Dni consolidates and expands Buckton Resource to 3.49 billion tons on its Alberta polymetallic black shale project

(DNI : TSX-Ven)
(DG7 : Frankfurt)

TORONTO, Jan. 11, 2013 /CNW/ - DNI Metals Inc. (DNI:TSX-Ven)(DG7:FSE) announces results of its NI-43-101 compliant resource study just completed which consolidates, updates and expands the inferred mineral resource at its Buckton Zone on its Alberta polymetallic black shale project. The Consolidated and Updated Buckton Mineral Resource Study (the "Resource Study") successfully expands the inferred resource at the Buckton Zone to 3.49 billion short tons. This resource extends over approximately 14 square kilometres, and is hosted in two near-surface stacked black shale horizons which are mineralized with recoverable Mo-Ni-U-V-Zn-Co-Cu-Li-REEs-Y-Th-Sc and are partly exposed on surface. The Buckton Zone is one of six mineralized systems, or zones, identified on DNI's 2,720 square kilometre Property in northeast Alberta.

The inferred resource being announced is based on a US$10/tonne base cut-off and represents all mineralized tonnages that are under less than 75m of overburden cover, consisting of an upper, lower-grade, horizon hosted in Labiche Formation, which directly overlies a higher-grading horizon hosted in Second White Speckled Shale Formation. The two Formations together comprise a wedge of mineralized black shale, ranging approximately 13m-140m thick, extending westward from the point where they are exposed on surface along the eastern erosional edge of the Birch Mountains to a point where overburden cover above the uppermost resource blocks in the Labiche shale thickens to more than 75m.

The Resource Study consolidates all previous resource estimates from the Buckton Zone using more current metal prices and a higher base cut-off per recommendations of previous studies. This resource study, accordingly, supersedes and replaces all prior resource estimates announced in 2011-2012 from the Zone (DNI press October 24, 2011, January 16, 2012, and September 12, 2012). The study will be revised again in early 2013 to incorporate results from DNI's 2012 drilling to further expand the resource in preparation for a Preliminary Economic Analysis (Scoping Study) of the Zone.

The Consolidated and Updated Buckton Mineral Resource Study was prepared by Apex Geoscience Ltd ("Apex"), Edmonton, under the supervision of Mr.Roy Eccles PGeol, Mr.Michael Dufresne PGeol and Mr.Steven Nicholls MAIG, who are the Qualified Persons in connection with its preparation and are independent of DNI. The Study relies on DNI's 2010-2011 winter drilling over the Buckton Zone, together with historic drilling from the area from which all archived drill core were previously re-sampled and re-analyzed by DNI in 2009 and 2012. All of the foregoing drilling campaigns were implemented by Apex under the supervision of Mr.Dufresne. The Consolidated and Updated Buckton Mineral Resource Study complies with National Instrument 43-101 and CIM resource estimation guidelines.

This press release is a summary of salient conclusions from the Consolidated and Updated Buckton Mineral Resource Study report which is being filed to SEDAR and will be available shortly. The report, "National Instrument 43-101 Technical Report, Consolidated And Updated Inferred Resource Estimate For The Buckton Zone, SBH Property, Northeast Alberta", with effective date of January 9, 2013, will also be available from DNI's website www.dnimetals.com once it is filed.

The Consolidated and Updated Buckton Mineral Resource is classified as an inferred resource consisting of 3,485,011,000 short tons (3,161,549,000 metric tonnes) of mineralized black shale extending over 14 square kilometres beneath less than 75m of overburden cover. This resource is hosted in the Labiche Formation and underlying Second White Speckled Shale Formation, which are two flat-lying black shale Formations that are stacked to comprise a continuous thick zone of mineralized shale. The inferred resource is mineralized with recoverable Molybdenum (Mo), Nickel (Ni), Uranium (U), Vanadium (V), Zinc (Zn), Copper (Cu), Cobalt (Co), Lithium (Li), Scandium (Sc), Thorium (Th) and Rare Earth Elements Lanthanum (La), Cerium (Ce), Praseodymium (Pr), Neodymium (Nd), Samarium (Sm), Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Yttrium (Y). The Study estimates that the inferred resource is overlain by 738,729,000 short tons (670,164,000 metric tonnes) of glacial till overburden.

The inferred resource reported by the Consolidated and Updated Buckton Mineral Resource Study is tabulated below combining the Upper and Lower Zones on a weighted basis.

Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no guarantee that all or any part of the mineral resource reported herein will be converted into a mineral reserve. An 'Inferred Mineral Resource' is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The metal recoveries reported represent preliminary mineral recovery testing results collated from the collective bench scale laboratory testwork completed by DNI to date and may not reflect actual process recoverability that might be achieved in a mineral production operation, all of which is the subject of ongoing studies.

