between sublayer norite and a mixed unit of ultramafic-gabbroic/granite
breccia rocks. The upper portion dips at 55(degree) and is completely within
the mixed ultramafic-gabbroic/granite breccia unit. The mineralization is
consistent with a nickel-rich contact deposit, consisting of massive,
semi-massive, blocky and blebby pyrrhotite-pentlandite-chalcopyrite-pyrite
mineralization.
Prior to FNX's involvement in the Levack Property, Inco had completed 7 holes
into the 1300 Deposit with representative intersections demonstrating the
potential being 1.10% CU, 3.33% NI, OVER 65.7 FT and 0.80% CU, 3.63% NI OVER
5.8 FT.
In 2002, FNX completed 23 holes, testing both the 1300 and 1900 deposits.
Significant FNX intersections in the 1300 Deposit include 0.5% CU, 2.1% NI OVER
56.7 FT in drillhole FNX2013 and 0.7% CU, 1.6% NI OVER 79.1 FT in drillhole
FNX2009.
The 1300 Deposit will be the focus of much of the 2004 exploration drilling
program. Due to its bimodal character, it is not possible to drill the deposit
from only one drill platform. The sub-horizontal portion of the deposit must be
drilled from surface, whereas the sub-vertical portion of the 1300 Deposit will
be drilled from the rehabilitated 1600 Level drift. The 20,000 ft planned for
this drill program should be sufficient to upgrade the inferred resource of
349,000 tons at 0.7% Cu, 1.9% Ni to a reserve category.
The NO. 7 NI-CU DEPOSIT is located down dip and to the west of the Levack Main
Orebody. Partially mined prior to the Levack Mine shutdown, this contact
deposit contains significant resources and will be an initial focus for
production. The main bodies of mineralization at the No. 7 Deposit are
controlled by: (i) local perturbations of the footwall gneissic rock, which
result in sulphide traps on the contact, and (ii) blocks and clasts of the
footwall in the hanging-wall granite breccia. The irregular nature of the
mineralization in this deposit is intensified by the occurrence of thickened
units of granite breccia which appear to be related to a disruption and
displacement of the ore. The dominant host rocks for the
pyrrhotite-pentlandite-chalcopyrite-pyrite mineralization are the granite
breccia and the sublayer norite.
In addition to the partially mined portions of the Deposit, an undeveloped
exploration area to the east of this deposit has significant potential. This
area, known as the NO. 7 EXTENSION (NO. 7X), has similar geology and ore
mineralogy to the No. 7 Deposit, but is less intensely drilled. The
mineralization appears to be associated with an elongate, trough-like zone
approximately 200 ft wide and extending 1000 ft down dip. Thirty-seven Inco
boreholes with 48 intersections, 26 of which are greater than 10 ft cut the
zone, and assays show that Ni values exceed Cu values by a ratio of at least
2:1 with negligible PGE values.
Historical intersections demonstrating potential are 0.93% CU, 1.64% NI OVER
78.7 FT and 0.54% CU, 5.78% NI OVER 3.2 FT.
In 2003, FNX completed three holes into the No. 7 Deposit with the following
significant intersections : 0.15% CU, 1.2% NI, OVER 36.1 FT in drillhole
FNX2034 and 0.69% CU, 2.51% NI, 0.94 G TPM OVER 15.5 FT in drillhole FNX2037.
In 2004, 9,600 ft of drilling are planned for the No. 7 Deposit. This drilling,
which will focus on defining the upper portions of the No. 7 Extension, will be
partially completed from surface, and partially from the 1600 Level of the
mine. The focus of this drilling campaign will be to provide the data necessary
to upgrade the No. 7 Extension inferred resource of 123,170 TONS GRADING 0.23%
CU, 1.25% NI.
The NO. 3 DEPOSIT is a partially mined Ni-Cu-PGE contact-type mineralized body
located 3,600 ft east of the No. 2 shaft in a large footwall embayment. This
orebody, however, is atypical of most other North Range contact-type deposits
because of the strong association of Ni-dominant mineralization with Sudbury
Breccia rather than with granite breccia.
The 2003 FNX drilling program was designed to test the down dip proximal
footwall to the No. 3 Deposit in an attempt to locate any associated Cu-Ni-PGE
mineralization. This drilling intersected several narrow Cu-Ni-PGE - rich veins
in FNX2030 which assayed 2.22% CU, 0.93% NI, 5.45 G TPM OVER 12.2 FT. Two other
holes were drilled as follow-up to this mineralization. One of these holes was
faulted off (Fecunis Fault) prior to intersecting target depth, while the
second did not intersect any significant mineralization.
In 2004, 7,000 ft of drilling has been allocated to test the relatively
untested, though highly prospective, footwall environment around the No. 3
Orebody.
The 1900 DEPOSIT is located down dip from the mined Intermediate Deposit, and
is regarded as a hybrid of the Ni-rich and Cu-Ni-PGE-rich deposit types. This
650 ft. by 150 ft deposit is hosted in a mixed unit of granite breccia with
Sudbury Breccia, and is overlain by a 450 ft wide meta-gabbroic-ultramafic
block, upon which the 1300 Deposit is positioned. Below the deposit, the
footwall rocks are composed of granodiorite gneiss and Sudbury Breccia.
Mineralization within this deposit occurs as narrow fracture controlled
veinlets, and locally massive zones consisting of
chalcopyrite-pyrrhotite-pentlandite with minor millerite. The mineralization
appears to be dominantly associated with granite breccia in the south-west, but
in the north-east it is associated more with the Sudbury Breccia.
The 1900 Deposit contains significant PGE mineralization. It should also be
noted that narrow (< 3 ft) mineralized intercepts with enriched Cu and PGM
values typical of the footwall vein- type Cu-PGE mineralization, occur in the
lower parts of some of the boreholes.
Inco previously completed 15 drillholes that returned 18 intersections in the
Deposit, with seven being greater than 10 ft. Intersections demonstrating
potential included 1.94% CU, 2.60% NI, 4.4 G/T TPM OVER 87.4 FT and 3.32% CU,
4.87% NI, 10.6 G/T TPM OVER 5.3 FT.
Drilling by FNX in 2002 reported significant intersections from six drillholes
including 2.2% CU, 1.0% NI, 2.7G/T TPM OVER 21.1 FT in drillhole FNX2015; and
2.8% CU, 2.0% NI, 3.0 G/T TPM OVER 19.9 FT in drillhole FNX2001.
No drilling was undertaken on the 1900 Deposit during 2003 but 20,000 ft of
drilling have been budgeted for testing both the 1300 and 1900 Deposits in
2004.
The other prime target area at the Levack Mine is the large expanse of FOOTWALL
rock extending north from the SIC contact. This setting is the host for a
number of high grade Cu-Ni PGM vein-type deposits on the North Range,
immediately adjacent to the FNX ground.
8.2.4 RECOMMENDED WORK PROGRAM AND BUDGET
The prime objective in 2004 is to upgrade as quickly as possible the near term
production targets (1300, 1900 and No. 7X Deposits) from inferred resources to
reserve status. This will be achieved by a program of detailed diamond drilling
and geological interpretation. In addition, drilling will continue to test
under-explored areas of the contact and footwall.
To accomplish the 2004 program, 44,600 ft of underground and surface drilling
have been allocated to the Levack Project. Access to the initial underground
drill platforms has been gained through the 1600 Level from the adjoining
McCreedy West Mine. Approximately 30,000 ft of this drilling will be used for
definition purposes with the balance allocated to exploration of the contact
and proximal footwall.
Proposed exploration expenditures for this program are estimated at $2.5
million. In addition to this exploration budget, it is anticipated that a
program to recondition the Levack #2 shaft to facilitate advanced exploration
from underground drill platforms will be initiated in order to permit upgrading
of the resources established during the year and to determine the feasibility
of their being mined.
[GRAPHIC OMITTED - Sudbury Joint Venture Levack Property Longitudinal Section]
8.3 NORTH RANGE FOOTWALL PROJECT
8.3.1 GEOLOGICAL SETTING AND HYPOTHESIS
As previously noted, all of the major Inco and Falconbridge past and current
producing mines of the North Range (Strathcona, Coleman, Levack, McCreedy East,
Onaping, McCreedy West, Hardy) occur within an extensively mineralized 8.5
km-long portion of the SIC. The McCreedy West Mine and Levack Mine properties
cover some 4 km of this strike and limited exploration to date in the footwall
rocks to the north of the mines has demonstrated potential for this belt to
host similar deposits.
This is an important exploration target and some 50% of this prolific area is
included in the Sudbury Project Properties subject to this agreement. Of
particular interest is the discovery and development of high-grade Footwall
Cu-Ni-PGM deposits on the east side of the Fecunis Fault compared with that on
the west (FNX) side. The geology across the entire embayment is similar and
there is no compelling reason why such deposits should not occur on the FNX
ground. The presence of the 700, 950 and PM Deposits in the proximal footwall
at the McCreedy West Mine supports this contention and previous exploration had
not systematically explored the more distal sections of the footwall on this
west side of the fecunis fault. The current FNX Footwall exploration program is
designed to test this hypothesis.
Within the McCreedy West property, previous wide-spaced drilling has indicated
favourable zones of Sudbury Breccia with trace Cu-Ni-PGM sulphide
mineralization. On the adjacent Levack property, the brecciated footwall rocks
have been tested by a small drilling program and surface mapping has identified
large zones of favourable footwall Sudbury Breccia.
8.3.2 FNX EXPLORATION PROGRAM
The aim of the Footwall Project drill program is to test the footwall rocks
along the entire strike length of the contact, up to 1 km into the footwall. In
addition to testing the geology, these holes will serve as platforms for
in-hole UTEM surveys to locate off-hole anomalies.
From 1 April, 2003 to March 23, 2004 13 footwall holes, varying in length from
459 to 4065 ft were completed on the Levack and McCreedy West properties for a
total of 18,928 ft. Downhole UTEM geophysical surveys completed on one of these
holes did not identify any significant anomalies that could be attributed to
sulphides. UTEM surveys on three other holes are pending. Local mapping of the
footwall environment during the summer of 2003 has provided the basis for the
first five holes of the 2004 footwall drilling program. These holes, located
500 ft behind the Levack Main Orebody, were designed to follow-up anomalous Pt
and Pd values associated with Cu veining in recrystallized Sudbury Breccia. One
of these holes (FNX6019) intersected 0.8% CU, 2.0% NI, 1.74 G/T TPM OVER 12.45
FT, at a depth of 100 ft below surface.
8.3.3 RECOMMENDED EXPLORATION PROGRAM AND BUDGET - 2004
The focus of the 2004 footwall program will be to complete drill holes that
take advantage of the extensive geological mapping and interpretation that
formed a large part of the 2003 program. This will include drilling from both
underground and surface platforms into areas of Sudbury Breccia that are deemed
to have the correct characteristics for potentially hosting Cu-Ni-PGE deposits.
To complete this program, the North Range Footwall Project has been budgeted
25,000 feet of drilling in 2004 at a cost of $0.97 million.
[GRAPHIC OMITTED - North Range Footwall Project: Levack Embayment Longitudinal
Section]
8.4 NORMAN PROPERTY
8.4.1 LOCATION, HISTORY, INFRASTRUCTURE & ENVIRONMENT
The Norman property, comprising 1,111.33 acres (449.8 ha), is located in the
Norman Township 32 km north-northeast of Sudbury (Figure 1). The mining rights
are held under ten-year mining and surface rights leases 287 and 288, and are
renewable April 1, 2007. Excellent road access is available and the main
Ontario line of the CNR passes approximately 6.5 km west of the project site.
The property has been intermittently explored since 1971 by surface drilling
and geological mapping. The former Whistle open pit mine is located on the
property and was in production between 1988 and 1991 and again between 1994 and
1997. The mine produced 5.71 MILLION TONS GRADING 0.33% CU, 0.95% NI, 0.034%
CO. The Whistle contact-type deposit was located in an embayment from which the
Whistle Offset trends in a north-eastward direction away from the SIC. Three
zones of PGM-Cu-Ni mineralization (North, South and 2000 Deposits) have been
partially delineated in the Whistle Offset; the North and South to the
northeast of the Whistle open pit and the 2000 in the Offset below the open
pit.
The former Whistle open pit mine site is currently being reclaimed under a
conceptually approved closure plan. FNX has implemented monitoring programs at
the property in order to collect the data required to support operational
permit applications and define existing environmental liabilities. In
accordance with established protocols, FNX initiated a baseline monitoring
program to characterize current conditions at target exploration areas at the
Norman Property. The program has been carried out with the participation of
Wahnapitae First Nation, and has focused on both terrestrial and aquatic
systems. The data that have been collected will identify existing liabilities
and support permit applications for advanced exploration and, if warranted,
production.
The terrestrial assessment focused on the identification of biological values
and the information generated has been used to sterilize certain areas from
surface development. As part of this assessment, land within the property
boundary was classified in accordance with the Forest Ecosystem Classification
System. Assessment work also quantified metal levels in vegetation and soil in
the vicinity of the proposed project site.
The aquatic assessment examined surface water and sediment quality, as well as
the fish and benthic invertebrate communities. Watershed boundaries have been
delineated within the property boundary and creek flows in the receiving
environment are being monitored on a continuous basis.
A groundwater monitoring program has been in effect since autumn 2002.
Additional monitoring wells will be installed as part of a Certified
Groundwater Monitoring Program.
With the advancement of biological studies and field exploration work, a
conceptual site plan has been defined for an advanced underground exploration
project at the property. The proposed project site is external to the Whistle
Mine closure plan area and watershed. In order to allow site development to
commence and the advanced exploration project to proceed, all applications for
the required permits are in the final stages of submission to government.
Consultation is continuing with Wahnapitae First Nation and the community has
been involved in the planning for the project. The Corporation and Wahnapitae
First Nation are currently working towards a Memorandum of Understanding and
Statement of Principles to promote effective communication between the two
parties and to create a constructive and mutually beneficial relationship.
A Public Information Session, an integral part of the permiting process, is
scheduled for second quarter 2004 in the community of Capreol to update the
community regarding the SJV's activities at the Norman property.
8.4.2 PROPERTY GEOLOGY & MINERALIZATION
The Norman property is located (Figure 1) at the northeast apex of the SIC
where the strike of the SIC changes from the east-west direction of the North
Range to the north-south direction of the East Range. The property includes the
Whistle embayment and the southern portion of the Whistle Offset dyke. The
Offset extends north-eastward from the Whistle embayment into the gneissic
footwall rocks as a vertically dipping dyke varying in thickness from 50 ft, to
greater than 300 ft, and consisting of irregular, discontinuous lenses of
quartz diorite within a wider zone of Sudbury Breccia. Three zones of Cu-Ni-PGM
mineralization have been discovered along the Whistle Offset and Ni-bearing
targets at the base of the SIC have been followed up by drilling.
8.4.3 TARGETS (Figure 7).
The NORTH DEPOSIT, hosted within the Whistle Offset Dyke, has been exposed at
surface over a 100 ft by 300 ft area where the overburden has been stripped.
Mineralization occurs as a set of sub-parallel, north-east trending,
sub-vertical lenses consisting of concentrations of Cu-PGM-Ni-bearing veins and
lesser disseminated mineralization within inclusion quartz-diorite and
metabreccia. Sulphide veins range from inches to 15 ft wide and can be
generalized into two types: (i) more continuous breccia veins with matrix
chalcopyrite (+PGM+Ni minerals) and (ii) less continuous extensional veins of
massive chalcopyrite (+PGM+Ni minerals). Veins anastomose around blocks
contained within the offset dyke while structures, most commonly North South
trending, result in oblique offsets to their overall north-east trend.
FNX's exploration program on the North Deposit from April 2003 to 23 March 2004
consisted of detailed geological interpretation and diamond drilling. Four
diamond drill holes (2,809 ft) were completed to verify the geological model
and to provide additional information within areas of widely spaced drilling.
Table 9 presents intersections from this drilling. A geological and mineral
interpretation completed in 2003 indicates a deposit of 600 ft strike length
and 600 ft vertical depth extent.
TABLE 9: NORMAN: NORTH DEPOSIT - 2003/04 DRILLING - ASSAY INTERSECTIONS
--------------- ----------- ---------------------------------- ----------------------- -----------
FEET. % G/T
--------------- ----------- ---------------------------------- ----------------------- -----------
DDH FROM TO LENGTH CU NI TPM
--------------- ----------- --------- ---------- ------------- ------------- --------- -----------
FNX4145 419.9 428.3 8.4 1.4 0.3 4.6
--------------- ----------- --------- ---------- ------------- ------------- --------- -----------
FNX4146 582.5 607.5 25.0 1.2 0.2 1.7
--------------- ----------- --------- ---------- ------------- ------------- --------- -----------
AND 647.7 656.0 8.3 10.4 0.3 10.2
--------------- ----------- --------- ---------- ------------- ------------- --------- -----------
AND 678.4 689.9 11.5 1.6 0.3 4.4
--------------- ----------- --------- ---------- ------------- ------------- --------- -----------
FNX4147 308.5 538.5 230.0 2.6 0.2 2.7
--------------- ----------- --------- ---------- ------------- ------------- --------- -----------
INCL. 308.5 389.7 81.2 6.4 0.4 6.0
--------------- ----------- --------- ---------- ------------- ------------- --------- -----------
INCL. 347.3 389.7 42.4 11.7 0.5 10.5
--------------- ----------- --------- ---------- ------------- ------------- --------- -----------
FNX4148 207.8 323.0 115.2 1.1 0.1 1.2
--------------- ----------- --------- ---------- ------------- ------------- --------- -----------
INCL. 259.5 266.4 6.9 9.9 0.2 9.2
--------------- ----------- --------- ---------- ------------- ------------- --------- -----------
INCL. 295.5 323.0 27.5 1.5 0.1 2.0
--------------- ----------- --------- ---------- ------------- ------------- --------- -----------
Near term work on the North Deposit will consist of detailed resource
estimation and a pre-feasibility study. Some additional drilling is recommended
to test predicted high grade lenses within the North Deposit which may not be
fully delineated. Additionally, there is potential for expansion of the North
Deposit to both the northeast and southwest.
