Duluth Metals Limited - The Nokomis Deposit


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Projects Overview The Nokomis Deposit Project Summary The Duluth Complex

Integrating the true science of geology into the Nokomis Project to potentially create a world-class underground mine

Nokomis Deposit Project Summary The Duluth Complex
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Nokomis Deposit Resource Estimate

Based on Indicated and Inferred Resources for the Nokomis Deposit, the Nokomis Deposit ranks as one of the largest combined base and precious metal Resources to be discovered in North America in decades containing a higher than average grade for deposits within the Duluth Complex. The Nokomis Deposit contains significantly higher grade copper, nickel, platinum, palladium, gold and silver zones in portions of the deposit. One of the main objectives of the Company is to quantify these higher grade zones and appraise the potentially positive impact on future mining scenarios.

A new Resource Estimate has been received on October 26, 2009 from Scott Wilson Roscoe Postle Associates Inc. This October 2009 Resource Estimate incorporates assay data from 96 additional holes from what was largely an infill drilling program completed during the 2008-2009 period. All vertical and wedge holes drilled in the Nokomis Deposit were used in this analysis. The October 2009 Nokomis Resource Estimate defines 550 million tonnes of Indicated Resources grading 0.639% copper, 0.200% nickel, 0.660 grams per tonne TPM (TPM = Pt + Pd + Au) for a copper equivalent (CuEq) grade of 1.51%, plus an additional 274 million tonnes of Inferred Resources grading 0.632% copper, 0.207% nickel, 0.685 grams per tonne TPM for a CuEq grade of 1.53% . (Note - Copper Equivalent is based on US metal prices of: Copper - $1.75/lb, Nickel - $7.00/lb, Cobalt - $10.00/lb, Gold - $600/oz, Platinum - $1,100/oz, Palladium - $350/oz and Silver - $8.50/oz, and the methodology with metallurgical recoveries, refining costs and other charges being considered for all metals in accordance with the Net Smelter Return Factors contained in the January 22, 2008, NI 43-101 Scoping Study produced by Scott Wilson RPA.)

This Scott Wilson RPA Estimate also includes multiple higher grade areas. The three highest grade areas have a cumulative total of 92 million Indicated tonnes of 1.80 CuEq% (at a 1% CuEq cut-off grade) and 22 million Inferred tonnes of 1.81 CuEq% (also at a 1% CuEq cut-off grade). Duluth Metals notes that definition of these higher grade areas is important for mine planning and initial operations in order to enhance rapid payback of capital investment.

Furthermore, Scott Wilson RPA has reported on silver in this estimate, and the Nokomis Deposit contains 37 million ounces of silver within the Indicated Resource outline (550 million tonnes at 2.116 g/t Ag) and 18 million ounces of silver within the Inferred Resource outline (274 million tonnes at 2.056 g/t Ag).

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The October 2009 Resource Estimate used a 1% copper equivalent cut-off grade to define the resource model. A table of the new tonnes and grades for various cut-offs is shown below. Based on Scott Wilson RPA's review of metal prices, process recoveries, refining costs and underground mine operating costs likely to apply at the Nokomis deposit site, the 1.0% copper equivalent cut-off grade (highlighted) is reasonable for the statement of Indicated and Inferred Resources at this time.

Duluth Metals Limited Nokomis Deposit
	Indicated Resources
Cut-off	Tonnes	Cu	Ni	Co	Au	Pt	Pd	TPM	CuEq^6,8
Grade	(000's)	%	%	%	g/t	g/t	g/t	g/t	%
1.0% CuEq	550,038	0.639	0.200	0.010	0.092	0.176	0.392	0.660	1.51
0.5% Cu	482,438	0.666	0.206	0.010	0.098	0.188	0.420	0.706	1.57
0.6% Cu	327,847	0.179	0.216	0.011	0.110	0.216	0.482	0.808	1.69
0.7% Cu	157,803	0.797	0.231	0.011	0.127	0.256	0.567	0.950	1.87
0.8% Cu	59,958	0.886	0.242	0.011	0.149	0.307	0.676	1.132	2.07
	Inferred Resources
Cut-off	Tonnes	Cu	Ni	Co	Au	Pt	Pd	TPM	CuEq^6,8
Grade	(000's)	%	%	%	g/t	g/t	g/t	g/t	%
1.0% CuEq	273,835	0.632	0.207	0.010	0.091	0.185	0.409	0.685	1.53
0.5% Cu	252,000	0.648	0.210	0.010	0.094	0.192	0.424	0.710	1.57
0.6% Cu	158,651	0.700	0.218	0.010	0.109	0.227	0.499	0.835	1.69
0.7% Cu	63,846	0.785	0.229	0.010	0.131	0.278	0.601	1.010	1.88
0.8% Cu	20,275	0.865	0.239	0.010	0.134	0.307	0.657	1.098	2.03

CIM definitions were followed for Mineral Resource estimation and classification.