This Consolidated and Updated Buckton Mineral Resource has been classified as an inferred resource according to CIM standards, based on a number of factors, namely; limited number of drill holes and their wide spacing, good continuity of mineralization and geological control between drill holes and from section to section along approximately six kilometres of strike. The inferred resource is open to the north, northeast and south, and eastward to the erosional edge of the Birch Mountains over a large area with thin overburden cover where mineralization intermittently outcrops at surface or is intermittently exposed throughout several kilometres of valley walls.

The Resource Study concludes that the Consolidated and Updated Buckton mineral resource is mineralization which has a reasonable prospect for extraction in the future. This resource comprises all Labiche and Second White Speckled Shale resource blocks which are beneath less than 75m of overburden cover, and for which the combined gross value of recoverable contained Mo-Ni-U-V-Zn-Co-Cu-Li-REEs-Y-Th-Sc exceeds the base cut-off of US$10 per tonne relying on the best achieved metals recoveries as reported from the collective of DNI's leaching testwork. Metal prices used are the trailing 2yr, 3yr and 5yr year commodity price averages as tabulated below. The inferred resource is distributed between the Upper and Lower zones as follows (also tabulated separately below):

(a) 2.7 billion short tons (2.5 billion metric tonnes) in the Upper, lower grade, zone hosted in the Labiche Formation ranging 13m-115m in thickness (ultimate thickness of the Labiche Shale at the Property is unknown as near-surface portions of it have been locally scoured away by glaciation). Most of this tonnage was previously reported in the Buckton Labiche Resource Study announced September 12, 2012; and

(b) 747 million short tons (678 million metric tonnes) in the Lower, higher grade, zone hosted in the Second White Speckled Shale Formation ranging 13m-23m in thickness. A 250 million short ton portion of this tonnage was previously reported as the Buckton Initial Maiden Resource in the Buckton Maiden Resource Study and the Buckton Supplementary REE-Y-Sc-Th Resource Study announced October 24, 2011, and January 16, 2012, respectively. The Consolidated and Updated Buckton Mineral Resource Study expands the resource in the Second White Speckled Shale Formation to include additional tonnages of mineralization surrounding the Buckton Maiden resource beneath the Labiche Formation, which were previously excluded from being classified as a resource due to excessive thickness of overlying Labiche cover where the Labiche was previously believed to be waste but was subsequently demonstrated to be a mineral resource in its own right.

Modelling and estimation of the Consolidated and Updated Buckton inferred resource was carried out using 3-dimensional block model based on geostatistical applications using commercial mine planning software MICROMINE (v12.5.4). The model relies on an aggregate of eleven vertical core holes distributed over an area of approximately 15.8 square kilometres, and spaced approximately 240m-2500m apart (averaging 1000m), and was generated using the combined drill hole data derived from drilling campaigns conducted in 1997 (6 holes) and 2011 (5 holes). There were 5 drill lines in the MICROMINE model that ranged in spacing from 670 m to 2 km between sections. Approximately 88% of the mineralized black shale within the foregoing area lies beneath less than 75m of overburden till and meet cut-off threshold criteria for classification as an inferred resource. The mineralized black shale in the area also shows good lateral uniformity for many of the contained metals over large distances across the Property. The spacing and number of holes are considered sufficient for the determination of inferred resources, and extrapolation of grades between the drill holes is supported by statistical variography examined during the Study.

Considering that leaching tests completed by DNI to date on samples from the Labiche and Second White Speckled Shale formations report different recoveries for the metals of interest, the resource modelling treated the two shale units separately. According to the foregoing scheme, the Buckton Zone assay file was composited using MICROMINE into separate sub-domains where the analytical data were assigned to composite sample files comprising: 269 composite samples for the Labiche sub-domain (at 2.2m intervals), 302 composite samples for the Second White Speckled Shale REE-Y-Sc-Th sub-domain (at 0.5m intervals); and 197 composite samples for the Second White Speckled Shale polymetallic sub-domain (at 1m intervals).

Variography was conducted on the composited drill hole data within the Labiche and Second White Speckled Shale domains to produce spherical semivariogram's. Each element was modeled individually to determine the continuity and orientation of mineralization. As a result of the wide hole spacing a parent model block size of 250 m x 250 m x 2 m was chosen for the resource estimate. The block model extents were extended far enough past the mineralized wireframe to encompass the entire domain. The recoverable grades for the metals were translated into a US$ value for each block and sub-block relying on the best metals recoveries achieved per DNI's leaching tests and trailing average metal/oxide prices as noted in footnotes to the above tables, and the values were aggregated into a collective gross recoverable value for each block and sub-block to enable testing against a block value base case cut-off of US$10 per tonne.