The SOUTH ZONE is also located within the Whistle Offset dyke and some 350 ft
southwest and along strike from the North Zone. Mineralization, which has a
confirmed strike length of 200 ft and a dip length of 250 ft is similar to that
in the North Deposit and appears to be open down dip, along strike and down
plunge to the west. No work was carried out on the South Zone in 2003. Future
exploration on the South Zone will consist of detailed geological modeling,
interpretation and, if warranted, diamond drilling.
[GRAPHIC OMITTED - Norman Property: Conceptual Advanced Exploration
Infrastructure]
The 2000 DEPOSIT (Figure 8), hosted within the Whistle Offset dyke, lies at a
vertical depth of 1600 to 2500 ft from surface, below the Whistle open pit. The
2000 Deposit mineralization consists of Cu + PGE + Ni-rich chalcopyrite +/-
millerite +/- pentlandite veins, stringers, fracture fillings and
disseminations within Whistle Offset dyke below the sublayer embayment.
Since the Patterson report dated May 2003 a total of 26 drillholes (75,279 ft)
has been completed on the 2000 Deposit yielding impressive intersections
including: 13.8% CU, 1.0% NI, 8.1 G/T TPM OVER 114.4 FT in hole FNX4130 with a
higher grade section within this grading 19.9% CU, 3.1% NI, 12.9 G/T TPM / 18.8
FT. The program to date has established significant mineralization over a 900
ft by 600 ft area and demonstrated continuity of the mineralized envelope.
Intersections as presented in news releases are listed in Table 10.
The 2004 drill program will include: (i) limited diamond drilling within the
known deposit to permit a resource estimation and provide support for advanced
underground exploration, and (ii) drilling to investigate the limits of the
mineralized system.
TABLE 10: NORMAN 2000 DEPOSIT : 2003/2004 DRILLING - ASSAY INTERSECTIONS
--------------- ---------------------------------- ---------------------- -----------
DDH FEET % G/T
--------------- ---------------------------------- ---------------------- -----------
FROM TO LENGTH CU NI TPM
--------------- ---------- ----------- ----------- ---------- ----------- -----------
FNX4092 nsv
--------------- ---------- ----------- ----------- ----------------------------------
FNX4093 1844.5 2329.2 SM
--------------- ---------- ----------- ----------- ----------------------------------
FNX4094 2366.0 2420.0 54.0 2.5 0.2 3.6
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2366.0 2376.8 10.8 7.1 0.5 2.8
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2399.4 2420.0 20.6 2.4 0.1 7.6
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2399.4 2412.0 12.6 3.4 0.2 10.4
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2490.0 2505.0 15.0 0.5 0.0 5.0
--------------- ---------- ----------- ----------- ---------- ----------- -----------
FNX4095 2042.4 2237.9 195.5 1.7 0.2 1.7
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2124.0 2237.9 113.9 2.4 0.2 2.5
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2131.9 2136.0 4.2 7.7 0.4 4.5
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2150.0 2153.4 2.9 16.4 2.3 13.5
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2199.1 2237.9 38.9 3.6 0.2 4.4
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2199.1 2206.6 7.6 0.9 0.1 7.2
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2220.0 2237.9 18.0 7.4 0.3 6.5
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2221.5 2225.5 4.0 27.5 0.1 14.3
--------------- ---------- ----------- ----------- ---------- ----------- -----------
FNX4096 1922.9 2098.0 175.1 1.9 0.2 1.5
--------------- ---------- ----------- ----------- ---------- ----------- -----------
1922.9 1925.4 2.5 20.2 1.9 8.2
--------------- ---------- ----------- ----------- ---------- ----------- -----------
1942.0 1949.8 7.8 4.8 0.2 2.1
--------------- ---------- ----------- ----------- ---------- ----------- -----------
1960.9 1964.4 3.5 5.2 0.2 2.9
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2049.9 2098.0 48.1 3.2 0.4 3.5
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2078.4 2098.0 19.6 6.3 0.2 6.7
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2088.8 2098.0 9.2 13.1 0.3 11.9
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2229.8 2238.0 8.2 3.5 0.2 2.3
--------------- ---------- ----------- ----------- ---------- ----------- -----------
FNX4097 1864.5 2187.0 SM
--------------- ---------- ----------- ----------- ----------------------------------
FNX4098 1942.0 2014.0 SM
--------------- ---------- ----------- ----------- ----------------------------------
FNX4099 1130.3 2125.0 SM
--------------- ---------- ----------- ----------- ----------------------------------
FNX4121 1933.0 2169.8 236.8 3.0 0.2 3.0
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2064.7 2169.8 105.1 5.5 0.2 5.5
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2075.1 2091.6 16.5 12.4 0.3 5.9
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2121.3 2169.8 48.5 6.7 0.2 7.7
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2124.4 2145.1 20.7 10.6 0.2 11.3
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2245.0 2249.3 4.3 4.1 0.1 8.3
--------------- ---------- ----------- ----------- ---------- ----------- -----------
FNX4122 1828.6 1831.5 SM
--------------- ---------- ----------- ----------- ----------------------------------
FNX4123 2570.5 2697.6 127.1 1.8 0.2 3.5
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2570.5 2572.0 1.5 1.5 2.2 28.6
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2578.7 2589.6 11.0 12.0 0.1 8.4
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2643.0 2697.6 54.6 1.4 0.4 5.3
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2643.0 2673.1 30.2 2.1 0.6 7.9
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2654.0 2673.1 19.1 2.7 0.2 11.3
--------------- ---------- ----------- ----------- ---------- ----------- -----------
FNX4124 2071.5 2284.1 SM
--------------- ---------- ----------- ----------- ----------------------------------
FNX4125 1925.8 2085.8 SM
--------------- ---------- ----------- ----------- ----------------------------------
FNX4126 2054.1 2055.1 SM
--------------- ---------- ----------- ----------- ----------------------------------
FNX4127 2453.9 2456.8 2.9 0.7 <0.1 9.6
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2564.4 2605.4 41.0 0.9 <0.1 5.4
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2577.3 2591.3 14.0 1.3 0.1 3.3
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2602.9 2605.4 2.5 2.5 0.1 53.4
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2704.8 2716.7 11.9 0.7 0.1 3.4
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2832.0 2844.9 12.9 0.6 <0.1 6.0
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2840.6 2844.9 4.3 0.9 0.1 15.7
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2967.2 2979.0 11.8 0.8 0.2 1.7
--------------- ---------- ----------- ----------- ---------- ----------- -----------
FNX4130 2665.9 2780.3 114.4 13.8 1.0 8.1
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2665.9 2707.4 41.5 19.5 0.9 10.1
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2724.6 2743.4 18.8 19.9 3.1 12.9
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2736.6 2743.4 6.8 7.9 7.2 12.0
--------------- ---------- ----------- ----------- ---------- ----------- -----------
2762.1 2769.1 7.0 26.2 1.1 11.0
--------------- ---------- ----------- ----------- ---------- ----------- -----------
Notes: nsv = no significant values
SM = stringer chalcopyrite mineralization present sporadically over the
indicated interval
[GRAPHIC OMITTED - Norman Property: 2000 Deposit Longitudinal Section (Looking
NorthWest)]
Thirteen holes (9,597 ft) were drilled to test contact style Ni-rich lenses in
the sublayer proximal to the Whistle Pit at a vertical depth of 400 to 550 ft
Sublayer Lens A consists of three known tabular bodies in close proximity, the
largest is currently 375 ft strike length by 200 ft dip length. Table 11 lists
significant intersections.
TABLE 11: NORMAN: SUBLAYER LENS A - DRILLHOLE ASSAY INTERSECTIONS
----------------------------------------------------------------
FEET %
----------------------------------------------------------------
DDH FROM TO LENGTH CU NI
----------------------------------------------------------------
FNX4057 NSA
----------------------------------------------------------------
FNX4059 195.0 457.7 262.7 0.2 1.0
----------------------------------------------------------------
507.1 532.3 25.2 0.2 1.8
----------------------------------------------------------------
517.2 532.3 15.1 0.2 2.7
----------------------------------------------------------------
FNX4060 179.1 416.7 237.6 0.2 0.8
----------------------------------------------------------------
379.7 411.7 32.0 0.2 1.2
----------------------------------------------------------------
FNX4061 182.5 500.3 317.8 0.1 0.6
----------------------------------------------------------------
367.8 393.4 25.6 0.2 1.2
----------------------------------------------------------------
FNX4062 138.0 543.2 405.2 0.1 0.7
----------------------------------------------------------------
454.1 469.0 14.9 0.2 1.1
----------------------------------------------------------------
FNX4063 172.4 386.2 213.8 0.1 0.7
----------------------------------------------------------------
318.2 381.2 63.0 0.2 0.9
----------------------------------------------------------------
500.8 545.2 44.4 0.2 0.9
----------------------------------------------------------------
623.8 638.4 14.6 0.4 0.8
----------------------------------------------------------------
FNX4064 nsv
----------------------------------------------------------------
FNX4069 575.4 635.1 59.7 0.1 1.0
----------------------------------------------------------------
606.0 635.1 29.1 0.2 1.4
----------------------------------------------------------------
General exploration in addition to the 2000, North, South and Pit target areas
consisted of drilling and surface mapping. Eight drillholes (17,560 ft) were
completed in previously unexplored areas within the WHISTLE OFFSET outside of
the known mineralized zones. Significant mineralization was encountered in two
of these holes as follows: 2.1%CU, 0.1%NI, 1.3 TPM/ 15.8 FT and 1.7% CU, 3.6%
NI, 13.8 TPM / 3.1 FT.
Four holes (8,508 ft) were drilled to test the SIC SUBLAYER for contact style
Ni mineralization. Two of these holes, planned to target offset locations in
conjunction with the sublayer target intersected low grade Cu values but with
Ni values just over 1% over intersection lengths of 3.0 ft and 10.7 ft.
Other targets tested include the COUGAR ZONE, an as yet undelineated body of
mineralization that has repeatedly been intersected by drillholes targeting the
2000 Deposit. The mineralization consists of chalcopyrite veins +/- millerite
+/- PM minerals. Two intersections in FNX4071 are attributed to the Cougar Zone
and are as follows: 3.4% CU, 0.6% NI, 0.9 G/T TPM / 5.6 FT and a second zone
some 230 ft lower in the hole with 4.0%CU, 0.1% NI, 1.4 G/T TPM OVER 18.3 FT.
Additional work, including drilling, is required to interpret the significance
of these intersections. A single hole (2,500 ft) was drilled to test west of
the Whistle embayment for footwall style mineralization.
Fifteen short holes (581 ft) were drilled to test the depth extent of surface
Ni mineralization in the sublayer immediately to the EAST OF THE WHISTLE PIT.
These intersections delineated a small tonnage deposit.
Mapping of the SIC contact, the embayment and the offset from the embayment to
the North Deposit has been partially completed and is continuing. Additional
mapping in the footwall of the SIC and within the Whistle Offset to the
northeast of the North Deposit is planned.
8.4.4 RECOMMENDED WORK PROGRAM AND BUDGET
The main emphasis of the 2004 exploration program is dedicated to: (i) drilling
on the 2000 Deposit, (ii) further delineation of Lens A Ni-rich contact
deposits below the Whistle open pit and (iii) to explore the balance of the SIC
contact environment on the Norman property. Exploration on the 2000 Deposit
will consist of infill drilling within the known mineralized envelope and
continued drilling to define the limits of the mineralized system and test for
possible extensions of the deposit. This drilling will facilitate an
anticipated advanced underground exploration decision.
The Norman property includes approximately two kilometres of SIC contact which
has seen limited exploration in the past. Two zones of significant
mineralization have been previously identified along the contact (Whistle West
and Wildcat zones). A ground EM survey has been completed in early 2004 which
will help drillhole targeting at moderate depths along the SIC contact. In
addition, much of the SIC contact on the Norman property is below the
penetration limits of EM geophysical surveys and will require drilling and
borehole EM surveying to help direct the exploration. Other potential areas of
interest on the Norman property include: ( i ) the extensive Sudbury Breccia
zones which can host footwall style mineralization; ( ii ) Ni rich contact
style mineralization extending below the Whistle Pit (Lens B); ( iii ) the
northeast extension of the Whistle Offset Dyke; and ( iv ) the southwest
extension of the Whistle Offset beneath the SIC, south of the known 2000
Deposit.
The program is budgeted at $ 3.3 million.
In addition to the above program, the drilling at both the Norman North and
2000 Deposits has indicated bodies of mineralization which require further
investigation prior to permitting resource/reserve estimations. It is apparent
that continued drilling from surface will not provide the necessary information
and consideration is being given to going underground on both Deposits. The
Norman 2000 may be accessed by a shaft while a ramp may be the most appropriate
means of accessing the North Deposit (Figure 7). The purpose of this advanced
exploration program will be to develop a better understanding of ore controls,
grade distribution, continuity of mineralization and to recover bulk samples
for metallurgical testwork culminating in a feasibility study. Such an
undertaking will require an additional budget.
8.5 VICTORIA PROPERTY
8.5.1 LOCATION, HISTORY, INFRASTRUCTURE & ENVIRONMENT
The Victoria property comprising 1,282.9 acres (519.3 ha) of mining rights
contained in two patented mining parcels is located 30 km southwest of Sudbury
in the Denison Township (Figure 1). Access is via paved roads and a rail spur
from the main CPR line is located 2.5 km south of the property.
Copper and nickel sulphide mineralization was discovered in 1886. Following the
1899 acquisition of the property by Mond, ore production and shaft sinking
continued from 1900 to 1918. In 1918 a vertical three-compartment production
shaft was sunk to a depth of 3,012 ft During the period 1900-1923, 888,000 tons
of ore averaging 2.99% Cu and 2.12% Ni were produced. Following cessation of
mining in 1923 the mine was flooded. The property was acquired by Inco in 1931
following the merger with Mond.
During the period 1945-1964, 175 surface exploration holes were drilled to
delineate the Victoria West low-grade zone. The mine was dewatered in 1969 and
production resumed in 1973. A total of 649,000 tons of ore averaging 1.26% Cu,
0.83 % Ni, 0.067 oz/ton Pt-Pd-Au was produced between 1973 and 1978 when the
mine was closed and flooded. The principal extraction methods at that time were
shrinkage and long-hole mining. The total historical production for the
Victoria property was 1,543,000 TONS GRADING 2.26% CU AND 1.57% NI, + TPM.
Infrastructure at Victoria consists of a three-compartment vertical shaft
measuring 5.0 ft by 13.5 ft, sunk to a depth of 3,000 ft, with development on
18 Levels. Exploration drifts were driven on the 1350 and 3000 ft Levels.
The property was abandoned, the underground workings flooded, and the shaft
capped. No surface infrastructure remains. Some closure work has been done on
the site under Inco's ongoing environmental reclamation program. The site of
the old shaft has been fenced off and grassed over.
FNX has initiated a baseline monitoring program to characterize current
conditions on the Victoria property. The program has focused on both
terrestrial and aquatic systems. The data that have been collected will
identify existing liabilities and support permit applications for advanced
exploration and production.
The terrestrial assessment focused on the identification of biological values
that require protection and classification of land within the property boundary
in accordance with the Forest Ecosystem Classification System. Assessment work
also quantified metal levels in vegetation at the property. A sampling campaign
to determine the metal content of upper soil horizons within the proposed site
footprint will be completed prior to re-establishing infrastructure at the
site.
The aquatic assessment, conducted in accordance with Environment Canada's
Environmental Effects Monitoring guidance documents, examined surface water and
sediment quality, as well as the fish and benthic invertebrate communities.
Surface water monitoring has been on-going. Watershed boundaries have been
delineated within the property boundary and creek flows in the receiving
environment are continuously monitored.
A site characterization will be completed by a third party consultant in second
quarter 2004. The Corporation has held introductory meetings with Sagamok and
Whitefish Lake First Nation. In addition, the Corporation holds regular
discussions with recreational users including the Sudbury Trail Plan regarding
the snowmobile trails on the property.
8.5.2 PROPERTY GEOLOGY & MINERALIZATION
The Victoria property is situated at the junction of the SIC and the
Worthington quartz diorite offset dyke, approximately 6.5 km northeast of
Inco's Totten property. Other mineralized locations are known along the
Worthington Offset between the Victoria property and the Totten Mine. Two of
these, the adjacent McIntyre deposit and the AER/Kidd Copper property, located
3 km further southwest from the Victoria property, were the objects of small
mining operations.
Within the property, both the footwall contact of the SIC and the Worthington
Offset Dyke dip steeply about the vertical. Both intrude sheared and
metamorphosed mafic volcanic and sedimentary rocks of the Stobie Formation.
Zones of Sudbury Breccia occur throughout the property as discontinuous lenses.
Late quartz diabase and olivine diabase dykes cross-cut all lithologies. Two
dominant structural shear directions, one set trending northwest-southeast and
the other trending northeast-southwest, have been defined and these control the
distribution of mineralization on the property.
The Cu-Ni-PGM sulphide mineralization at the Victoria property is characterized
by a complex assemblage of irregular lenses of chalcopyrite, pentlandite and
pyrrhotite. The lenses dip and plunge steeply and are typically pipe-like. The
complex structural features of the property have caused remobilization of the
sulphides and control the lateral extent and dimensions of the mineralization.
8.5.3 TARGETS (Figure 9)
Numerous zones of Cu-Ni-PGM mineralization are present on the Victoria property
and four of these, the No. 4 Zone; West Zone; No. 1 West and No. 2 West Zones
have been mined or partially mined in the past. In addition to the above, there
are several other known mineralized zones on the property which have not been
the focus of historical production. These include the Far West Zone, the East
Zone, the Dyke Zone, and the newly discovered Powerline Zone. Exploration by
FNX in 2003 focused on the quartz diorite Offset Dyke environment on the
Victoria property.
[GRAPHIC OMITTED - Victoria Property: Geology Plan]
In addition to continued exploration on the Powerline Deposit and a proposed
western extension, several other Offset Dyke related quartz diorite bodies were
tested. To focus exploration efforts, historical Inco drillholes were located
and surveyed using Crone geophysics to detect nearby conductive bodies. In
addition, surface mapping was conducted over the property to help define the
complex structure and outline the quartz diorite contacts.