Mineral Resources are estimated at a zone definition (wireframe) cut-off grade of approximately 1.0% Cu equivalent grade (CuEq).

The approximately 1.0% CuEq cut-off grade includes all material in the wireframed zones.

Bulk density is 3.01 t/m³

Resources were estimated to a maximum depth of approximately 1,350 m.

Copper equivalent (CuEq%) is based on Net Smelter Return Factors as determined for the Preliminary Economic Assessment by Scott Wilson RPA dated January 18, 2008.

Metal Prices used were $1.75/lb copper, $7.00/lb nickel, $10.00/lb Co, $600/oz Au, $1100/oz Pt and $350/oz Pd.

Copper equivalent (CuEq%) = Cu% + 3.03 x Ni% + 0.63 x Co% + 0.30 x Au g/t + 0.76 x Pt g/t + 0.24 x Pd g/t based on expected metal prices and process recovery and refining charges.

TPM is Au g/t + Pt g/t + Pd g/t.

Co, Au, Pt, Pd grades, that are lacking in historic drill holes, have been entered in the resource database based on regression of assay grades from DML drill hole assays

There is no information available on silver recoveries for the Nokomis Deposit; these recoveries would be needed to include silver in the CuEq determination.

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Higher Grade Areas of the Nokomis Deposit

expanded multiple higher grade zones within the overall deposit particularly in three areas -- known as the Eastern, Central and Western Higher Grade Areas. These three Higher Grade Areas have a cumulative total of 92 million Indicated tonnes of 1.023 g/t TPM (1.80 CuEq% at a 1% CuEq cut-off grade) and 22 million Inferred tonnes of 1.005 g/t TPM (1.81 CuEq% at a 1% CuEq cut-off grade). Cumulatively, the Eastern, Central and Western Higher Grade Areas exhibit 55% higher TPM grades in the Indicated Resource category compared to the global Indicated Resource TPM grades, and 47% higher TPM grades in the Inferred Resource category compared to the global Inferred Resource TPM grades. In addition, there are three other higher grade areas that have been identified to date in the Nokomis Deposit, known as Areas A, B and C. The combined resource for these additional areas totals 48 million tonnes of 0.802 g/t TPM (1.75% CuEq at a 1.0% CuEq cutoff grade) and an additional 12 million tonnes of 0.972 g/t TPM (1.68% CuEq at a 1.0% CuEq cutoff grade).

All of these higher grade areas are important for future mine planning and initial operations in order to enhance rapid payback of capital investment. As the 40,000 tonne per day operation featured in the NI 43-101 January 2009 Preliminary Assessment utilizes 14 million tonnes of feed per year, the higher grade areas need to be studied carefully during pre-feasibility in order to enhance and optimize cash flow in the initial years of operation.

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New Scoping Study

On January 12, 2009, Duluth Metals announced the receipt of of a new independent NI 43-101 Preliminary Assessment ("PA" or Scoping Study) on its Nokomis Project from Scott Wilson Roscoe Postle Associates ("Scott Wilson RPA"). The full report has now been filed on SEDAR. This report provides an updated Preliminary Assessment of the Nokomis Project, based on the June 2008 Mineral Resource Estimate, and is based on an expanded 40,000 tonne per day ("tpd") production rate scenario, doubling the January 2008 PA production rate case. The report confirms positive economics for the Nokomis Deposit even at today's lower metal prices with the potential to be one of the world's low cost copper-nickel producers.

The new Scoping Study used three metal price scenarios (all monetary units are in $US) to examine the economics of developing and mining the Nokomis Deposit:

Low-Price Case - reflecting recent low metal prices of 1.55/lb Cu; $4.90/lb Ni; $10.00/lb Co; $795/oz Pt; $295/oz Pd; $600/oz Au.
Base Case - same base case prices used in the previous Technical Report (January 2008 PEA), based on long-term average price forecasts of the past several years. ($1.75/lb Cu; $7.00/lb Ni; $10.00/lb Co; $1,100/oz Pt; $350/oz Pd; $600/oz Au)
Market-Price Case - prices as of January 13, 2008*, for direct comparison to the previously-reported 20,000 tpd scenario contained in the January 2008 PA.

