(Kitco News) - The discovery of sufficient reserves at Franconia Minerals Corp.’s Birch Lake deposit in northern Minnesota will allow it to begin studying the possibility of developing a mine for copper, nickel and platinum group metals, the company’s chief executive said.

Franconia (TSX: FRA) hopes to begin production by around 2015, said President and Chief Executive Officer Brian Gavin in an interview with Kitco News. Other companies are also looking to develop similar deposits in the Duluth Complex.

Franconia, based in Spokane Valley, Wash., holds three deposits in northern Minnesota. It is focusing on Birch Lake due to expectations that it will be easier to secure the necessary permits since this deposit is on state and private lands, rather than federal. It also is located farthest from the Boundary Waters Canoe Area Wilderness eight miles away, Gavin said.

Birch Lake is also located adjacent to Minnesota’s iron-mining region, which has an underemployed labor force and existing infrastructure.  The nearest abandoned iron mine is a few hundred yards away, while the nearest active iron-mining operation is only few miles way.

Franconia was formed a little more than a decade ago, initially looking for base and platinum group metals worldwide but with an emphasis on the U.S. It settled on Minnesota and has spent more than $25 million on drilling since 2006. The company was looking for resources that would last at least 25 years at a rate of 20,000 tons of ore mined daily, Gavin said.

“We need to have an indicated category of about 175 million tons,” he said. “And we just reached that goal….What that means is we can now move onto an economic analysis, a pre-feasibility study and an eventual feasibility study.”

The company announced late Thursday that Scott Wilson Roscoe Postle Associates estimates an indicated resource of 176.8 million metric tons, up 35% from the previous 2009 estimate. The estimate for an inferred resource was put at 39.9 million tons.

The economic analysis and pre-feasibility study are expected to take some six months, Gabin said. This will include a cash-flow analysis, study of mining and ore-recovery methods, as well as both the opening and eventual closing of a mine. Toward the end of these studies, the company can initiate metallurgical tests, another six-month process.

If the early studies are encouraging, Franconia would initiate a full feasibility study, which would take six to nine months, Gavin said. This would largely cover the same ground as earlier studies but in greater detail, meeting parameters that would be required by a lending institution.

“If all goes according to plan, we would like to have a feasibility study finished by late 2011 or early 2012,” Gavin said. The permit process would come next, followed by the beginning of construction
“Optimistically, we are looking at 2015 for production.”

So far, preliminary studies suggest that one-third of the mine’s revenue would come from each of the three metal categories – copper, nickel and platinum group metals, Gavin said.

Currently, Stillwater Mining Co. in Montana is the only other U.S. producer of PGMs. However, Glencore AG-Polymet is working toward a neighboring mining project in northern Minnesota and is likely to begin production there ahead of Franconia, Gavin said. Also, he said, Polymet would be the first nickel mine in the U.S. and Franconia would be second.

The Birch Lake deposit would be an underground mine, with the deposit starting some 2,000 feet below ground and continuing for another 320 feet. It runs 9,100 feet from north to south and 3,300 feet from east to west. The mine would be underneath Birch Lake, a man-made reservoir about 12 feet deep.

Since the mine will be underground, Gavin hopes it will be viewed favorably by regulators in the permit process.

“An open-pit deposit would likely be at least 1,000 acres or so just for the mine and a couple thousand acres or more for tailings and waste disposal,” Gavin said.

 The above-ground site for an underground mine shaft might take up five acres, he said. The area for above-ground processing and tailings storage would be around 1,000 acres. Franconia anticipates only having to handle a few million tons of waste rock, which eventually would be put back into the mine, he said. By contrast, an open pit mine might have 1 billion tons of waste.

Franconia’s three deposits, including Maturi and Spruce Road, cover 3,000 acres on total land holdings of 15,000 acres.

The Duluth Complex deposits were discovered in the 1940s and 1950s, Gavin said. Other companies previously undertook drilling and collected data showing the presence of minerals. Current high prices, coupled with additional discoveries, have encouraged mining companies to move ahead. But the biggest key is new technology allowing companies to process the type of copper-nickel-PGM ore found in the Duluth Complex, Gavin said.

With conventional smelter technology, he said, it would have been “almost impossible” to produce nickel or copper concentrate. But with new high-temperature, acid-leach-extraction techniques, the problem has been resolved, Gavin said. Furthermore, the company expects to produce copper cathodes at the mining site. Franconia anticipates that it would sell nickel and PGM precipitate, which then would be sent elsewhere for additional refining.

By Allen Sykora of Kitco News; asykora@kitco.com

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