The NO. 4 ZONE lies 820 ft east of the Victoria shaft and contains Cu-Ni-PGM
bearing sulphides hosted by diorite, quartz diorite, metagabbro and
metasedimentary rocks. The zone lies along a southeast striking trend of
discontinuous quartz diorite and Sudbury Breccia, which is host to both the
West and No. 4 zones. The No. 4 zone was mined above 750 ft Level. The possible
down dip extension of the No. 4 Zone represents an area of 400 by 2200 ft.
During the 2003 season four holes were drilled east of the No. 4 Zone to
follow-up mineralization in an historic hole and an associated off-hole UTEM
anomaly outlined by FNX in 2002. Three of these holes intersected variable
widths of stringer to semi-massive mineralization grading up to 0.5% CU, 1.2 %
NI, 2.4 G/T TPM OVER 4. 9FT. This drilling, while identifying a thin,
continuous zone of mineralization along the edge of the Quartz Diorite and
confirming the geological model, failed to intersect mineralization of economic
significance.
The WEST ZONE was the focus of previous production at Victoria and was mined to
a depth of 3,000 ft. Cu-Ni-PGM sulphide mineralization occurs as structurally
controlled massive to inclusion-rich massive sulphide adjacent to the SIC
contact and historic drilling confirmed that the mineralization extends at
least a further 700 ft below the 3000 Level. No exploration or diamond drilling
was completed on the West Zone during the 2003 season. Surface exploration
drilling and borehole UTEM-4 is recommended to test the down-plunge extension
of the West Zone.
The NO. 1 WEST ZONE, is located 330 ft west of the Victoria shaft and consists
of a structurally controlled, steeply plunging, zone of Cu-Ni sulphides. The
zone has been traced from surface to approximately the 2000 Level where it is
still open to depth. The zone may be best divided into shallow and deep
sections. Both sections have been explored primarily by diamond drilling from
both surface and historically from underground with a drift on the 1350 Level
serving as a drilling platform for the deeper section.
During 2002 FNX completed 20 diamond drillholes within the shallow portion of
the No. 1 West Zone. Assay results were consistent with historical Inco
drilling and have defined the mineralization over a 350 ft strike length and
down to the -200 ft vertical level, including a thicker core with 100-150 ft
strike length. Intersections from the core of the zone include: 0.6% CU, 0.8%
NI, 2.7 G/T TPM OVER 90.7 FT and including 0.8% CU, 1.9% NI, 9.6 G/T TPM OVER
17.4 FT.
No drilling was completed on the Shallow portion of the No. 1 West zone during
2003. Future work will include re-evaluation of the data including the FNX
drilling and, if warranted resource evaluation and or more drilling on the
zone.
The results from historic drilling in the NO. 1 WEST ZONE (DEEP) show
significant mineralization over substantial intersection lengths as follows:
1.56% CU, 2.55% NI, 5.0 G/T TPM OVER 20.4 FT and 0.89% CU, 0.19% NI, 6.4 G/T
TPM OVER 11.4 FT.
These intersections suggest the presence of a mineralized envelope within which
local higher values are present. Though FNX has not tested this Zone, it
warrants additional exploration drilling, as it appears to be open down dip and
down plunge towards the 3000 ft Level.
The NO. 2 WEST ZONE (Figure 10) is adjacent to and some 400 ft west of the No.
1 West Zone. The Zone is similar to the No. 1 West in that historically, a
shallow, near-surface, zone has been outlined by drilling. The Zone is hosted
in sublayer norite hosted with a Ni-Cu-PGE zone at the base of the SIC. It
consists of narrow, steeply dipping lenses, of high grade mineralization
contained within a wider interval of low grade mineralization in the sublayer
norite. Three styles of mineralization are recognized, including a broad sheet
of stringer to locally massive sulphide at the base of the sublayer unit,
blebby sulphides within the sublayer norite and stringer sulphides concentrated
along shear zones within the sublayer. A narrow zone of high grade, massive
Cu-Ni-TPM mineralization exists within the broad envelope of mineralization at
the base of the sublayer. This high grade core was partially mined by Inco from
the 1350 Level.
Exploration by FNX in 2002 outlined the stringer to semi-massive sulphides at
the base of the SIC over a 900 ft strike length and also defined the high grade
massive core from surface down to the 800 ft vertical level, to within 400 ft
of the previously mined portion. This zone returned intersections grading up to
3.12% Cu, 2. 03 % Ni, 4.11 g/t TPM over 44.4 ft.
Work on the No. 2 West Zone in 2003 focused on geological interpretation and
modeling to facilitate resource estimation. A detailed surface structural
mapping program, conducted in the spring, was integrated with the drillhole
data to help with geological modeling and interpretation. In addition, two
holes were drilled to test the eastern extension of the high grade shear hosted
mineralization within the sublayer. These holes were targeted 100 ft east of
the known mineralization, at the 400 ft and 600 ft vertical level. Both holes
intersected significant mineralization grading up to 0.4% CU, 1.0 % NI, 1.7 G/T
TPM OVER 29.5 FT, including 0.5% CU, 1.5 % NI, 3.5 G/T TPM OVER 7.8 FT.
Historic drilling has tested the NO. 2 WEST ZONE to below the 3000 Level and
two holes demonstrate the potential of this deep part of the zone as follows:
2.03% CU, 0.35% NI, 1.6 G/T TPM OVER 34.6 FT at the 1900 Level and 1.11% CU,
0.66% NI, 3.6 G/T TPM OVER 162.7 FT immediately below the 3000 Level. FNX has
not completed any exploration on the deep portions of the No. 2 West zone to
date.
For 2004 the Victoria Property exploration program will focus on further
delineation and infill drilling of the No. 2 West Deposit. For these purposes
4,800 ft of surface diamond drilling is allocated to facilitate a
pre-feasibility study.
[GRAPHIC OMITTED - Victoria Property: No. 2 West Zone Longitudinal Section
(Looking North)]
Historical drilling by Inco on the FAR WEST ZONE identified significant widths
of low grade Cu-Ni mineralization within sublayer rocks at the contact of the
SIC. As part of the 2002 FNX exploration program, 4 holes were drilled on the
down-plunge trend of the historical drilling to explore for a higher grade core
within the low grade sulphide zone. No high-grade or massive sulphide zones of
economic significance are indicated from the FNX drilling. Borehole UTEM
surveys were completed and the responses indicate a broad zone of weak
conductivity. No work was completed on the Far West Zone during the 2003
exploration season.
The POWERLINE DEPOSIT is a new discovery made by FNX Mining in 2002. The zone
is located approximately 1,100 ft south of the No. 4 Zone at the western
termination of an east-west striking quartz diorite body. The mineralization is
associated with a narrowing of the host quartz diorite Offset Dyke where the
wallrocks of the dyke comprise zones of intensely sheared Sudbury Breccia. The
Powerline mineralization consists of high grade, massive to semi-massive
sulfides extending to depth. The high grade core of the Deposit returned assays
up to 6.7% CU, 1.3% NI and 13.3 G/T TPM OVER 42.3 FT.
The 2003 drilling was focused on defining the limits of the Powerline Deposit
and to locate a possible extension below the 600 ft vertical level, where
mineralization was truncated by a fault. Drilling during the year also tested
for a possible western strike extension of the Powerline Deposit. This drilling
encountered a second, though smaller, massive sulfide lens grading up to 4.9%
CU, 1.9% NI AND 15.2 G/T TPM OVER 6.3 Ft. Drilling down-plunge and further to
the west of the Powerline Deposit encountered no significant mineralization. In
total, from April 1, 2003, to March 23, 2004 an additional 6,099 ft were
drilled around the Powerline in 13 holes (Table 12 & Figure 11). Future work on
the Powerline deposit will include detailed 3-D modeling and resource
estimation.
TABLE 12: POWERLINE DEPOSIT - GRADED ASSAYS
------------ ------------------------- --------------- ------------------------------
BOREHOLE FEET % G/T
------------ ------------------------- --------------- ------------------------------
FROM TO LENGTH CU NI PT PD AU TPM
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1135 191.9 194.4 2.5 0.69 1.72 0.20 2.43 0.03 2.66
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
AND 384.2 387.5 3.3 2.64 0.84 0.64 1.73 4.03 6.40
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1136 232.8 233.7 0.9 1.34 0.32 0.72 0.86 0.12 1.70
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1137 289.3 290.6 1.4 6.22 0.47 0.27 1.38 0.18 1.83
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1138 63.9 64.9 1.0 1.32 0.60 0.43 0.65 0.11 1.19
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1140 15.8 19.2 3.4 0.75 0.51 0.11 1.06 0.05 1.22
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1141 14.9 16.3 1.4 1.17 0.54 0.08 1.15 0.31 1.54
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1142 411.5 412.4 0.9 0.92 0.44 0.02 5.10 0.19 5.31
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
AND 416.1 417.4 1.3 2.88 0.24 0.10 0.63 0.03 0.76
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1147 43.50 44.90 1.40 0.21 2.15 0.78 1.54 0.12 2.44
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
AND 48.70 49.70 1.00 0.68 0.57 0.16 1.43 0.05 1.64
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1148 49.00 55.30 6.30 4.90 1.85 2.64 12.36 0.21 15.21
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1150 153.50 154.30 0.80 0.40 1.44 0.90 4.64 0.07 5.61
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1151 122.20 124.00 1.80 1.50 1.31 1.26 3.40 0.11 4.77
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1152 57.60 62.90 5.30 0.76 2.28 0.29 3.77 0.04 4.10
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
FNX1153 124.10 130.60 6.50 0.43 1.93 0.57 3.31 0.17 4.04
------------ ------- -------- -------- ------- ------- ------ ------- ------- -------
[GRAPHIC OMITTED - Victoria Property: Powerline Deposit Longitudinal Section
(Looking South West)]
In the second half of 2003 drilling focused on QUARTZ DIORITE BODIES located in
the southern and eastern portions of the Victoria Property. A downhole Pulse EM
survey using historic drill holes helped to direct the exploration efforts.
Using the EM responses and historic intersections, the SJV completed nine drill
holes totaling 12,599 ft targeting the quartz diorite areas. While several of
the holes intersected anomalous mineralization, no intervals of economic
significance were identified.
8.5.4 RECOMMENDED WORK PROGRAM AND BUDGET
The Victoria property is in-board from Inco's Totten deposit (also on the
Worthington Offset dyke) for which resources in excess of 10 million tonnes and
grading approximately 2.0% Cu, 1.5% Ni and 4.8 g/t PGM has been announced. It
is anticipated that the announced resources will be increased significantly.
This new deposit has been found below and adjacent to a previously mined older
deposit.
Much of the 2003 program focused on the under-explored Quartz Diorite bodies on
the Victoria property. Re-evaluation of the new data acquired from the
drilling, together with historical data will enable more complete 3-D
re-modeling of the structurally complex Quartz Diorite bodies thereby
clarifying their relationship with other geological units and structures on the
Victoria property. The new information will help to define irregularities
within the offsets which commonly focus sulphide mineralization, and possibly
generate new exploration targets on the property. The No. 2 West deposit
mineralization is open in several directions. Computer block modeling and
resource evaluation will be completed on the deposit to help define its
economic potential and to determine if further drilling is necessary at this
stage. The Powerline Deposit and its newly drilled western extension will be
modeled and a resource estimation completed.
A budget of $133,000 (4,800 ft drilling) has been approved for the 2004
Victoria property exploration program.
8.6 KIRKWOOD PROPERTY
8.6.1 LOCATION, HISTORY, INFRASTRUCTURE & ENVIRONMENT
The Kirkwood property, comprising 473.0 acres (191 ha) in three patented mining
parcels, is located in the Garson Township some 11 km northeast of Sudbury
(Figure 1). The property is easily accessible by road and a rail line passes
approximately 1.0 km south of the project area.
Copper and nickel sulphide mineralization was discovered 1892 and the property
was purchased by Mond. During the period 1914-1916, three shallow shafts (38 m;
61 m; & 18 m) were excavated and production totalled 71,600 tons grading 1.53%
Cu and 2.81% Ni. The mine was closed and flooded in 1916. The property was
acquired by Inco following the acquisition of Mond and exploration drilling was
carried out during the period 1947-1964.
In 1969 a new vertical, three-compartment shaft was excavated to a depth of 650
m. A total of 2,488,000 tons of ore averaging 0.99% Cu and 0.87% Ni was
produced from the Main and East orebodies between 1969 and 1976. A total of
134,000 tons of ore grading 0.96% Cu and 0.53% Ni was produced from a small
open pit between 1970-1972. The total historical production from the Kirkwood
property was 2,695,000 TONS GRADING 1.00% CU AND 0.90% NI.
Exploration drifts were driven on the 1,000 and 2,000 ft levels and underground
drilling was carried out to the east and west of the shaft. This program
outlined extensive contact mineralization in the West Zone and contact
mineralization in the 3800 Zone to the east. In addition, mineralization
associated with a quartz diorite dyke was also outlined to the east of the
shaft. There has been limited surface exploration drilling and mapping
completed at the Kirkwood property since the mine closure and flooding in 1977.
Infrastructure at the Kirkwood consists of a three-compartment vertical shaft
measuring 9 ft by 18 ft, excavated to a depth of 2100 ft. Level development
occurs on the 100, 200, 300, 400, 600, 800, 1,000, 1,200, 1,600 and 2,000 ft
levels. The underground workings are flooded and the shaft has been capped.
There are open pits and a head frame with associated auxiliary buildings as
well as mine water settling ponds on the site. Hydroelectric power is currently
available to the project site.
A closure plan will be required prior to commencing a program of advanced
exploration or mine development. An environmental site characterization was
completed by a third party consultant in first quarter 2004. This study defined
existing mining disturbances at the property, delineated watershed boundaries
and established an upstream and a downstream monitoring station in the on-site
creek.
8.6.2 PROPERTY GEOLOGY & MINERALIZATION
The Kirkwood property is located towards the southeast end of the Sudbury Basin
at the contact between the SIC and the Elsie Mountain metavolcanics. The
contact strikes east-west and dips steeply to the south. The footwall norite is
medium-grained and generally sheared at and adjacent to the contact. The
hangingwall consists of a series of metamorphosed sediments and volcanics with
minor schist zones.
An east-trending quartz diorite dyke occurs south of the norite contact within
a zone of Sudbury Breccia, which parallels the norite contact.
8.6.3 TARGETS
Cu-Ni-PGM sulphide mineralization at the Kirkwood property has been defined in
six distinct zones. These are the MAIN, EAST, WEST, LOWER EAST, QUARTZ DIORITE
AND 3800 ZONES. The higher-grade Main and East orebodies were mined during the
period 1969 to 1976, leaving unrecoverable remnant pillars of mineralization.
The West, Lower East and 3800 zones contain low-grade Cu-Ni-PGM mineralization,
which has not been mined. Additional evaluation of these zones is warranted to
determine if there is potential for mineable zones of higher-grade material
with possible PGM enrichment.
The WEST ZONE, lying to the west of the shaft and down dip from the East Zone,
consists of a large mass of disseminated sulphides with minor massive sulphide
bands within norite adjacent to the contact with the volcanics and sediments.
The Zone extends 2000 ft west of the main shaft, dips steeply south and has an
average thickness of 30 ft. Cu-Ni-PGM mineralization has been defined from
surface to a depth of 4,300 ft. Below this level the zone is unexplored.
The LOWER EAST AND 3800 ZONES can be combined, as one is probably a
continuation of the other. They occur within a broader zone of elevated PGM
mineralization (>0.044 oz/ton) that plunges to the east at 55(degree). Both
zones have been partially defined by underground drillholes. The LOWER EAST
ZONE lies between the 2000 and 3000 Levels and up-plunge from the 3800 Zone. It
consists of disseminated sulphides within norite adjacent to the contact with
the volcanics and sediments. It dips steeply south, has a strike length of 500
ft and an average thickness of 50 ft. The 3800 ZONE of Cu-Ni-PGM mineralization
is situated on the 3800 Level and centred on section 38200 E. It consists of a
vertical zone of disseminated and inclusion massive Cu-Ni sulphide along the
contact between the SIC and metamorphosed volcanic and sedimentary rocks. The
3800 Zone has a 330 ft strike length, a dip length of 660 ft, and a true
thickness of 10-50 ft. Six historic drillholes yielded 7 intersections, five of
which are greater than 10ft, ranging from 2.9 to 81.2 ft. Intersections include
TABLE 13: KIRKWOOD PROPERTY: 3800 ZONE - GRADED ASSAYS (HISTORIC DATA)
------------------------------------------------------------------------------------------
BHID FEET % OZ/T G/T
------------------------------------------------------------------------------------------
FROM TO LENGTH CU NI PT PD AU TPM TPM
------------------------------------------------------------------------------------------
464962 1471.0 1475.0 4.0 0.12 0.52 0.03 0.02 0.00 0.06 0.2
------------------------------------------------------------------------------------------
539560 1532.0 1576.0 44.0 0.92 1.15 0.02 0.03 0.02 0.06 1.9
------------------------------------------------------------------------------------------
539560 1556.0 1576.0 20.0 1.10 1.66 0.02 0.02 0.03 0.07 2.2
------------------------------------------------------------------------------------------
539720 2019.0 2048.0 29.0 2.31 1.28 0.02 0.06 0.01 0.09 2.8
------------------------------------------------------------------------------------------
539721 2494.1 2497.0 2.9 3.98 2.51 0.03 0.02 0.00 0.04 1.3
------------------------------------------------------------------------------------------
539870 1769.0 1850.2 81.2 0.99 1.19 0.02 0.03 0.00 0.05 4.1
------------------------------------------------------------------------------------------
INCLUDING 1797.0 1811.5 14.5 2.00 0.73 0.03 0.02 0.00 0.05 1.6
------------------------------------------------------------------------------------------
597120 2203.2 2223.8 20.6 0.99 1.05 0.01 0.04 0.02 0.07 2.2
------------------------------------------------------------------------------------------
FNX has carried out an airborne geophysical survey over the property but no
substantial ground work has been done. Data compilation has been initiated on
this property which, though having potential, is ranked lower than the other
properties described. No field work, apart from the environmental site
characterization, and airborne survey has been carried out The main target
remains the Lower East and 3800 Zones and the intervening area together with
the depth potential in the untested area below the 4000 level.