While the collective work from the Buckton Zone indicate that none of the metals present in the Buckton Zone occurs in sufficiently high enough concentration to be of economic merit by itself, the metals of interest collectively represent sufficient recoverable gross value on a combined basis to place the resources identified at the Buckton Zone within reach of economic viability provided the metals are efficiently recovered on a combined basis. DNI's leaching testwork has already demonstrated that the metals can be collectively extracted from the shale but clear communication of overall bulk grade has been a challenge considering the polymetallic nature of the mineralization of merit. In the foregoing regard, the Resource Study notes, with concurrence from DNI, that given the absence of a single metal to represent bulk of the overall recoverable value of the mineralized shale, reporting of its overall grade as a traditional "metal equivalent" would be arbitrary and misleading.

Of necessity, the Resource Study has, accordingly, opted instead to communicate overall grade by aggregating the individual gross recoverable values represented by each of the metals of interest into a single gross recoverable total per tonne value to characterize the resource and enable its discussion and testing against a base cut-off for the purposes of resource estimation. The reader is cautioned that disclosure of gross values discussed in this announcement and in the Resource Study does not comply with Section 2.3(1c) of National Instrument 43-101 since the figures are gross and the term may be misleading in the absence of proven production costs. The recoverable gross values are quoted for convenience of communicating overall grade and are otherwise conceptual in nature and do not represent economic worth of the resource being reported from the Buckton Zone. The reader is also reminded that the values are based on recoverable metal grades per bench scale leaching tests and do not imply that economic viability of the recoveries has been determined and they may not reflect actual recoveries which might be achieved in an ultimate mineral production operation.

Polymetallic black shale is an emerging deposit type which has gained recognition over the past decade mainly due to advances in application of bioleaching procedures to extract low grade metals from shale by bulk-heap leaching. Worldwide, there is one active mining operation extracting polymetals via bio-heapleaching and two other scoping stage projects that are exploring/developing polymetallic deposits in black shale. These operations provide the only resource estimation and operating cost guidelines, particularly with respect to base cut-off values, that are relevant to evaluating the mineral resource hosted in the Buckton Zone.

The US$10 per tonne base cut-off used by the Resource Study is considered to be a reasonable benchmark which is higher than cut-offs utilized by recent mineral resource estimates and a scoping study for other open pit mineable poly-metallic black shales in Sweden and Finland as the break-even point and lower cut-off. This base cut-off incorporates operating costs from the only available operation worldwide of bulk mining and bioheapleaching exploitation of a polymetallic black shale deposit, and includes a nominal cost for refining of REEs into final saleable final products relying on estimates from other REE projects. Considering a scenario of possible open pit mining in northeast Alberta along the eastern edge of the Birch Mountains, with potential for a low strip ratio at startup, the likely free-dig nature of the poorly consolidated shale bedrock, the potential for easy access to multiple working faces, the location of the project with respect to access, power and other important infrastructure, the US$10 per tonne base lower cut-off value is considered reasonable for the purposes of mineral resource estimation as a base case cut-off threshold which also captures a relatively continuous mineralized zone with favourable bulk mining configuration.

DNI's leaching testwork demonstrated that the Buckton Zone mineralization is recoverable by a single bulk leaching method from the shale and that REEs and Specialty Metals are incidentally leached from the shale as co-products of leaching of base metals. The Resource Study notes that REEs account for a significant proportion of the recoverable gross value of the resource, especially for Upper zone mineralization in the Labiche shale, and concludes that ultimate economics of the resource are, accordingly, subject to uncertainties of long term REE pricing and viability of demand, the unknown effect of new production on REE markets; and the cost of separating REEs from pregnant leaching solutions once they have been leached from the shale and their refinement into saleable final products. Although the base cut-off of US$10 per tonne used in the Resource Study includes a nominal cost for separation of REEs relying on estimates from other REE projects, a sensitivity analysis was conducted in the Resource Study to investigate sensitivity of the inferred resource to cost fluctuations by testing the resource model against progressively higher arbitrary base cut-offs.