Production Rate @ 40,000 tpd	Low Metal Price Case	Base Price Case	Market Price Case (as of Jan. 13, 2008)*
Undiscounted Net Present Value	$4.901 Billion	$8.214 Billion	$20.983 Billion
Net Present Value @ 10%	$672 Million	$1.598 Billion	$5.144 Billion
Average Annual Cash Flow	$283 Million	$434 Million	$1.014 Billion
Internal Rate of Return (IRR)	16.2%	23.0%	41.4%
Capital Cost	$1.332 Billion	$1.332 Billion	$1.332 Billion
Payback Period	6 years	4 years	2 years
Annual Metal Production	181.7 million lbs copper; 42.3 million lbs nickel; 251,000 ozs TPM	181.7 million lbs copper; 42.3 million lbs nickel; 251,000 ozs TPM	181.7 million lbs copper; 42.3 million lbs nickel; 251,000 ozs TPM

Potential annual metal production under the 40,000 tpd expanded production scenario for all three price cases is as follows:

181.7 million pounds of copper per annum;
42.3 million pounds of nickel per annum; and
251,000 ounces of platinum-palladium-gold per annum.

The new independent NI 43-101 Scoping Study was completed by Scott Wilson Roscoe Postle Associates ("Scott Wilson RPA"). Holger Krutzelmann, P.Eng., Jason Cox, P.Eng., and Richard Routledge, M.Sc., P.Geo., of Scott Wilson RPA are the Independent Qualified Persons who are responsible for the report.

This new PA for the Nokomis Project encompasses the following general process flow: Ore production rate of 40,000 tonnes per day, or 14 million tonnes per year; Underground mining by blasthole open stoping with partially recoverable pillars; Underground access by shaft and ramp; Underground ore handling by conveyor systems; Underground primary crushing, further crushing and grinding on surface; Transfer from mine to concentrator via 10 km slurry line; Agitated holding tanks at mill with a minimum capacity of 11,000 m³; Flotation concentration, producing a bulk copper-nickel-cobalt-PGM-gold concentrate; Hydrometallurgical processing using PLATSOL™ process; Production of saleable copper and nickel metal via standard electrowinning, and production of cobalt and PGM-gold products to shipped to refineries for final processing to metal; and a brownfields tailings disposal facility within three kilometers of the processing site.

The following table shows unit cash costs (operating and capital), calculated for either nickel or copper. This measure provides a means to compare costs in dollars per pound of metal to individual metal prices (also in dollars per pound of metal). Scott Wilson RPA notes that the calculation is net of byproduct credits, which in this case amount to approximately 60% of revenue. Since no single metal is a dominant contributor, unit cash costs calculated in this manner appear very low, or negative in most cases.

Nokomis Deposit Potential Copper / Nickel Cash Costs *EXPANDED -- 40,000 TPD PRODUCTION CASE*
	Low-Price Case	Base Case	Market-Price Case*
*Assumptions*
Key Variable -- Cu Price ($/lb)	*$1.55 /lb.*	*$1.75 /lb.*	*$3.31 /lb.*
Key Variable -- Ni Price ($/lb)	*$4.90 /lb.*	*$7.00 /lb.*	*$12.70 /lb.*
Capital Cost, including Contingency	*$1.332 Billion*	*$1.332 Billion*	*$1.332 Billion*
Conceptual Projected Mine Life	*22 years*	*22 years*	*22 years*
*Copper*
Unit Cash Costs -- Operating ($/lb Cu)	*$(0.09) /lb.*	*$(0.72) /lb.*	*$(2.36) /lb.*
Unit Cash Costs -- Capital ($/lb Cu)	*$0.42 /lb.*	*$0.42 /lb.*	*$0.42 /lb.*
Total Unit Cash Costs -- Operating plus Capital ($/lb Cu)	*$0.32 /lb.*	*$(0.30) /lb.*	*$(1.94) /lb.*
*Nickel*
Unit Cash Costs -- Operating ($/lb Ni)	*$(2.15) /lb.*	*$(3.61) /lb.*	*$(11.62) /lb.*
Unit Cash Costs -- Capital ($/lb Ni)	*$1.79 /lb.*	*$1.79 /lb.*	*$1.79 /lb.*
Total Unit Cash Costs -- Operating plus Capital ($/lb Ni)	*$(0.36) /lb.*	*$(1.82) /lb.*	*$(9.83) /lb.*

Scott Wilson RPA reports their model is sensitive to higher grade and world metal prices. The economic analysis contained in this press release is based, in part, on Inferred Resources, and is preliminary in nature. Inferred Resources are considered too geologically speculative to have mining and economic considerations applied to them and to be categorized as Mineral Reserves. There is no certainty that the reserves development, production and economic forecasts on which this Preliminary Assessment is based will be realized.