8.6.4 RECOMMENDED WORK PROGRAM AND BUDGET
The program for 2004 will continue the data compilation with limited ground
follow-up. The program is budgeted at $112,000.
9. PROJECT EXPLORATION PROGRAM & BUDGET
The exploration programs described above are budgeted at $12.5 million
including administration and contingency allowances and are itemized in Table
14.
The objectives of this work program are:
o to expand the known deposits at the McCreedy West Mine in order to add
to the mineral resource/reserve base
o to test other target areas within the McCreedy West property
o to complete the advanced exploration ramp into the PM Deposit at the
McCreedy West Mine to support the planned feasibility study
o to drill from underground the priority targets at the Levack Mine to
support a feasibility study
o to delineate the Norman 2000 Deposit to facilitate the anticipated
advanced underground exploration program on the 2000 and also on the
Norman North Deposits
o to complete resources/reserve estimations on the Victoria Powerline
and the No. 2 West Deposits
o to aggressively pursue the very prospective footwall environment in
the McCreedy West/ Levack properties (North Range Footwall Project)
o to continue the compilation of data on the Kirkwood property.
SUDBURY JOINT VENTURE - FNX MINING EXPLORATION BUDGET - 2004
----------------------------------------------- ----------------------------- --------- -----------
TABLE 14: EXPLORATION BUDGET
----------------- ----------------------------- ----------------------------- --------- -----------
ACTIVITY MCCREEDY WEST LEVACK NORTH NORMAN
RANGE
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
SURFACE UNALLOCATED U/G SURFACE UNALLOCATED U/G
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
DRILLING
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
Surface $143,520 $680,000 $642,500 $1,649,000
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
U/G $2,086,800 $472,000
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
PRE DEV DRLG $250,160
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
PERSONNEL $325,000 $337,500 $201,600 $95,000 $270,000
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
CAD/GIS $40,650 $40,650 $13,550 $40,650
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
IT $38,200 $26,400 $14,700
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
RES/RES $125,000 $125,000 $10,000 $100,000
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
QA/QC $51,600 $51,656 $51,600
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
SAFETY HEALTH $25,000 $20,000 $7,200
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
ENVIRONMENTAL $125,000 $80,000 $180,000
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
GEOPHYSICS $46,500 $142,250 $55,000 $180,000
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
STR. GEOLOGY $29,250 $19,500 $0 $29,250
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
PROP.MAINTEN.
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
PREFEASIBILITY $110,000 $86,000 $140,000
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
VEHICLES $30,000 $40,000 $30,000 $10,000 $10,900 $35,000
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
SUDBURY ADMIN $124,125 $124,125 $124,125
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
SUB-TOTAL $298,520 $805,325 $2,824,460 $983,906 $557,275 $568,000 $826,950 $2,821,525
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
7% INDIRECT $20,896 $56,373 $197,712 $68,873 $39,009 $39,760 $57,887 $197,507
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
SUB-TOTAL $319,416 $861,698 $3,022,172$1,052,779 $596,284 $607,760 $884,837 $3,019,032
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
CONTINGENCY $31,942 $86,170 $302,217 $105,278 $59,628 $60,776 $88,484 $301,903
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
SUB-TOTAL $351,358 $947,868 $3,324,389$1,158,057 $655,913 $668,536 $973,320 $3,320,935
----------------- --------- --------- --------- ---------- -------- --------- --------- -----------
----------------- ----------------------------- ----------------------------- --------- -----------
TOTAL $4,623,615 $2,482,506 $973,320 $3,320,935
----------------- ----------------------------- ----------------------------- --------- -----------
[Table continued]
SUDBURY JOINT VENTURE - FNX MINING EXPLORATION BUDGET - 2004
------------------------------------------------------------------------------------------
TABLE 14: EXPLORATION BUDGET
----------------- ----------- -------- ------------------------ --------- ---------------
ACTIVITY VICTORIA KIRK DRILLING OTHER TOTAL
WOOD
----------------- ----------- -------- ------- --------- ------ --------- ---------------
HOLES FT $/FT $
----------------- ----------- -------- ------- --------- ------ --------- ---------------
DRILLING
----------------- ----------- -------- ------- --------- ------ --------- ---------------
Surface $132,480 $0 70 119,100 $27.5 $3,247,500
----------------- ----------- -------- ------- --------- ------ --------- ---------------
U/G 200 108,000 $23.7 2,558,800
----------------- ----------- -------- ------- --------- ------ --------- ---------------
PRE DEV DRLG 30 10,000 $23.7 250,160
----------------- ----------- -------- ------- --------- ------ --------- ---------------
PERSONNEL $83,600 $14,000 $100,000 1,326,700
----------------- ----------- -------- ------- --------- ------ --------- ---------------
CAD/GIS $27,100 162,600
----------------- ----------- -------- ------- --------- ------ --------- ---------------
IT $14,700 $25,000 94,000
----------------- ----------- -------- ------- --------- ------ --------- ---------------
RES/RES $40,000 $0 390,000
----------------- ----------- -------- ------- --------- ------ --------- ---------------
QA/QC $10,000 164,856
----------------- ----------- -------- ------- --------- ------ --------- ---------------
SAFETY HEALTH $2,900 $1,400 56,500
----------------- ----------- -------- ------- --------- ------ --------- ---------------
ENVIRONMENTAL $92,900 $18,375 $130,000 626,275
----------------- ----------- -------- ------- --------- ------ --------- ---------------
GEOPHYSICS $0 $0 423,750
----------------- ----------- -------- ------- --------- ------ --------- ---------------
STR. GEOLOGY $4,875 $12,200 97,500
----------------- ----------- -------- ------- --------- ------ --------- ---------------
PROP.MAINTEN. $50,000 50,000
----------------- ----------- -------- ------- --------- ------ --------- ---------------
PREFEASIBILITY $85,400 $130,000 551,400
----------------- ----------- -------- ------- --------- ------ --------- ---------------
VEHICLES $11,000 $5,000 171,900
----------------- ----------- -------- ------- --------- ------ --------- ---------------
SUDBURY ADMIN $49,650 $24,825 446,850
----------------- ----------- -------- ------- --------- ------ --------- ---------------
----------------- ----------- -------- ------- --------- ------ --------- ---------------
SUB-TOTAL $554,605 $125,800 227,100 $385,000 10,618,791
----------------- ----------- -------- ------- --------- ------ --------- ---------------
----------------- ----------- -------- ------- --------- ------ --------- ---------------
7% INDIRECT $38,822 $8,806 $0 $26,950 $743,315
----------------- ----------- -------- ------- --------- ------ --------- ---------------
----------------- ----------- -------- ------- --------- ------ --------- ---------------
SUB-TOTAL $593,427 $134,606 $0 227,100 $411,950 11,362,106
----------------- ----------- -------- ------- --------- ------ --------- ---------------
----------------- ----------- -------- ------- --------- ------ --------- ---------------
CONTINGENCY $59,343 $13,461 $0 $0 $41,195 $1,136,211
----------------- ----------- -------- ------- --------- ------ --------- ---------------
----------------- ----------- -------- ------- --------- ------ --------- ---------------
SUB-TOTAL $652,770 $148,067 $0 227,100 $0 $453,145 12,498,317
----------------- ----------- -------- ------- --------- ------ --------- ---------------
----------------- ----------- -------- ------- --------- ------ --------- ---------------
TOTAL $652,770 $148,067 300 237,100 $453,145 12,498,317
----------------- ----------- -------- ------- --------- ------ --------- ---------------
10 CERTIFICATE
CERTIFICATE
TO ACCOMPANY THE TECHNICAL REPORT DATED MARCH 23, 2004
PROPERTY REPORT, SUDBURY, ONTARIO CU-NI-PGE PROPERTIES
(VICTORIA, MCCREEDY WEST, LEVACK, NORMAN AND KIRKWOOD)
I, DR. JAMES M. PATTERSON, BA (HONS. GEOLOGY), PH.D., P.GEO., DIC., do
hereby certify that:
1. I reside at 2292 Carol Road, Oakville, Ontario, L6J 6B6.
2. I am Vice President, Exploration of FNX Mining Company Inc.
3. I am a registered Practicing Member of the Association of Professional
Geoscientists of Ontario (Registration No. 0419); Member of the
Prospectors & Developers Association of Canada; Founding President Irish
Association for Economic Geology and a former Member of the Society of
Economic Geologists. I hold an Honours Geology Degree (BA Hons) from
Trinity College, University of Dublin, Ireland; a Ph.D in Mining Geology
from the Royal School of Mines, University of London, England and a
Diploma of Imperial College, University of London, England. I have
practised my profession as a geologist for over 40 years and have worked
in Europe, SE Asia and North America. During my career I have worked with
the private sector, government geological surveys, Canadian International
Development Agency and have completed assignments for the UN. For the past
4 years I have been involved in exploration programs in the Sudbury Basin
and am familiar with the geology and mineral deposits of that area.
4. I am a qualified person for the purposes of National Instrument 43-101 -
Standards of Disclosure for Mineral Projects ("NI 43-101").
5. Since October 2001, I have been intimately associated with the Project and
have been intimately involved with all aspects of the FNX Mining Company
Inc. exploration program, including regular site visits, since its
initiation in January 2002.
6. I have prepared the Technical Report in its entirety and have drawn on
information supplied by Senior Project Personnel in the Corporation's
Sudbury offices.
7. I am not aware of any material fact or material change with respect to the
subject matter of the Technical Report which is not reflected in the
Technical Report, the omission to disclose which makes the Technical
Report misleading.
8. I have read NI 43-101 and Form 43-101F1 and have prepared the Technical
Report in compliance with NI 43-101 and Form 43-101F1 and in conformity
with generally accepted Canadian mining industry practices.
Dated as of the 23rd day of March, 2004
/s/ James M. Patterson
-------------------------------
Dr. James M. Patterson, P.Geo (0419)
REFERENCES
FNX MINING COMPANY INC.
o CONFIDENTIAL RECORDS AND FILES FROM FEBRUARY 2002 TO APRIL, 2004
o PUBLIC NEWS RELEASES
o SEDAR FILINGS
INCO LIMITED
o CONFIDENTIAL CORPORATION FILES
ONTARIO GEOLOGICAL SURVEY
o THE GEOLOGY AND ORE DEPOSITS OF THE SUDBURY STRUCTURE, SPECIAL VOLUME
1, 603 PAGES. 1984
PATTERSON, JAMES M.
o TECHNICAL REPORT ON MINERAL PROPERTIES IN THE SUDBURY BASIN, ONTARIO,
FOR FNX MINING COMPANY INC., AN UPDATE TO 30 APRIL, 2003 : 9 MAY, 2003
o AN UPDATE TO TECHNICAL REPORT ON MINERAL PROPERTIES IN THE SUDBURY
BASIN, ONTARIO, FOR FORT KNOX GOLD RESOURCES INC. : 31 MAY, 2002
o TECHNICAL REPORT ON MINERAL PROPERTIES IN THE SUDBURY BASIN, ONTARIO,
FOR FORT KNOX GOLD RESOURCES INC. : 7 NOVEMBER, 2001
ROSCOE POSTLE ASSOCIATES INC
o REVIEW OF THE MINERAL RESOURCES OF THE LEVACK MINE PROPERTY, SUDBURY
AREA, ONTARIO; PREPARED FOR FNX MINING COMPANY INC., 3 OCTOBER, 2003
(FILED ON SEDAR)
o REVIEW OF THE MINERAL RESOURCES & MINERAL RESERVES OF THE MCCREEDY
WEST MINE PROPERTY, SUDBURY AREA, ONTARIO; PREPARED FOR FNX MINING
COMPANY INC., 22 AUGUST, 2003 (FILED ON SEDAR)
o REVIEW OF THE MINERAL RESOURCES OF THE MCCREEDY WEST MINE PROPERTY,
SUDBURY AREA, ONTARIO; PREPARED FOR FNX MINING COMPANY INC., 5 MARCH,
2003. ( FILED ON SEDAR)
SPITERI GEOLOGICAL & MINING CONSULTANTS INC. (SGM)
o FORT KNOX PROJECT, SUDBURY, ONTARIO. INDEPENDENT CHECK SAMPLING &
ASSAYING PROGRAM: JULY 27, 2001
o FORT KNOX GOLD RESOURCES INC. TECHNICAL REVIEW & MINERAL ASSET
VALUATION OF SUDBURY AREA PROPERTIES, SUDBURY ONTARIO; NOVEMBER 1,
2001
APPENDIX: 1
ABBREVIATIONS AND CONVERSIONS
-------------- -------------- -------------------------- -----------------
ABBREVIATION METAL MINERALS CHEMICAL
FORMULA
-------------- -------------- -------------------------- -----------------
Au Gold Au
-------------- -------------- -------------------------- -----------------
Co Cobalt
-------------- -------------- -------------------------- -----------------
Cu Copper Chalcopyrite CuFeS2
-------------- -------------- -------------------------- -----------------
Ni Nickel Pentlandite, Millerite (FeNi)S; NiS
-------------- -------------- -------------------------- -----------------
Pd Palladium
-------------- -------------- -------------------------- -----------------
Pt Platinum
-------------- -------------- -------------------------- -----------------
Pyrrhotite Fe1-XS
-------------- -------------- -------------------------- -----------------
Ag Silver
-------------- -------------- -------------------------- -----------------
Additional abbreviations are as follows: PGM - Platinum Group Metals
TPM - Total Precious Metals = PD+PT+AU
It should be noted that Pt + Pd values are greater than Au, and that Au rarely
contributes more than 20% of the TPM content.
The following table will assist in conversions from metric to imperial
equivalents.
------------------------- --------------------------- ----------------
TO CONVERT FROM TO MULTIPLY BY
------------------------- --------------------------- ----------------
Centimetres Inches 0.394
------------------------- --------------------------- ----------------
Metres Feet 3.218
------------------------- --------------------------- ----------------
Kilometres Miles 0.621
------------------------- --------------------------- ----------------
Hectares Acres 2.471
------------------------- --------------------------- ----------------
Tonnes Short tons 1.102
------------------------- --------------------------- ----------------
Grams Ounces (Troy) 0.032
------------------------- --------------------------- ----------------
Grams per tonne Ounces (Troy) per ton 0.029
------------------------- --------------------------- ----------------
The factor used to convert ounces (Troy) per short ton (oz/t) to grams per
short ton (g/t) is 31.1048 grams.
BHID: Borehole Identification No
All intersection lengths referred to are lengths of drill core and should not
be interpreted as being true widths.
Document No. 2
Management's Responsibility for Financial Reporting
The accompanying consolidated financial statements, their
presentation and the information in this annual report are the responsibility
of management. The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in Canada. Accounting
principles and methods that are appropriate to the Company's circumstances
have been chosen by management. Where appropriate, these statements reflect
management's best estimates and judgments based on currently available
information. Management is responsible for all other information in the annual
report and ensuring that this information is consistent with information
contained in the consolidated financial statements.
The integrity and objectivity of these consolidated financial
statements are the responsibility of management. Internal systems of financial
and operating controls, which include effective controls to provide reasonable
assurance that relevant and reliable financial information is produced, is the
responsibility of management.
The Board of Directors is responsible for ensuring that management
fulfills its financial reporting and internal control responsibilities,
primarily through the Audit Committee. The Audit Committee consists of three
independent directors not involved in the daily operations of the Company. It
reviews the quarterly and annual consolidated financial statements, approves
Management's Discussion and Analysis and reviews the adequacy of the systems
of internal control. The Audit Committee meets periodically with management
and the Company's external auditors to review the results of the annual audit
and to review the financial reporting matters prior to approval of the
consolidated financial statements. The Audit Committee satisfies itself that
each party is properly discharging its responsibilities; reviews the quarterly
and annual financial statements and any reports by the external auditors; and
recommends the appointment of the external auditors for review by the Board of
Directors and approval by the shareholders.
The Company's external auditors conduct an independent audit on
behalf of the shareholders. The external auditors have full and free access to
management and the Audit Committee.
/s/ Terry MacGibbon /s/ John C. Ross
---------------------- -----------------------
Terry MacGibbon John C. Ross
President and Chief Financial Officer
Chief Executive Officer
March 1, 2004
Auditors' Report
To the Shareholders of FNX Mining Company Inc.
We have audited the consolidated balance sheet of FNX Mining Company
Inc. as at December 31, 2003 and the consolidated statements of operations and
deficit and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the Company as at
December 31, 2003 and the results of its operations and its cash flows for the
year then ended in accordance with Canadian generally accepted accounting
principles.
The consolidated financial statements as at December 31, 2002 and for
the year then ended were audited by other auditors, who expressed an opinion
without reservation on those statements in their report dated February 28,
2003.
/s/ KPMG LLP
Chartered Accountants
Toronto, Ontario
March 1, 2004
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-U.S.
REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when there is a
change in accounting principles or when there is a retroactive adjustment that
has a material effect on the comparability of a company's financial statements.
As described in note 1(i) (Asset retirement obligations) and note 1(m)
(Stock-based compensation), the Company has adopted new accounting standards
during the year. Our report to the shareholders dated March 1, 2004, is
expressed in accordance with Canadian reporting standards, which do not require
a reference to such changes in accounting principles in the auditors' report
when the change is properly accounted for and adequately disclosed in the
financial statements.
/s/ KPMG LLP
KPMG LLP
Toronto, Canada
March 1, 2004
FNX Mining Company Inc.
Balance Sheets
DECEMBER 31, 2003 and 2002
(in thousands of Canadian dollars)
2003 2002
______________________________________________________________________________
(Restated -
note 1(m))
Assets
CURRENT ASSETS:
Cash and cash equivalents $ 52,536 $ 30,159
Short-term deposits 1,121 774
Accounts receivable 2,864 975
Ore in process (note 3) 2,106 -
Inventory (note 3) 400 -
Prepaid and other (note 4) 689 43
______________________________________________________________________________
59,716 31,951
Mining properties (note 5) 23,695 -
Mineral exploration properties (note 6) 23,816 12,880
Capital assets (note 7) 191 252
______________________________________________________________________________
$ 107,418 $ 45,083
________________________
Liabilities and Shareholders' Equity
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 3,041 $ 993
Minority interest 14,599 -
SHAREHOLDERS' EQUITY:
Capital stock (note 8) 106,073 54,125
Stock options 6,737 2,920
Deficit (23,032) (12,955)
______________________________________________________________________________
89,778 44,090
______________________________________________________________________________
$ 107,418 $ 45,083
________________________
ON BEHALF OF THE BOARD
/s/ T. MacGibbon /s/ R. D. Cudney
T. MacGibbon R. D. Cudney
Director Director
See accompanying notes to consolidated financial statements.
FNX Mining Company Inc.
Consolidated Statements of Operations and Deficit YEARS ENDED DECEMBER 31, 2003
and 2002 (In thousands of Canadian dollars, except per share amounts)
2003 2002
________________________________________________________________________________
(Restated -
note 1(m))
EXPENSES:
Administration $ 2,384 $ 1,224
Exploration administration 1,741 19
Stock options 4,879 3,159
Amortization 123 106
Mineral exploration properties written off (note 6) 2,288 2,962
Interest income (1,128) (481)
________________________________________________________________________________
LOSS BEFORE MINORITY INTEREST 10,287 6,989
MINORITY INTEREST (210) -
________________________________________________________________________________
LOSS FOR THE YEAR 10,077 6,989
DEFICIT, BEGINNING OF YEAR:
As previously stated 9,796 5,966
Effect of change in accounting policy (note 1(m)) 3,159 -
________________________________________________________________________________
As restated 12,955 5,966
________________________________________________________________________________
Deficit, end of year $ 23,032 $ 12,955
________________________
Loss per share:
Basic and diluted (note 9) $ 0.24 $ 0.23
________________________
See accompanying notes to consolidated financial statements.
FNX Mining Company Inc.
Consolidated Statements of Cash Flows
YEARS ENDED DECEMBER 31, 2003 AND 2002
(In thousands of Canadian dollars)
2003 2002
________________________________________________________________________________
(Restated -
note 1(m))
Cash provided by (used in):
OPERATING ACTIVITIES:
Loss for the year $ (10,077) $ (6,989)
Items not involving cash:
Amortization 123 106
Stock options 4,879 3,159
Mineral exploration properties written off 2,288 2,962
Minority interest (210) -
Net change in non-cash working capital (2,380) (63)
________________________________________________________________________________
(5,377) (825)
FINANCING ACTIVITIES:
Common shares issued 50,886 38,440
Funds contributed by minority interest 9,309 -
________________________________________________________________________________
60,195 38,440
INVESTING ACTIVITIES:
Short-term deposits (347) (774)
Purchase of capital assets (62) (353)
Mining properties (15,062) -
Exploration expenditures (16,970) (7,365)
________________________________________________________________________________
(32,441) (8,492)
________________________________________________________________________________
INCREASE IN CASH AND CASH EQUIVALENTS 22,377 29,123
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 30,159 1,036
________________________________________________________________________________
CASH AND CASH EQUIVALENTS, END OF YEAR $ 52,536 $ 30,159
_______________________
Supplemental cash flow information:
Interest paid $ 16 $ 2
_______________________
See accompanying notes to consolidated financial statements.
FNX Mining Company Inc.
Notes to Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2003 AND 2002
(Tabular amounts in thousands of Canadian dollars, except per share amounts)
1. Significant accounting policies
These financial statements have been prepared in accordance with
accounting principles generally accepted in Canada. Summarized below are those
policies considered significant to the Company:
(a) Basis of presentation:
The consolidated financial statements include the accounts of the
Company. Entities in which the Company has a controlling interest are
consolidated, including its interest in unincorporated joint ventures. The
Company has one significant joint venture, a 75% interest in the Sudbury Joint
Venture (the "SJV").
(b) Revenue recognition:
Revenue is recognized when both final quantity of metal sold and price
are known. Production delivered to the mill and awaiting pricing is accounted
for as ore in process. Pricing is based on the market price at the time of the
settlement, which is normally two months following the transfer of ownership
for McCreedy West Phase I.
(c) Ore in process:
Ore in process is valued at the lower of cost and net realizable
value. Cost of production includes all costs to mine, crush and truck ore to
the mill, and any depreciation charges associated with mining activities. Cost
is determined on a first-in, first-out basis.
(d) Inventory:
Inventory is valued at the lower of cost and net realizable value.
Cost of production includes costs to mine and crush ore and any depreciation
changes associated with mining activities. Cost is determined on a first-in,
first-out basis.
(e) Short-term deposits and marketable securities:
Short-term deposits are those with a remaining maturity greater than
90 days at the time of purchase. Marketable securities are carried at the lower
of cost or quoted market value.
(f) Cash and cash equivalents:
Cash and cash equivalents are defined as cash on hand and short-term
investments that have a remaining term to maturity of less than 91 days at
acquisition.
(g) Mining properties and mineral exploration properties:
Acquisition, exploration and development costs associated with mineral
exploration properties are capitalized until the property is producing,
abandoned, impaired in value or placed for sale.
Costs are transferred to mining properties once a property is placed
into commercial production. These costs are amortized into the ore in process
account, using a units-of-production basis over the expected life of the mine
as determined using proven and probable reserves.
The costs of abandoned properties are charged to operations when the
property is abandoned. The Company reviews the carrying values of its mineral
properties on a regular basis, by reference to the project economics, including
the timing of the exploration and/or development work, the work programs and
exploration results experienced by the Company and others. When the carrying
value of a property exceeds its estimated recoverable amount, a provision is
made for the decline in fair value and charged to income.
(h) Mining equipment:
Equipment is written off on a straight-line basis over the shorter of
its estimated useful life or the expected life of the mine. The depreciation
charge is included in ore in process and inventory.
(i) Asset retirement obligations:
The Company has adopted the new Recommendations of The Canadian
Institute of Chartered Accountants for the accounting for asset retirement
obligations. The Recommendation requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred. Also, when a liability is initially recorded, a corresponding
increase to the carrying amount of the related asset is recorded.
On an annual basis, the liability is increased by the interest factor
that was applied in the initial measurement to fair value and the asset is
amortized over the estimated life of the related asset. The amount of the
liability will be subject to re-measurement at each reporting period. Any
adjustment to this liability will impact the related asset. This differs from
the prior practice, which involved accruing for the estimated reclamation
liability through annual charges to earnings over the estimated life of the
mine.
Due to uncertainties concerning environmental remediation, the
ultimate cost to the Company of future site restoration could differ from the
amounts provided. The estimate of the total liability of future site
restoration costs is subject to change based on amendments to laws and
regulations and as new information concerning the Company's operations becomes
available. The Company is not able to determine the impact on its financial
position, if any, of environmental laws and regulations that may be enacted in
the future due to the uncertainty surrounding the form that these laws and
regulations may take.
(j) Capital assets:
Capital assets relate to equipment not used in mining operations.
Capital assets are recorded at cost less accumulated amortization. Amortization
is calculated on a straight-line basis at the following rates:
Equipment 5 years
Furniture and fixtures 5 years
Computer hardware 4 years
Computer software 3 years
Leasehold improvements 5 years
(k) Flow-through shares:
The Company financed a portion of its exploration and development
activities through the issue of flow-through shares. Under the terms of these
share issues, the tax attributes of the related expenditures are renounced to
subscribers. Share capital is reduced and future income tax liabilities are
increased by the estimated income tax benefits renounced by the Company to the
subscribers, except to the extent that the Company has unrecorded loss
carryforwards and tax pools in excess of book value available for deduction.
(l) Income taxes:
The Company uses the asset and liability method of accounting for
income taxes. Under this method, future income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Future tax assets and liabilities are measured
using enacted or substantively enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on future tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
date of enactment or substantive enactment.
(m) Stock-based compensation:
The Company adopted the fair value-based approach of accounting for
all stock-based awards. The expense is recognized over the vesting period of
the award.
Effective September 30, 2003, the Company adopted the fair value
method of accounting for all stock options. The comparative figures have been
restated to show the effect as though the Company had adopted the fair value
method of accounting for all stock options upon adoption of Section 3870
effective January 1, 2002. This accounting policy change was made in response
to investor preferences that these costs be reported in the statements of
operations and deficit. The stock options amount for 2002 on the statements of
operations and deficit was adjusted to reflect a $3.2 million expense item
related to stock-based compensation with the offset in shareholders' equity, as
contributed surplus.
(n) Foreign exchange:
The Canadian dollar is the functional currency of the Company. Revenue
and some expenses are U.S. dollar-denominated. These items are converted to
Canadian dollars at the transaction rate. Gains and losses are recorded in
income.
(o) Use of estimates:
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses
during the year. Significant estimates and assumptions relating to the
recoverability of mineral properties and mineral exploration properties are
made in accordance with Canadian mining industry practice. While management
believes that these estimates and assumptions are reasonable, actual results
could vary significantly.
(p) Financial instruments:
The carrying values of cash and cash equivalents, short-term deposits,
accounts receivable and accounts payable and accrued liabilities approximate
their fair values due to the short-term nature of these instruments.
2. Sudbury Joint Venture
The SJV was accounted for as a joint venture during 2002 and the
Company's interest proportionately consolidated. During 2003, the initial work
program of $14 million was completed by the joint venture partners. Following
the completion of this program, the nature of the SJV arrangement changed to
the extent that consolidation is now appropriate. The effect of consolidation
at January 1, 2003 was to increase exploration properties and minority interest
by $5.6 million.
3. Ore in process and inventory, at cost
(a) Ore in process, at cost:
Ore in process includes ore shipped to Inco Limited ("Inco") for which
revenue has not been recognized. Balances in the account include mining and
haulage costs, depreciation and amortization.
2003 2002
____________________________________________________________________
Direct costs $ 1,593 $ -
Depreciation and amortization 513 -
____________________________________________________________________
$ 2,106 $ -
______________________
(b) Inventory, at cost:
Inventory includes ore mined and not yet shipped to Inco. Balances in
the account include mining costs, depreciation and amortization.
2003 2002
____________________________________________________________________
Direct costs $ 300 $ -
Depreciation and amortization 100 -
____________________________________________________________________
$ 400 $ -
______________________
4. Prepaid and other assets
2003 2002
_____________________________________________________________________
Prepaid assets $ 240 $ 40
Marketable securities 449 3
_____________________________________________________________________
$ 689 $ 43
______________________
The Company holds the following portfolio of marketable securities in
other assets at December 31, 2003 and 2002:
2003 2002
_______________________________________________________________________
15,152 shares of Platinum Group Metals Ltd.
(previously 25,000 shares of New
Millennium Metals Corp.) $ 3 $ 3
150,000 shares of Nevada Star Resource Corp. 45 -
300,000 share purchase warrants of Nevada
Star Resource Corp. 1 -
2,000,000 shares of NFX Gold Inc. 400 -
_______________________________________________________________________
$ 449 $ 3
______________________
Market value of marketable securities $ 470 $ 8
______________________
During 2003, the Company sold its interest in the Canwell, Alaska
property to Nevada Star Resource Corp. ("Nevada Star") for 150,000 Nevada Star
shares and 300,000 Nevada Star share purchase warrants. During 2003, the
Company sold its interest in the Larder Lake, Ontario properties to NFX Gold
Inc. for 2,000,000 shares of NFX Gold Inc. The value of the shares received was
credited to exploration expense.
5. Mining properties
2003 2002
____________________________________________________________________________
Accumulated Net book Net book
Cost amortization value value
____________________________________________________________________________
Property and development $ 16,046 $ 320 $ 15,726 $ -
Mining equipment 8,262 293 7,969 -
____________________________________________________________________________
$ 24,308 $ 613 $ 23,695 $ -
_________________________________________________
Mining property and development relates to McCreedy West Phase I which
went into commercial production November 1, 2003. The first $14 million in
income earned from the SJV will be allocated 60% to the Company and 40% to
Dynatec. During 2003, the SJV exceeded the $30.0 million spending requirement
and assumed ownership of the mineral rights to all projects in the SJV.
All ore produced from the mining properties is shipped to Inco for
further processing under the terms of the original option agreement.
6. Mineral exploration properties
2003 2002
_______________________________________________________________________
Sudbury Basin (a):
McCreedy West Phase 1 $ - $ 3,746
McCreedy West Phase 3 9,989 953
Levack Phase 2 3,676 1,900
Victoria 2,823 1,590
Norman 6,024 1,907
Kirkwood 196 172
North Range Footwall 1,108 324
Alaska, USA:
Gunsite (b) - 205
Ontario:
Larder Lake (b) - 1,128
Fawcett Township (b) - 951
Other - 4
_______________________________________________________________________
$ 23,816 $ 12,880
________________________
(a) Sudbury Basin:
On January 10, 2002, the Company signed an option agreement (the "Inco
Option") to earn a 100% interest from Inco in five former
copper-nickel-platinum-palladium-gold producing properties located in the
Sudbury Basin area. Coincidentally with the signing of the option agreement,
the Company assigned their rights under the Inco Option to the SJV owned 75% by
the Company and 25% by Dynatec Corporation, a TSX-listed mining contractor.
Under the terms of the Inco Option the SJV had to spend $30.0 million for
exploration on the optioned properties by May 2006. This expenditure level was
reached during 2003.
(b) Mineral exploration properties:
After the Company signed the Inco Option (note 6(a)) to earn a 100%
mineral rights interest in five nickel-copper-platinum-palladium-gold
properties in the Sudbury Basin area, other mineral properties were either
allowed to lapse or were made available for option to third parties. Minimal
expenditures were made on these other properties during 2002 and 2003.
The Nickolai properties in Alaska were allowed to lapse during 2002,
except for the Canwell claim group, which was under option to Nevada Star.
During 2003, Nevada Star purchased the Company's remaining interest in the
property for 150,000 Nevada Star common shares and 300,000 Nevada Star share
purchase warrants. The Company's 25% interest in the Larder Lake gold property
in Ontario was purchased in 2003 by NFX Gold Inc. for 2 million NFX Gold Inc.
common shares.
The Gunsite property in Alaska was sold in 2003 for a 1.5% net smelter
royalty. The Fawcett Township property near Shiningtree, Ontario remains
inactive and no further work is planned for 2003. Both properties were written
off during 2003. The McBratney Lake property in Manitoba was returned to Hudson
Bay Exploration and Development Co. Ltd. during 2002. The balance was written
off during 2003.
7. Capital assets
Accumulated Net book
2003 Cost amortization value
_______________________________________________________________________
Equipment $ 89 $ 34 $ 55
Furniture and fixtures 33 13 20
Computer hardware 138 62 76
Computer software 122 84 38
Leasehold improvements 40 38 2
_______________________________________________________________________
$ 422 $ 231 $ 191
_____________________________________
Accumulated Net book
2002 Cost amortization value
_______________________________________________________________________
Equipment $ 68 $ 14 $ 54
Furniture and fixtures 33 6 27
Computer hardware 103 27 76
Computer software 118 42 76
Leasehold improvements 38 19 19
_______________________________________________________________________
$ 360 $ 108 $ 252
_____________________________________
8. Capital stock
(a) Authorized:
Unlimited common shares
(b) Issued:
Number of
common shares Consideration
___________________________________________________________________________
(Restated -
note 1(m))
<
Balance, December 31, 2001 13,355,466 $ 11,120
Issued for property option payment (b)(i) 3,006,324 3,006
Issued for cash under private placement (b)(ii) 4,000,000 3,387
Issued for cash under flow-through share
offerings (b)(iii) 5,000,000 10,000
Issued for cash under public offering (iv) 5,000,000 22,934
Issued on exercise of special warrants (c)(i) 3,300,000 1,320
Issued on exercise of share purchase warrants (c)(ii) 550,750 688
Issued on exercise of broker warrants (c)(iii) 678,000 559
Issued on exercise of stock options (d) 1,412,000 872
Transferred from stock options on exercise - 239
___________________________________________________________________________
Balance, December 31, 2002 36,302,540 54,125
Issued for cash under public offering (b)(v) 7,500,000 45,774
Issued on exercise of special warrants (c)(ii) 1,946,129 2,433
Issued on exercise of stock options (d) 1,666,500 2,679
Transferred from stock options on exercise - 1,062
___________________________________________________________________________
Balance, December 31, 2003 47,415,169 $ 106,073
_________________________
(i) On January 10, 2002, as consideration for the Inco Option, the
Company issued to Inco 3,006,324 common shares for deemed consideration of
$3,006,324.
(ii) On January 10, 2002, the Company completed a brokered private
placement of 4,000,000 units of the Company at $1.00 per unit. Each unit is
comprised of one common share of the Company and one-half of a warrant with
each warrant being exercisable for one common share of the Company at an
exercise price of $1.25 per warrant. Financing costs were $613,468, resulting
in net proceeds of $3,386,532.
(iii) On January 10, 2002, the Company issued 4,000,000 flow-through
common shares at $1.00 per common share, resulting in gross proceeds of
$4,000,000.
On July 22, 2002, the Company issued 1,000,000 flow-through common
shares at $6.00 per common share, resulting in gross proceeds of $6,000,000.
(iv) On July 22, 2002, the Company issued 5,000,000 common shares at a
price of $5.00 per share for gross proceeds of $25,000,000 pursuant to a
short-form prospectus filing. Financing costs were $2,065,927, resulting in net
proceeds of $22,934,073.
(v) On July 11, 2003, the Company issued 7,500,000 common shares at a
price of $6.45 per share for gross proceeds of $48,375,000 pursuant to
short-form prospectus filing. Financing costs were $2,601,000, resulting in net
proceeds of $45,774,000.
(c) Warrants and special warrants:
(i) In May 2001, the Company issued 3,300,000 special warrants at
$0.40 per warrant for cash of $1,320,000. Each special warrant entitled the
holder, upon exercise and without payment of any additional consideration, to
be issued one common share of the Company on the date that is the earlier to
occur of: (a) the fifth business day after all receipts have been issued for
the final prospectus qualifying the distribution of the shares by the
securities regulatory authorities in each of the Provinces of Canada in which
the purchasers of the special warrants are resident, and (b) May 10, 2002.