The database for the Resource used in the PA was based on 106 drill holes drilled by DML. In completing the 2008-2009 drill program, DML has now drilled 155 holes, of which 48 holes are not included in the current Indicated and Inferred Resources. The new PA has scoped a conceptual mine plan based on a 40,000 tpd operation over a 22 year mine life with average grades of Cu 0.68%, Ni 0.21%, Pd 0.47g/t, Pt 0.21 g/t, Au 0.10 g/t, Co 0.01%. This proposed operation mines 282 million tonnes, which is less than half the resource estimate published by Scott Wilson RPA on July 18, 2008.

Geological Modeling

Duluth Meals is utilizing advanced geological modelling and analysis of the Nokomis base and precious metal deposit to identify and characterize higher grade copper, nickel, platinum, palladium and gold zones within the deposit, and potentially define contiguous, large tonnage -- higher grade zones that will be important in the evaluation of future mining scenarios. This geological analysis forms part of the Company's current work program on the combined base and precious metal Nokomis Deposit, which also includes mine planning, metallurgical studies, infrastructure analysis, project optimization, and environmental baseline studies required for future permitting.

The modeling currently led by Dr. Dean Peterson, Duluth Metals Senior VP Exploration and Duluth Metals staff is providing a new understanding of the origin of and the controls on grade distribution within the Nokomis Deposit. The geologic models provide confidence in the search parameters and variography of the block models and subsequent grade - tonnage estimates. Duluth Metals is commissioning a new 43-101 resource estimate which will include 155 drill holes and 63 wedges as part of its higher grade zone targeting effort.

The modeling has identified and provided an understanding of the origin of and controls on the distribution of four distinct types of higher-grade Copper-Nickel-Platinum-Palladium-Gold mineralization within the Nokomis Deposit mineralized system.

Platinum Group Element- rich disseminated mineralization within the SKI on the Eastern side of the Nokomis Property. This area is known as the Eastern High Grade Corridor (21 drill holes as press released October 27, 2008). This large coherent zone of significantly higher grade PGE mineralization is the result of the initial constriction of the magma channel beneath a large block of older rocks within the Nokomis Deposit. Such a blockage impedes the flow of crystals and sulfide droplets. However, the liquid portion of the magma continues to flow along with its dissolved Platinum Group Elements ("PGE"). Once these dissolved and flowing PGE's come in contact with a stuck sulfide droplet, they instantly dissolve into the sulfide and increase the PGE grade of the sulfide.
Nickel-Cobalt enriched semi-massive sulfide mineralization at the base of the SKI (or immediately below) the main magma channelway through the Nokomis Deposit. This mineralization is believed to have formed by continuous flushing of hot magma through the channelway which melted footwall granitic rocks. These granitic melts were incorporated into the magma and induced the formation of new sulfide minerals beneath a crystal slurry. These new sulfides scrubbed the melt of nickel and cobalt and settled to the bottom of the system.
Copper-PGE enriched disseminated mineralization deep in the footwall below the magma channel. The ever-deepening (into the melting footwall) magma channel induced and pinned hydrothermal convection cells in the footwall beneath the magma channel. The water in the system was released from the footwall granitoids by thermal metamorphism and circulated Cu-PGE downwards beneath the channel way.
Top-Loaded Cu-PGE enriched disseminated mineralization in the SKI. To the sides of the magma channel way, the sulfide-bearing crystal-liquid slurry was intruded as batches of magma out and to the sides of the channel. Since these highly crystalline magmas are distal to the very hot main magma channel, they solidified quickly into sulfide-bearing troctolite. Once the silicates (olivine+plagioclase) are solid, buoyant fractionated sulfide (Cu-PGE) liquid and magmatic waters moved upwards through the solidifying crystal pile and precipitated Cu-PGE sulfide and hydrous silicate minerals beneath the overlying crystal-poor, liquid silicate magma.

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