During the year ended December 31, 2002, these 3,300,000 special
warrants were converted into common shares.
(ii) On January 10, 2003, the Company issued the following warrants to
Inco under the terms of the Inco Option and issued additional warrants under a
private placement.
Number of
warrants
_______________________________________________________________
Under the Inco Option 496,879
Under the private placement (b)(ii) 2,000,000
Exercised in 2002 (550,750)
_______________________________________________________________
Balance, December 31, 2002 1,946,129
Exercised in 2003 (1,946,129)
_______________________________________________________________
Balance, December 31, 2003 -
______________
Each warrant was exercisable for one common share of the Company at an
exercise price of $1.25 per warrant. During 2002, 550,750 of these warrants
were exercised for cash proceeds of $688,437. The balance of the warrants were
exercised in January 2003 for cash proceeds of $2,432,661.
(iii) On May 10, 2001, the Company issued, as part of the compensation
payable in connection with the financing described in note 8(c)(i), broker
warrants to acquire 198,000 common shares at $0.40 for each warrant. These
warrants were exercised in 2002 for proceeds of $79,200.
On January 10, 2002, as part of the compensation payable in connection
with the private placement, the Company issued broker warrants to acquire
480,000 common shares at $1.00 for each warrant. These warrants were exercised
in 2002 for proceeds of $480,000.
(d) Stock options:
The Company has a stock option plan (the "Plan") under which the
directors of the Company may grant options to acquire shares of the Company to
qualified directors, officers, employees and persons providing ongoing services
to the Company to acquire up to 5.5 million common shares. The strike price of
these options will not be less than the market price of the common shares at
the time of the grant.
Unless specifically stated in an employment agreement, all options
vest 50% six months from the date of grant, and 50% one year from the date of
grant. All other options vest immediately. The options have a term of five
years. The number of common shares reserved for issuance to any one person upon
the exercise of options may not exceed 5% of the issued and outstanding common
shares at the date of such grant.
The following table reflects the continuity of options granted under
the Plan for the years ended December 31, 2003 and 2002:
2003 2002
______________________________________________________________________________________
Weighted Weighted
average average
exercise exercise
Options price Options price
______________________________________________________________________________________
Outstanding, beginning of year 2,883,000 $ 2.05 2,800,000 $ 0.67
Granted 1,779,000 7.12 1,495,000 3.29
Terminated (2,500) 3.40 - -
Exercised (1,666,500) 1.61 (1,412,000) 0.62
______________________________________________________________________________________
Outstanding, end of year 2,993,000 5.31 2,883,000 2.05
___________________________________________________
The following table summarizes information about stock options
outstanding at December 31, 2003:
Options outstanding Options exercisable
___________________________________________________________________________________________________
Weighted Weighted
Number average Weighted Number average Weighted
outstanding, remaining average exercisable, remaining average
Range of December 31, contractual exercise December 31, contractual exercise
exercise price 2003 life (years) price 2003 life (years) price
___________________________________________________________________________________________________
$0.40 - $1.00 388,000 2.3 $0.83 388,000 2.3 $ 0.83
$1.01 - $2.00 200,000 3.0 1.50 200,000 3.0 1.50
$2.01 - $3.00 182,500 3.2 2.26 182,500 3.2 2.26
$3.01 - $4.00 17,000 3.4 3.40 17,000 3.4 3.40
$4.01 - $5.00 427,500 3.7 5.00 427,500 3.7 5.00
$5.01 - $6.00 465,000 4.3 5.50 357,500 4.3 5.50
$6.01 - $7.00 568,000 4.3 6.57 350,500 4.0 6.45
$8.01 - $9.00 745,000 4.9 8.55 360,000 4.9 8.70
___________________________________________________________________________________________________
2,993,000 3.9 5.31 2,283,000 3.7 4.64
_____________________________________________________________________________
The fair value of stock options granted during 2003 and 2002 was estimated
using the Black-Scholes option pricing model on the date of grant with the
following weighted average assumptions:
2003 2002
_______________________________________________________________________
Stock price at grant date $ 7.12 $ 3.29
Exercise price $ 7.12 $ 3.29
Expected life of options (years) 2.0 2.0
Expected stock price volatility 99% 112%
Expected dividend yield - -
Risk-free interest rate 3% 3%
________________________
The weighted average value per option issued in 2003 is $3.76 (2002 -
$2.09).
9. Loss per share
Basic loss per share has been calculated by dividing the annual loss
by the weighted average number of shares outstanding during the year. The
diluted loss per share is similar to the basic loss per share, except the
denominator is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares had been
issued.
2003 2002
____________________________________________________________________________
Basic and diluted earnings per share computation:
Numerator:
Loss for the year $ (10,077) $ (6,989)
_______________________
Denominator:
Average common shares outstanding 42,747,614 30,055,848
_______________________
Basic and diluted loss per share $ (0.24) $ (0.23)
_______________________
No shares or warrants are added to the denominator when a company is
in a loss position as the result is not dilutive.
10. Related party transactions
The Company obtained management services from a company controlled by
the president of the Company in the amount of nil in 2003 (2002 - $553,200).
11. Income taxes
The main components that will give rise to future income tax assets
and future income tax liabilities are as follows:
2003 2002
_______________________________________________________________________
Future income tax assets:
Share issue costs $ 1,300 $ 800
Non-capital losses 5,100 800
_______________________________________________________________________
6,400 1,600
Valuation allowance (100) (200)
_______________________________________________________________________
6,300 1,400
Future income tax liability:
Mining properties 6,300 1,400
_______________________________________________________________________
Net future income tax asset $ - $ -
_______________________
Income tax expense differs from the amount that would have been
computed by applying the combined federal and provincial statutory income tax
rate of 36% (2002 - 40%) to loss before income taxes. The reasons for the
differences are a result of the following:
2003 2002
____________________________________________________________________________
Loss before income taxes $ (10,077) $ (6,989)
_______________________
Computed expected tax recovery of statutory rates $ (3,628) $ (2,796)
Non-deductible stock option expense 1,756 1,264
Resource loss 351 120
Losses, not tax-benefited 1,521 1,412
____________________________________________________________________________
$ - $ -
_______________________
The Company has non-capital loss carryforwards for Canadian tax
purposes of approximately $14.1 million (2002 - $2.3 million) to reduce taxable
income on or prior to 2010.
12. Significant differences between Canadian and United States generally
accepted accounting principles
Canadian generally accepted accounting principles ("Canadian GAAP")
varies in certain significant respects from the principles and practices
generally accepted in the United States ("U.S. GAAP"). The effect of these
principal differences on the Company's consolidated financial statements are
quantified below and described in the accompanying notes.
(a) Under Canadian GAAP, all costs related to the acquisition,
exploration and development of non-producing mineral properties are
capitalized. Under U.S. GAAP, mining companies are permitted to capitalize
acquisition, exploration and development costs only upon the determination of a
commercially mineable deposit. As at July 31, 2003, the Company had proven and
probable reserves related only to Phase 1 of the McCreedy West Mine. All Phase
1 costs prior to the fourth quarter of 2003 have been written off. All
exploration and development expenses not related to Phase 1 have been written
off.
Phase 1 development costs in the fourth quarter of 2003 have been
capitalized. Due to differences in asset bases for Canadian and U.S. GAAP, the
annual depreciation, amortization and depletion charge will differ.
(b) Under Canadian GAAP, flow-through shares are recorded at face
value when the shares are issued, and the related tax benefit renounced to
shareholders is recorded as a reduction to share capital, when recognized.
Under U.S. GAAP, when flow-through shares are issued, the proceeds are
allocated between the offering of shares and the sale of tax benefits. The
allocation is made based on the difference between the quoted price of the
existing shares and the amount the investor pays for the shares. A liability is
recognized for this difference. The liability is reversed when tax benefits are
renounced and a deferred tax liability is recognized at that time. Income tax
expense is the difference between the amount of deferred tax liability and the
liability recognized on issuance. The flow-though shares issued during 2002
were granted at $1,880,000 more than the fair value of existing
non-flow-through shares. Upon renunciation of the expenses to the shareholders,
income tax expense was recorded for the difference between the deferred tax
liability and the liability recognized on issuance. The valuation allowance in
the amount of the deferred tax liability results in an income tax recovery
equal to the liability recognized on issuance.
(c) Under U.S. GAAP, the Company is required to expense the cost of
start-up activities as incurred; these costs were capitalized under Canadian
GAAP. Broadly defined, start-up activities consist of the operating activities
of the facility prior to reaching commercial production levels. Sales revenue
of $3,341,000 and costs of $2,848,000 (including depreciation of $412,000)
incurred during this time have been capitalized under Canadian GAAP.
(d) Under Canadian GAAP the Company has expensed the fair value of all
options granted after January 1, 2002. Under U.S. GAAP, the Company has adopted
the prospective transition method of FASB 148 and expensed the fair value of
all options granted after January 1, 2003.
As a result of the points previously discussed with respect to
differences between Canadian GAAP and U.S. GAAP, the following adjustments
would need to be made to the financial statements:
2003 2002
________________________________________________________________________________
Loss for the year per Canadian GAAP $ (10,077) $ (6,989)
Exploration and acquisition costs (a) (16,970) (10,372)
Pre-feasibility study mining costs (a) (4,685) -
Mineral exploration properties written off (a) 2,288 2,962
Income tax income on renunciation of flow-through
expenses - 1,880
Start-up costs 493 -
Stock options - 3,159
Minority interest 5,291 -
________________________________________________________________________________
Loss for the year per U.S. GAAP $ (23,660) $ (9,360)
_______________________
Basic and diluted loss per share per U.S. GAAP $ (0.55) $ (0.31)
_______________________
Deficit per Canadian GAAP $ 23,032 $ 12,955
Cumulative exploration and development costs (a) 23,816 12,880
Pre-feasibility study mine development costs 8,431 -
Cumulative flow-through share tax income (b) (2,124) (2,124)
Start-up costs (c) (493) -
Stock options (d) (3,159) (3,159)
Minority interest (5,791) -
________________________________________________________________________________
Deficit per U.S. GAAP $ 44,212 $ 20,552
_______________________
(e) Other recent accounting pronouncements:
In June 2001, the U.S. Financial Accounting Standards Board ("FASB")
issued SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS
143"), which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The Company has adopted the provisions of SFAS 143 as
of January 1, 2003. The impact was not material to the financial statements.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"), which is effective
for exit or disposal activities that are initiated after December 31, 2002.
SFAS 146 requires that a liability be recognized for exit or disposal costs
only when the liability is incurred, as defined in the FASB's conceptual
framework rather than when a company commits to an exit plan, and that the
liability be initially measured at fair value. The Company has not entered into
any exit or disposal activities after January 1, 2003.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"), which requires certain
disclosures to be made by a guarantor in its interim and annual financial
statements for periods ending after December 15, 2002 about its obligations
under guarantees. The Company does not believe it has any guarantees as defined
by FIN 45.
In April 2003, FASB issued Statement No. 149, which amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
Company is not affected by this pronouncement as it has no such derivative
instruments or contracts.
In May 2003, FASB issued Statement No. 150, which establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances). Many of those instruments were
previously classed as equity. The Company does not believe it will be affected
by this pronouncement as it has no financial instruments with such
characteristics.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"). Its consolidation provisions are
applicable for all newly created entities created after January 31, 2003, and
is applicable to existing entities as of the beginning of the first interim or
annual reporting period beginning after June 15, 2003. With respect to entities
that do not qualify to be assessed for consolidation based on voting interests,
FIN 46 generally requires a company that has variable interests that will
absorb a majority of the variable interest entity's expected losses if they
occur, receive a majority of the entity's expected residual returns if they
occur, or both, to consolidate that variable interest entity. For periods prior
to FIN 46's effective date, certain disclosures are required if it is
reasonably possible that the Company will have a significant variable interest
in or be the primary beneficiary of a variable interest entity when FIN 46
guidance is effective. The Company does not have any variable interest
entities, as defined by FIN 46.
Canadian GAAP allows alternate treatment of mineral rights with
respect to balance sheet classification. CICA HB 1581 Business Combinations
defines such assets as intangible assets, while CICA 3061 defines acquired
mineral rights as property, plant and equipment. In the United States the
Securities and Exchange Commission has interpreted FASB 141 Business
Combinations, which is consistent with CICA HB 1581, in such a way that under
US GAAP mineral rights are classified as intangible assets. The issue in the
United States has been referred to the Emerging Issues Task Force ("EITF") for
its consideration. There can be no certainty as to the conclusions the EITF
will reach, nor as to whether Canadian GAAP will continue to allow alternate
treatments. The Company has classified such assets, less the related
accumulated depreciation, depletion and amortization, as "Mining asset" on its
consolidated balance sheet. The Company continues to believe this is the
appropriate classification under Canadian GAAP.
13. Comparative figures:
Certain 2002 comparative figures have been reclassified to conform
with the financial statement presentation adopted in 2003.
Corporate Information
Directors
James W. Ashcroft 3,4
Consulting Mining Engineer
Former President,
Ontario Division,
Inco Limited
Wayne G. Beach 1,2
Barrister and Solicitor
Robert D. Cudney 4
President and CEO
Northfield Capital Corporation
Duncan Gibson 1,2
Former Vice Chairman,
TD Bank Financial Group
John Lydall 3
Former Managing Director
Investment Banking
National Bank Financial
Terry MacGibbon 4
President and CEO
FNX Mining Company Inc.
Hon. Frank McKenna 2
Counsel,
McInnes Cooper
Former Premier of New Brunswick
Terrence Podolsky 3
Consulting Geologist Former VP Exploration,
Inco Limited
Donald M. Ross 1
Chairman of
Jones, Gable & Company
1 Member of Audit Committee
2 Member of Compensation Committee
3 Member of Corporate Governance Committee
4 Member of Safety, Health and Environment Committee
Officers
Terry MacGibbon, P.Geo.
President and CEO
John C. Ross, C.A.
Chief Financial Officer
James M. Patterson,
Ph.D., P.Geo.
Vice President Exploration
David W. Constable, P.Geo., MBA
Vice President Investor Relations and Corporate Affairs
Gord Morrison, P.Geo.
Director of Exploration
Head Office
55 University Avenue
Suite 700
Toronto, Ontario, Canada M5J 2H7
Tel 416 628 5929
Fax 416 360 0550
Email:
info@fnxmining.com
Sudbury Field Office
1300 Kelly Lake Road
Sudbury, Ontario, Canada P3E 5P4
Tel 705 671 1779
Fax 705 671 1137
Bank
The Royal Bank of Canada
Royal Bank Plaza
Toronto, Ontario
M5J 2J5
Transfer Agent
CIBC Mellon Trust Company
320 Bay Street
PO Box 903
Toronto, Ontario
M5H 4A6
Counsel
Goodman and Carr LLP
Suite 2300
200 King Street West,
Toronto, Ontario
M5H 3W5
US Counsel
Skadden, Arps, Slate, Meagher & Flow LLP
Royal Bank Plaza,
North Tower, Suite 1820
Toronto, Ontario
M5J 2J4
Auditors
KPMG LLP
Suite 3300
Commerce Court West
199 Bay Street
Toronto, Ontario
M5L 1B2
Listing
Toronto Stock Exchange
American Stock Exchange
Symbol "FNX"
S&P/TSX Composite Index
(Since December 22, 2003)
Capitalization
$333 million
(March 24, 2004)
Share Price
52 Week High/Low:
$9.40/5.30
Issued and Outstanding Shares
47,506,169
(March 23, 2004)
Fully Diluted Shares
50,158,169
Major Shareholders
(>10%)
Dundee Wealth Management Inc
Cash
$45 million
(March 23, 2004)
Debt
Nil
Web Site
www.fnxmining.com
Abbreviations
Ni Nickel
Cu Copper
Pt Platinum
Pd Palladium
Au Gold
Co Cobalt
TPM Total precious metal (Pt+Pd+Au)
oz/t Troy ounces per short ton (12 troy ounces = 1.0 pound)
g/t Grams per short ton (31.1 grams = 1.0 troy ounce)
ft Feet or Foot
km(s) Kilometre(s) (1.61 km = 1.0 mile)
lb Pound (2.2 lbs = 1.0 kilogram = 1000 grams)
m Metre (3.28 feet = 1.0 metre)
tpd Short tons per day
SIC Sudbury Igneous Complex
SJV Sudbury Joint Venture
PGE Platinum Group Elements (including platinum, palladium plus other
affiliated elements of the platinum group)
Printed in Canada on recycled paper using vegetable based inks.
Production:
Walter J. Mishko & Co. Inc.
Design:
Goodhoofd Inc.
FNX Mining Company Inc.
www.fnxmining.com
Document No. 3
2003 MANAGEMENT'S DISCUSSION AND ANALYSIS AND
CONSOLIDATED FINANCIAL STATEMENTS
"DRIVEN BY NICKEL"
FNX MINING COMPANY INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
FNX Mining is an emerging mining company producing nickel, copper,
cobalt, platinum, palladium and gold in Canada's prolific Sudbury Basin. FNX
has gone from a junior exploration company to a well funded mining producer in
just two years. In January 2002, FNX entered into an option agreement with Inco
Limited whereby FNX acquired rights to earn a 100% interest in the mineral
rights to five former producing mining properties owned and previously operated
by Inco. FNX immediately assigned its rights in the option agreement to the
Sudbury Joint Venture ("SJV"), which is 75% owned by FNX and 25% owned by
Dynatec Corporation. The SJV spent over $40 million exploring the properties in
2002 and 2003 and subsequently met all requirements to exercise the Inco option
and did so in two years instead of the planned 52 months. FNX is the SJV
exploration operator, Dynatec is the SJV mining operator and Inco has the right
to process and market all ore produced on the properties by the SJV. FNX will
receive 75% of the proceeds.
The Company started mining in the Upper Main deposit at the McCreedy
West Mine in May 2003, just 14 months after initiating its first exploration
program. Commercial production was achieved at McCreedy West in November 2003
at the modest rate of 300 tons of ore per day and has been increasing
incrementally since then and will be at 1,000 tons of ore per day by mid-2004.
On-going feasibility studies on the adjacent PM Deposit and the neighbouring
Levack Mine have the potential to triple the Company's production rate to over
3,000 tons of ore per day starting 2005. The Company has also initiated a
feasibility study at the Norman property which hosts a large
copper-platinum-palladium and gold deposit with potential to be the Company's
third operating mine.
The Company can readily support its rapid expansion plans from
anticipated cash flows, CDN$52 million of cash at December 31, 2003 and its
zero debt. The Company is also pursuing additional nickel opportunities
elsewhere in the Sudbury Basin and globally.
CRITICAL ACCOUNTING POLICIES
The Company's critical accounting policies relate to the change in the
basis of consolidation, revenue recognition, amortization of mining assets,
production accounting, and accounting for stock options.
BASIS OF CONSOLIDATION
The accounts of the SJV were proportionately consolidated on a joint
venture basis in 2002. During 2003, once the initial work program was
completed, the nature of the SJV arrangement changed to the extent that the
Company used 100% consolidation of the accounts with a 25% minority interest.
REVENUE RECOGNITION
Mining at Phase 1, started in May 2003, was suspended during the
summer with the labour disruption at Inco. Mining was restarted in late
September 2003. Commercial mining levels were reached in November 2003. Other
areas of McCreedy West, such as the PM Deposit, are still included in
exploration and development assets.
For accounting purposes, revenue is not recognized into the income
statement until an operation reaches commercial levels. Revenue from
pre-commercial production, amounting to $3.3 million, and associated costs, are
included as a reduction in the McCreedy West Phase 1 mining asset.
Revenue recognition into the income statement will commence January
2004 as the November 2003 ore shipments will be recognized in January.
Revenue is the product of payable metal produced by the mill and metal
price. Payable metal quantities, based on ore tonnage and grade, can be
established soon after the ore is delivered to the mill. Recoveries have been
previously established based on testing. Grade determination is based on assay
results from samples collected at the end of the crushing process. Final
pricing of production can take anywhere from an additional two to five months
after the month the ore is shipped to Inco, depending on the metal. This
pricing delay corresponds with the time afforded to Inco to process, refine and
sell the production.
The Company could potentially recognize revenue as early as delivery
to the mill or as late as when pricing was determined for each metal. Earlier
revenue recognition would require some estimation of final prices and
subsequent adjustment of this estimate until the final pricing was known. Later
recognition would result in reporting an accurate revenue number but would
delay recognition. Cash flow is not affected by either policy.
The Company has chosen to recognize revenue when both the quantity of
metal produced and the price are known. This alternative is more conservative
than earlier recognition. In the Company's opinion accurate revenue reporting
is more important than earlier reporting. This policy is most consistent with
the revenue cycle of a fully integrated mining company. Production and cost
information will be reported by period. All metal revenue will report as gross
revenue regardless of the type of metal. No metal by-product credits will be
applied against operating costs.
AMORTIZATION OF MINING ASSETS
The Company has two broad categories of assets; property and
development assets, representing exploration and development to place the asset
into production, and mining equipment used to extract ore. Charges to the
income statement from each category will be accounted for slightly differently.
The amortization balance per ton of the property and development
assets will be based on the total tons of reserves. Annual amortization will be
based on tons mined in the period. The amortization rate will be adjusted
quarterly to reflect any additions and any change in the remaining reserves.
Two examples of items which would affect reserves would be mining, which would
decrease remaining reserves, and exploration success, which would increase the
reserves.
Equipment will be amortized on a straight line basis. The useful life
of the equipment will be compared to the mine life and the lesser of mine life
or asset life will be used. An estimate of the salvage value of the equipment
at the end of the useful period will be established and this salvage value will
be excluded from the amortization calculation.
Amortization expenses for any period will be accounted for through the
inventory and ore in process accounts. The Company's opinion is that accounting
through the production process better matches the costs to the benefits as
compared against direct expense into the income statement.
ORE IN PROCESS AND PRODUCTION INVENTORY ACCOUNTING CONSIDERATIONS
Ore in process and inventory accounting considerations relate to
distribution of costs between a multi-metallic ore, costing method, and the
inclusion or exclusion of depreciation, depletion and amortization in
inventory.
At the end of each month the Company will know costs for the month and
payable metal for the month. With multiple sources of metal revenue (i.e.
nickel, copper, platinum, palladium, gold, cobalt) an issue of how the costs
should be distributed arises. The Company intends to pro-rate monthly mining
costs for ore in process and inventory purposes, based on average spot rate
revenue from each payable metal produced in the month. For example, if payable
nickel production represented 80% of the calculated revenue generated in a
given month (based on average spot prices for the metals in the month), nickel
would attract the same 80% of the mining costs in that same month. Inventory
cost allocations would be established in the month and not adjusted for any
subsequent change in the pricing.
Mill processing costs would also be allocated on the same average
monthly spot price basis as mining costs. Treatment and refining charges are
specific to each metal and costs will be reflected in operations on a specific
cost basis.
Costs will move from inventory to ore in process on shipment from the
mine to the Inco mill. As revenue is recognized, costs will move from ore in
process to operating costs on a first in, first out (FIFO) basis. The Company
feels that FIFO based cost best represents the consistently rapid turnover of
the inventory.
Good arguments exist for including and for excluding depreciation,
depletion and amortization into inventory and ore in process. If these non-cash
costs are included in inventory they will be matched against revenue on a
units-of-production basis and reflect the full cost of a unit-of-production.
This presentation is also consistent with US accounting.
If the costs are not included, the inventory reflects cash costs. The
Company feels that better matching of production costs will occur through
including the non-cash costs into inventory. Disclosure will be made of the
amount of depreciation in the inventory so investors can determine cash costs.
Depreciation, depletion and amortization rates for mining assets and
closure obligations will be recognized in the financial statements on a
units-of-production basis, based on revenue recognition for the primary metal
in the area being mined. Mining equipment will be depreciated on a
straight-line basis with an allowance for salvage. Since production-related,
non-cash charges will be included into inventory costs the income statement
depreciation line will not reflect all non-cash charges. The Company will
disclose all non-cash balances and tonnages in the notes to the financial
statements.
PRODUCTION INVENTORY
Production inventory results from tonnages mined and not yet shipped.
Ore broken and still underground, ore on surface and not crushed, and ore
crushed and not yet shipped will be reported as production inventory. These
inventory items will be moved into ore in process when shipped to Inco on a
FIFO basis using the lower of cost or market principal.
ORE IN PROCESS
On delivery of ore to the Inco mill ownership of the ore is
transferred to Inco. During the period between ore delivery and revenue
recognition the ore will be reported as a separate balance sheet item. Costs
will be accounted for on a FIFO basis due to the short-term nature of holding
the ore. Costs will be matched against the associated revenue in the period
reported.
STOCK OPTIONS
Commencing in 2003, the Company began to expense options over their
vesting period which at this time is a maximum of 12 months. The effect of this
change in policy will be to reduce profits of the Company and increase
Shareholders' Equity. Stock option accounting has no affect on cash flow.
[GRAPHIC OMITTED - Cash Position]
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2003 the Company held $52 million of cash. The Company
commenced 2003 with cash of $30 million. Cash of $61 million was received from
various sources and cash of $39 million was spent in 2003.
Cash of $61 million was raised in 2003 through the sale of shares,
minority interests contributions and interest on bank funds. Most of the inflow
resulted from the issue of 7.5 million shares for net proceeds of $45.8 million
in July 2003. The $9.2 million minority interest funds are contributions to the
SJV. A further $5.1 million was raised from the conversion of warrants and
share options. Cash inflow of $1.1 million resulted from interest income on
cash balances.
Cash of $15 million was used to fund mine development at McCreedy West
in 2003. This spending included development ($7 million) and mining equipment
($8 million). Exploration and development spending in 2002 related to Phase 1
amounted to $4 million.
Exploration and pre-production spending will be amortized over the
life of mine on a units-of-production basis. Mine equipment will be amortized
on a straight line basis, less an allowance for salvage, over the lesser of its
expected useful life or the mine life.
It is expected that some of the capital spending (e.g. surface
facilities, haul way refurbishment) will be used in mining operations in
addition to McCreedy West Phase 1. However, the Company intends to amortize all
the costs incurred to place Phase 1 into production at this time, using only
the McCreedy West Phase 1 reserves as a denominator. Should future operations
reach commercial levels before these multiple-use assets are fully amortized
the Company will adjust the amortization base.
Exploration project spending (excluding administration) of $17 million
was completed in 2003. All spending occurred on the SJV. The $17 million was
spent as follows:
______________________________________________________________________
Drilling Other Total
______________________________________________________________________
McCreedy West - Phase 1 $ nil $ nil $ nil
Levack- Phase 2 0.9 0.9 1.8
McCreedy West - Phase 3 1.3 7.7 9.0
North Range Footwall 0.7 0.2 0.9
Norman 3.6 0.5 4.1
Victoria 1.0 0.2 1.2
Kirkwood nil nil nil
______________________________________________________________________
TOTAL $7.5 $9.5 $17.0
______________________________________________________________________
The Company also spent $2.4 million on administration and $1.7 million
on exploration administration expenses in 2003. All work not directly spent on
a project in 2003 was expensed in the year.
The Company spent $nil on share options in 2003. These items are
non-cash.
Working capital increased by $2.4 million as increases in accounts
receivable, in process ore and inventory from the Phase 1 McCreedy Mine were
partly offset by increased payables. Accounts payable were increased $0.4
million for reclamation costs. Minority interests funded $0.5 million of
exploration administration spending in 2003.
CASH SPENDING ESTIMATE FOR 2004
The Company anticipates cash spending of $32.6 million in 2004.
Recovery from minority interest is expected to amount to $8.2 million for a net
spending of $24.4 million, excluding operating expenditures at McCreedy West
Phase 1. Significant spending areas in 2004 are planned to include capital
spending for mining equipment at the McCreedy West Phase 1 Mine, continued
progress on feasibility studies and exploration programs, administration, and
exploration administration spending.
The McCreedy West Mine anticipates spending $15.0 million in 2004,
excluding mining and processing expenses. The balance of the required mining
equipment is expected to be purchased in 2004 at a planned cost of $6.1
million. Development work at McCreedy West in 2004 is expected to be $3.0
million. Working capital is expected to increase by $5.9 million assuming a
US$5 per pound of nickel price ($5.0 million at US$4 per pound nickel, $6.8
million at US$6 per pound nickel). Accounts receivable, ore in process and
inventory will grow as the production cycle reaches full mining rates by
mid-year.
The Company has a $12.5 million exploration and development program
planned for Sudbury in 2004. Refurbishment of the 1600 Level access to Levack
is expected to be completed in 2004 at a cost of $1.2 million. An exploration
ramp and bulk samples is targeted for completion at the Phase 3 PM Deposit at a
cost of $2.4 million. Feasibility studies are planned to advance at a cost of
$1.5 million.
The Company may consider shaft rehabilitation at Levack and additional
work at Norman in 2004. These items are not included in the cash estimate for
2004.
RESULTS OF OPERATIONS
PRE-PRODUCTION ACTIVITIES
During the year mine development was accelerated to achieve access to
the nickel-rich Inter Main and East Main deposits.
The Company commenced shipping ore to Inco in May 2003. Shipments did
not occur in June, July or August as the mill was closed. During September and
October, the SJV mined 12,750 tons of nickel ore and 2,750 tons of copper ore
for a total of 15,500 tons.
Pre-commercial production (pre-November 2003) amounted to 16,500 tons
of nickel ore and 9,000 tons of copper ore for a total of 25,500 tons. Ore
shipments to the Clarabelle Mill during September and October were 14,750 tons
of nickel ore and 5,100 tons of copper ore. Revenue of $3.3 million from these
pre-commercial production activities was reported on the balance sheet as a
reduction in the Phase 1 mine asset.
EXPLORATION
Total exploration spending in 2003 was $17.0 million. Recoveries from
minority interests amounted to approximately $4.3 million for a net spending of
$12.7 million on the SJV exploration properties in 2003.
Spending of $9.0 million on McCreedy West Phase 3 was focused on the
PM Deposit, where a feasibility study was commenced in 2003. The Company
completed 85 holes for 51,036 feet into the PM Deposit, mostly from the 950 and
1600 Levels. The program was designed to increase confidence in continuity of
the mineralization and further understand the grade controls. An access ramp
was driven to the PM Deposit and bulk samples will be taken in 2004.
Spending of $4.1 million at Norman was focused on the 2000 Deposit,
the North Deposit and on Lens A. Drilling of 120,750 feet was done in 70 holes.
At the North Deposit drilling was focused on higher grade zones. Drilling at
the 2000 Deposit focused on defining the limits of the mineralization and on
infilling the known zone. Drilling on Lens A has shown encouraging results
which will be followed up in 2004.
At Levack, spending of $1.8 million in 2003 focused on additional
exploration near the #3 and #7 orebodies. Significant work was done on an
evaluation of the Inco mineral resource inventory at Levack. This work is the
basis for a planned re-opening of the Levack Mine in 2004.
Exploration work at Victoria amounted to $1.2 million in 2003. Work
was focused largely on defining the limits of the Powerline Zone. Other targets
were drill tested and surface mapping was advanced.
The North Range Footwall project occurs along a 4 km. strike length
across the McCreedy and Levack Properties. During 2003, nine holes were drilled
for a total of 21,827 feet at a cost of $0.9 million. No holes intersected
massive sulphides. Areas of low sulphidation, indicating fluid movement, offer
encouragement for additional work in 2004.
OPERATING RESULTS
MINING OPERATIONS - 2003
Commercial production commenced November 1, 2003. Production for
November and December was 24,883 tons of nickel ore and 1,144 tons of copper
ore for a total production of 26,027 tons. Shipments to Inco in November and
December were 23,848 tons of nickel ore and 2,675 tons of copper ore for total
shipments of 26,523 tons over the two months. Closing inventory, on surface and
underground at the mine, amounted to 5,217 tons.
FINANCIAL
The Company reported a loss of $10.1 million in 2003 ($0.24 per share)
compared to a $7.0 million loss ($0.23 per share) in
2002.
Administration costs of $2.4 million in 2003 were $1.2 million higher
than in 2002. Increased costs relate to additional staff as operations became
more active, and 2003 reflects a full year of operations. Costs increased
related to flow-through financings for funds raised in 2002. A new listing on
the American Stock Exchange resulted in higher Directors and Officers Liability
insurance premiums.
Exploration administration expenses were approximately $1.7 million in
2003. Any exploration cost which was not directly related to a project was
expensed in 2003. Like administration cost increases, staff compliment grew
throughout 2002 and these costs were carried for all of 2003.
Stock options expenses of approximately $4.9 million increased by $1.7
million from 2002. The rapid increase in share prices and a high volatility
factor combined to generate higher expenses in 2003 compared to 2002.
Amortization of $0.1 million in 2003 was the same as in 2002. Capital
asset additions in 2003 were small. All mineral properties unrelated to the SJV
were written off ($2.3 million) in 2003. Write-offs in 2002 amounted to $3.0
million.
Interest income of $1.1 million in 2003 ($0.5 million in 2002)
increased due to the July financing which added $45.8 million cash, net of
expenses, to the Company's treasury.
Quarterly financial results for 2003 and 2002:
(in thousands of Canadian dollars except per share amounts)
2003 Q1 Q2 Q3 Q4 Total
______________________________________________________________________________
Revenue $ - $ - $ - $ - $ -
Loss 1,560 1,487 3,010 4,020 10,077
Loss per share $ 0.04 $ 0.04 $ 0.08 $ 0.08 $ 0.24
2002 Q1 Q2 Q3 Q4 Total
______________________________________________________________________________
Revenue $ - $ - $ - $ - $ -
Loss 1,296 291 2,071 3,331 6,989
Loss per share $ 0.04 $ 0.01 $ 0.07 $ 0.11 $ 0.23
The Company recorded a loss of $4.0 million in the fourth quarter of
2003, mostly as a result of $2.7 million in stock option expenses. Exploration
expenses of $1.0 million in the fourth quarter of 2003 reflects charges not
directly related to projects.
FINANCING ACTIVITIES
The Company raised $45.8 million, net of expenses, on issue of 7.5
million shares in July 2003. The Company raised $2.4 million on the exercise of
two million warrants and $2.7 million on the exercise of 1.7 million share
options.
METAL PRICE AND EXCHANGE RATE OUTLOOK
FNX Mining is exploring, developing and mining nickel, copper,
platinum, palladium and gold deposits in the prolific Sudbury Basin mining
camp. Commodity price fluctuations will significantly affect the results of
operations and economics of a mineral deposit. The monitoring of price
movements and trends for our target metals are essential to understand and
monitor the viability of the Company's assets.
Most of the costs incurred by the Company are denominated in Canadian
dollars. Revenue from metal sales is quoted and earned in US dollars. The
US:Canadian exchange rate will also significantly affect the results of
operations of the Company.
The Company has not hedged metal prices or exchange rates. Official
closing prices for the reported commodities at year end were:
2003 2002
___________________________________________________________________
Nickel (lb.) (LME) US$7.55 US$3.24
Copper (lb.) (LME) US$1.05 US$0.70
Platinum (oz.) (London PM fix) US$814 US$598
Palladium (oz.) (London PM fix) US$193 US$233
Gold (oz.) (London PM fix) US$417 US$343
Cobalt (lb.) (Metall Bulletin) US$22.25 US$6.65
$Canadian: $US 0.77 0.63
[GRAPHIC OMITTED - Phase 1 Life of Mine Revenue by Metal (December 31, 2003
Prices)]
[GRAPHIC OMITTED - Phase 1 Life of Mine Cash Distribution Per Ton]
Nickel prices doubled during the year, starting 2003 at US$3.24 per
pound and rising steadily to finish the year at US$7.55 per pound. Nickel
demand grew 7% in 2003. No immediate sources of increased supply and strong
economic demand during the next two years should keep nickel prices very strong
over the period. Nickel inventories are at a 20 year low of five weeks of
supply.
[GRAPHIC OMITTED - Nickel Price]
The rapidly expanding Chinese economy is hungry for nickel and demand
from China for nickel is expected to increase by at least 20% in 2004. World
nickel demand is expected to increase 7% in 2004, the same rate as in 2003.
Stainless steel demand is expected to increase 7% due to world economic growth.
The nickel industry has very little shutdown capacity so there are few
sources of immediate supply available. There are new mines available to bring
on line but these projects take time to build and start up. Inco forecasts
production from Voisey's Bay and Goro will only start to reach the market in
2006. Total world nickel supply is forecast by Inco to increase by only 1% in
2004. Russian stockpiles, representing 5% of world supply in 2003, were sold
and will not be available in 2004. Production lost during the 2003 Inco labour
interruption will make up about 2% of the supply increase in 2004. World demand
is expected to bring further pressure on the already low remaining nickel
stockpiles during 2004.
Copper prices started 2003 at US$0.70 per pound and rose to US$1.05
per pound at the end of the year. Prices in the first quarter of 2004 rose
above US$1.30 per pound. Strong US housing starts provided increased
expectations for future copper demand. Copper production restarts are seen as
moderate in the short to medium term which, combined with demand increases,
will support prices over the next year.
Precious metal prices are most significantly affected by the US dollar
and hence the US economy. Platinum prices rose from US$598 per ounce to US$814
per ounce on tight supply. Prices continue to increase in the first quarter of
2004 and have exceeded US$900 per ounce. Palladium prices dropped from US$233
to US$193 per ounce during 2003. Oversupply and a thin market were the problem.
Although prices have increased to over $230 per ounce in the first quarter of
2004, Johnson Matthey expects the palladium price to remain range bound in the
near term on unchanged fundamentals. Gold prices increased from US$343 per
ounce to US$417 per ounce in 2003 through producer de-hedging and fund buying.
The future direction of gold is more tied to US dollar performance than any
other metal discussed here.
The US dollar was weakened against the Canadian dollar, starting the
year at 0.63 exchange rate and ending the year at 0.77 for a Canadian dollar.
The exchange rate in the first quarter backed off to 0.76 for a Canadian
dollar. The US economy continues to struggle with its fiscal and current
account deficits and will bear watching in 2004.
The Company has no assurance that future commodity prices or exchange
rates will be at a level sufficient to make mining operations viable. While
exploration in a proven mining camp in known geological environments with the
benefit of a large historic database serves to mitigate exploration risk,
future exploration success does still contain a significant degree of
exploration risk.
FORECASTED MINING OPERATIONS - 2004
The Company expects to build on its 2003 successes in 2004. The
McCreedy Mine is expected to increase production levels to over 1,000 tons per
day by mid-2004. Work at Phase 2 Levack and at the Phase 3 PM Deposit in
McCreedy West could see two additional areas opened to mining in 2004.
The Company's commitment to continued exploration success in 2004 will
be demonstrated by a $12.5 million program.
McCreedy West Phase 1 production is expected to be 6.6 million pounds
of nickel and 4.3 million pounds of copper in 2004. Further increases will
occur in 2005 as a complete year of full production is completed.
RISKS AND UNCERTAINTIES
MINING INDUSTRY
The exploration for and development of mineral deposits involves
significant risks which even a combination of careful evaluation, experience
and knowledge may not eliminate. While the discovery of an orebody may result
in substantial rewards, few properties which are explored are ultimately
developed into producing mines. Major expenses may be required to establish ore
reserves, to develop metallurgical processes and to construct mining and
processing facilities at a particular site. It is impossible to ensure that the
current exploration programs planned by the Company will result in a profitable
commercial mining operation.
Whether a mineral deposit will be commercially viable depends on a
number of factors, some of which are the particular attributes of the deposit,
such as size, grade and proximity to infrastructure, as well as metal prices
which are highly cyclical and government regulations, including regulations
relating to prices, taxes, royalties, land tenure, land use, importing and
exporting of minerals and environmental protection. The exact effect of these
factors cannot be accurately predicted, but the combination of these factors
may result in the Company not receiving an adequate return on invested capital.
Mining operations generally involve a high degree of risk. The
Company's operations are subject to all the hazards and risks normally
encountered in the exploration, development and production of ore, including
unusual and unexpected geology formations, rock bursts, cave-ins, flooding and
other conditions involved in the drilling and removal of material, any of which
could result in damage to, or destruction of, mines and other producing
facilities, damage to life or property, environmental damage and possible legal
liability. Although adequate precautions to minimize risk will be taken,
milling operations are subject to hazards such as equipment failure or failure
of retaining dams around tailings disposal areas which may result in
environmental pollution and consequent liability.
The Company's activities are directed towards the search, evaluation
and development of mineral deposits. Some of the mineral properties in which
the Company has an interest contain no known body of commercial ore and any
exploration programs thereon are exploratory searches for ore while other
properties in which the Company has an interest are subject to preliminary
stages of exploration and development programs only. There is no certainty that
the expenditures to be made by the Company as described herein will result in
discoveries of commercial quantities of ore. There is aggressive competition
within the mining industry for the discovery and acquisition of properties
considered to have commercial potential. The Company will compete with other
interests, many of which have greater financial resources than it will have for
the opportunity to participate in promising projects. Significant capital
investment is required to achieve commercial production from successful
exploration efforts.
GOVERNMENT REGULATION
The exploration activities of the Company are subject to various
federal, provincial and local laws governing prospecting, development,
production, taxes, labour standards and occupational health, mine safety, toxic
substances and other matters. Exploration activities are also subject to
various federal, provincial and local laws and regulations relating to the
protection of the environment. These laws mandate, among other things, the
maintenance of air and water quality standards, and land reclamation. These
laws also set forth limitations on the generation, transportation, storage and
disposal of solid and hazardous waste. Although the Company's exploration
activities are currently carried out in accordance with all applicable rules
and regulations, no assurance can be given that new rules and regulations will
not be enacted or that existing rules and regulations will not be applied in a
manner which could limit or curtail production or development. Amendments to
current laws and regulations governing operations and activities of
exploration, mining and milling or more stringent implementation thereof could
have a substantial adverse impact on the Company.
Government approvals and permits are currently, and may in the future
be, required in connection with the Company's operations. To the extent such
approvals are required and not obtained, the Company may be curtailed or
prohibited from proceeding with planned exploration or development of mineral
properties.
Failure to comply with applicable laws, regulations and permitting
requirements may result in enforcement actions thereunder, including orders
issued by regulatory or judicial authorities causing operations to cease or be
curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment, or remedial actions. Parties engaged in
mining operations may be required to compensate those suffering loss or damage
by reason of the mining activities and may have civil or criminal fines or
penalties imposed for violations of applicable laws or regulations.
Amendments to current laws, regulations and permits governing
operations and activities of mining companies, or more stringent implementation
thereof, could have a material adverse impact on the Company and cause
increases in exploration expenses, capital expenditures or production costs or
reduction in levels of production at producing properties or require
abandonment or delays in development of new mining properties.
PERMITS AND LICENCES
The exploitation and development of mineral properties may require the
Company to obtain regulatory or other permits and licences from various
governmental licensing bodies. There can be no assurance that the Company will
be able to obtain all necessary permits and licences that may be required to
carry out exploration, development and mining operations on its properties.
ENVIRONMENTAL RISKS AND HAZARDS
All phases of the Company operations are subject to environmental
regulation in the various jurisdictions in which it operates. Environmental
legislation is evolving in a manner which will require stricter standards and
enforcement, increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects and heightened degree of
responsibility for companies and their officers, directors and employees. There
is no assurance that future changes in environmental regulation, if any, will
not adversely affect the Company's operations. Environmental hazards may exist
on the properties on which the Company holds interests which are unknown to the
Company at present which have been caused by previous or existing owners or
operators of the properties. The Company may become liable for such
environmental hazards caused by previous owners and operators of the properties
even where it has attempted to contractually limit its liability.
Production of mineral properties may involve the use of dangerous and
hazardous substances such as sodium cyanide. While all steps will be taken to
prevent discharges of pollutants into the ground water and the environment, the
Company may become subject to liability for hazards that cannot be insured
against.
COMMODITY PRICES
The profitability of the Company will be significantly affected by
changes in the market price for nickel and by changes in the US:Canadian
exchange rate. During 2004, a US$1 per pound change in the price of nickel will
generate a CDN$7 million change on the Company's income statement. Each $0.05
change in exchange rates will generate a pre-tax change of $1.5 million on the
Company's income statement.
The Company has not entered into any hedge agreements in respect of
metal or foreign exchange at this time. Such contracts would prevent losses in
situations when the price changed adversely and would prevent gains in
situations where the price changed favourably.
The level of interest rates, the rate of inflation, world supply of
base metals and precious metals and stability of exchange rates can all cause
significant fluctuations in base metal and precious metal prices. Such external
economic factors are in turn influenced by changes in international investment
patterns and monetary systems and political developments. The price of base
metals and precious metals has fluctuated widely in recent years, and future
serious price declines could cause continued commercial production to be
impracticable. Depending on the price of base metals and precious metals, cash
flow from mining operations may not be sufficient to cover operating costs. Any
figures for reserves presented by the Company will be estimates and no
assurance can be given that the anticipated tonnages and grades will be
achieved or that the indicated level of recovery will be realized. Market
fluctuations and the price of base metals and precious metals may render
reserves uneconomical. Moreover, short-term operating factors relating to the
reserves, such as the need for orderly development of the orebodies or the
processing of new or different grades of ore, may cause a mining operation to
be unprofitable in any particular accounting period.
UNINSURED RISKS
The Company carries insurance to protect against certain risks in such
amounts as it considers adequate. Risks not insured against include
environmental pollution or other hazards against which such corporations cannot
insure or against which they may elect not to insure.
CONFLICTS OF INTEREST
Certain of the directors of the Company also serve as directors of
other companies involved in natural resource exploration and development and
consequently there exists the possibility for such directors to be in a
position of conflict. Any decision made by such directors involving the Company
will be made in accordance with their duties and obligations to deal fairly and
in good faith with the Company and such other companies. In addition, such
directors will declare, and refrain from voting on, any matter in which such
directors may have a conflict of interest.
LAND TITLE
Although title to the Properties has been reviewed by or on behalf of
the Company and title opinions were delivered to the Company, no assurances can
be given that there are no title defects affecting the Properties. Title
insurance generally is not available for mining claims in Canada, and the
Company's ability to ensure that it has obtained secure claim to individual
mineral properties or mining concessions may be severely constrained. The
Company has not conducted surveys of the claims in which it holds direct or
indirect interests; therefore, the precise area and location of such claims may
be in doubt. Accordingly, the Properties may be subject to prior unregistered
liens, agreements, transfers or claims, including native land claims, and title
may be affected by, among other things, undetected defects. In addition, the
Company may be unable to operate the Properties as permitted or to enforce its
rights with respect to its Properties.
JOINT VENTURE
The Company may enter into one or more joint ventures in the future,
in addition to the Sudbury Joint Venture. Any failure of Dynatec or any other
joint venture partner to meet its obligations could have a material adverse
affect on such joint ventures. In addition, the Company may be unable to exert
influence over strategic decisions made in respect of properties subject of
such joint ventures.
Forward-looking statements
Certain statements in this document constitute "forward-looking statements"
within the meaning of Section 27A of the US Securities Act of 1933 and Section
21E of the US Securities Exchange Act of 1943.
Such forward-looking statements involve known and unknown risks, uncertainties
and other important factors that could cause the actual results, performance or
achievements of the Company to be materially different from the future results,
performance or achievements expressed or implied by such forward-looking
statements.
Such risks, uncertainties and other important factors are described elsewhere
in this discussion and in the Company's other regulatory filings. These
forward-looking statements speak only as of the date of this document.
The Company undertakes no obligation to update publicly or release any
revisions to these forward-looking statements to reflect events or
circumstances after the date of this document or to reflect the occurrence of
unanticipated events.
A. Disclosure Controls and Procedures
Disclosure controls and procedures are defined by the Securities and Exchange
Commission as those controls and other procedures that are designed to ensure
that information required to be disclosed by FNX Mining Company Inc. (the
"Registrant") in reports filed or submitted by it under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported within
the time periods specified in the Commission's rules and forms. The
Registrant's Chief Executive Officer and Chief Financial Officer have evaluated
the Registrant's disclosure controls and procedures as of the end of the period
covered by this Annual Report on Form 40-F and have determined that such
disclosure controls and procedures are effective.
B. Changes in Internal Control Over Financial Reporting
During the fiscal year ended December 31, 2003, the Registrant made the
transition from an exploration company to a producer. Accordingly, new internal
controls over financial reporting systems were put in place to deal with
revenue reporting, operating cost reporting, cash receipts from metal sales and
reconciliation of cash receipts to revenue.
C. Notice of Pension Fund Blackout Period
The Registrant was not required by Rule 104 of Regulation BTR to send any
notice to any of its directors or executive officers during the fiscal year
ended December 31, 2003.
D. Audit Committee Financial Expert
While the Registrant's board of directors has determined that all of the
members of its audit committee are independent, as that term is defined under
the rules and regulations of the American Stock Exchange, no member of the
audit committee is an audit committee financial expert, as that term is defined
in General Instruction B(8)(a) of Form 40-F. All of the members of the audit
committee are "financially literate" as required by Canadian securities laws
under Multilateral Instrument 52-110 Audit Committees.
E. Code of Ethics
The Registrant has adopted a code of ethics that applies to all directors,
officers and employees. The Registrant will provide a copy of the code of
ethics without charge to any person that requests a copy by contacting David
Constable, Vice President, Investor Relations and Corporation Affairs, at the
address on the cover of this Form 40-F.
F. Principal Accountant Fees and Services
The Registrant changed its auditor from Smith, Nixon & Co. LLP ("Smith, Nixon")
to KPMG LLP ("KPMG") commencing for the fiscal year ended December 31, 2003.
Audit Fees
The aggregate fees billed by Smith, Nixon and KPMG, the Registrant's principal
accountants (the "Outside Auditors"), for the fiscal years ended December 31,
2002 and 2003 for professional services rendered by the Outside Auditors for
the audit of the Registrant's annual financial statements or services that are
normally provided by the Outside Auditors in connection with statutory and
regulatory filings or engagements for such years were Cdn$23,000 (Smith, Nixon
- Cdn$23,000) and Cdn$50,000 (Smith, Nixon - Cdn$25,000, KPMG - Cdn$25,000),
respectively.
Audit-Related Fees
The aggregate fees billed by the Outside Auditors for the fiscal years ended
December 31, 2002 and 2003 for assurance and related services rendered by it
that are reasonably related to the performance of the audit or review of the
Registrant's financial statements and are not reported above as audit fees were
Cdn$16,000 (Smith, Nixon - Cdn$16,000) and Cdn$29,347 (Smith, Nixon -
Cdn$29,347), respectively. Professional services provided included reviews of
the Registrant's public disclosure documents, including review of its
prospectus in connection with its public offering of common shares and the
reconciliation of its financial statements to U.S. generally accepted
accounting principals in conjunction with the Registrant's listing on the
American Stock Exchange, both of which occurred in the fiscal year ended
December 31, 2003.
Tax Fees
The aggregate fees billed by the Outside Auditors for the fiscal years ended
December 31, 2002 and 2003 for professional services rendered by it for tax
compliance, tax advice, tax planning and other services were Cdn$2,500 (Smith,
Nixon - Cdn$2,500) and Cdn$3,000 (Smith, Nixon - Cdn$3,000), respectively. Tax
services provided included preparation of tax returns.
All Other Fees
The aggregate fees billed by the Outside Auditors for the fiscal years ended
December 31, 2002 and 2003 for products and services provided by the Outsider
Auditors, other than the services reported in the preceding three paragraphs,
were nil and nil, respectively.
Audit Committee Pre-Approval Policies
All audit and non-audit services performed by the Registrant's auditor are
pre-approved by the audit committee of the Registrant.
G. Off-Balance Sheet Arrangements
The Registrant is not a party to any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on its financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to investors.
H. Tabular Disclosure of Contractual Obligations
The following table sets out the Registrant's known contractual obligations for
its long-term liabilities and lease commitments as of the fiscal year ended
December 31, 2003.
(Canadian dollars in thousands)
--------------------------------------------------------------------------------
Payments due by period
--------------------------------------------------------------------------------
Less
than 1 to 4 to
1 3 5
Total year years years Thereafter
--------------------------------------------------------------------------------
Long-term debt (excluding capital
lease obligations) $ 0 $ 0 $ 0 $ 0 $ 0
Capital lease obligations 0 0 0 0 0
Operating Lease Obligations 0 0 0 0 0
Purchase Obligations 0 0 0 0 0
Other Long-Term Liabilities 0 0 0 0 0
--------------------------------------------------------------------------------
Total contractual obligations $ 0 $ 0 $ 0 $ 0 $ 0
================================================================================
The accounts of the Registrant's Sudbury Joint Venture, which is 75% owned by
the Registrant and 25% owned by Dynatec Corporation, are consolidated into the
financial statements of the Registrant. A 25% minority interest is used in the
financial statements to account for Dynatec Corporation's 25% interest in the
Sudbury Joint Venture.
I. Critical Accounting Policies
A discussion of the Registrant's critical accounting policies can be found in
its Management's Discussion and Analysis for the year ended December 31, 2003
filed with the Securities and Exchange Commission as Document 3 herein.
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
A. Undertaking
The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and to
furnish promptly, when requested to do so by the Commission staff, information
relating to: the securities in relation to which the obligation to file an
annual report on Form 40-F arises; or transactions in said securities.
B. Consent to Service of Process
The Registrant has previously filed with the Commission a Form F-X in
connection with its Common Shares.
SIGNATURE
Pursuant to the requirements of the Exchange Act, the Registrant
certifies that it meets all of the requirements for filing on Form 40-F and has
duly caused this annual report to be signed on its behalf by the undersigned,
thereto duly authorized.
FNX MINING COMPANY INC.
Dated: May 14, 2004 By: /s/ A. Terrance MacGibbon
----------------------------
By: A. Terrance MacGibbon
Title: President and Chief Executive Officer
EXHIBIT INDEX
Number Document
------ --------
1. Consent of KPMG LLP
31. Certification of CEO and CFO pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
32. Certification of CEO and CFO pursuant to Section 906
of the Sarbanes-Oxley Act of 2002