The resource model was iterated and tested at progressively higher arbitrary base cut-offs to determine the commensurate tonnages that can be classified as mineral resources against any given base cut-off. The entire shale package resource model was, accordingly, tested at base cut-offs of US$12, US$14, US$16, US$16.5 and US$17 per tonne. The sensitivity analysis demonstrated that the tonnage and distribution of the shale package is virtually intact between base cut-offs of US$10 per tonne and approximately US$16 per tonne, and that the aggregate gross recoverable value of contained metals exceeds the base cut-off, but that at higher base cut-offs the tonnage of the Upper zone hosted in the Labiche shale rapidly decreases and distribution of resource blocks lose cohesion such that at a base cut-off of US$17 per tonne virtually none of the Upper zone in Labiche shale can be classified as a mineral resource since aggregate gross recoverable value of the contained metals is less than the cut-off.

The sensitivity analysis successfully demonstrates that as the spatial distribution of the Labiche resource decreases, progressively larger portions of Labiche would be regarded as cover waste material to be removed for the purposes of any mining operations to extract the underlying resource in the Second White Speckled Shale Formation. Considering that distribution of the Upper zone hosted in Labiche shale will affect distribution and tonnage of what might be realistically mined from the underlying Lower zone resource hosted in the Second White Speckled Shale, the resource model was tested at yet higher base cut-offs of US$30, US$40, US$50, US$60, US$70 and US$80 per tonne, to simulate a scenario for which the Upper zone hosted in Labiche shale is deemed to be waste and would have to be removed together with the overburden to gain access to the underlying higher grade mineralization in the Second White Speckled Shale. In these iterative scenarios, the Lower zone in the Speckled Shale is the only mineralization of interest and the resource identified within it remains intact between base cut-offs of US$10 per tonne and US$40 per tonne at which cut-off it comprises 265 million short tons (241 million metric tonnes) extending over 5.8 square kilometres and is similar in distribution and tonnage to the Buckton Maiden Resource announced on October 24, 2011. The resource gradually loses cohesion at base cut-offs higher than US$40 per tonne such that at a base cut-off of US$70 per tonne virtually none of it can be classified as a mineral resource since the aggregate gross recoverable value of contained metals is less than the base cut-off.

The Resource Study overall concludes that the per tonne of recoverable gross value represented by the Labiche and Second White Speckled Shale resource is sufficiently higher than the US$10 per tonne base cut-off used by the Resource Study, and sufficiently higher than the related iteration of the resource model at higher cut-offs up to US$16 per tonne, to reasonably conclude that the Consolidated and Updated Buckton mineral resource is mineralization that has a reasonable prospect for extraction in the future.

The Resource Study concludes that the inferred resource announced herein at the Buckton Zone has excellent potential for expansion with further drilling, and recommends implementation of additional exploration at the Buckton Zone, and the Property, to include additional leaching testwork (ongoing) and additional drilling to continue expanding and upgrading the Buckton Zone resource hosted within the Labiche as well as the Second White Speckled Shale Formations. The Resource Study supports DNI's decision to advance the Buckton Zone toward the Preliminary Economic Assessment study (Scoping Study) which is in progress. The Study also recommends that resources reported herein at the Buckton Zone be revised to incorporate results from DNI's 2012 drilling program.

The Qualified Persons in connection with the preparation of the Consolidated and Updated Buckton Mineral Resource Study are Mr. Roy Eccles PGeol, Mr. Michael Dufresne PGeol and Mr. Steven Nicholls MAIG who are independent of DNI. The Qualified Person in connection with this press release and in respect of the Alberta polymetallic black shale projects is Mr. Shahé F.Sabag PGeo, President and CEO of DNI, who is responsible for verification and quality assurance of the exploration information disclosed in connection with the projects and this release.

Ton=short ton; lb=pound; tonne = metric tonne = 1000kg. The 2011 drill core analyses and re-analysis of historic Labiche drill core intercepts included an appropriate number of analytical standards, blanks and duplicates, and no analytical issues were identified. Metal/Oxide commodity prices used to establish bulk recoverable values for cut-off grade thresholding tests are the five year trailing average to October 25, 2012, for Mo-Ni-U-V-Zn-Cu-Co-Li (U consolidated from www.cameco.com; Li from www.asianmetal.com; remaining metals from www.metal-pages.com); the three year trailing average to October 25, 2012, for; La-Ce-Pr-Nd-Sm-Eu-Gd-Tb-Dy-Y (consolidated from www.metal-pages.com); three year trailing average to August, 2011, for Tm (from Montviel Core Zone REE resources study 2011 by SGS Canada Inc.); Th per USGS  Mineral Commodity Summaries 2009-2011, the two year trailing average to October 25, 2012, for Ho-Er-Yb-Lu-Sc (consolidated from www.asianmetal.com). Metal prices vary among various commodity information sources and in all conflicting instances the lower pricing was used.

Analyses by Activation Laboratories Ltd., Ancaster, ON; Analytical results from the 2011 drilling were announced on Jul15/2011, along with details of DNI's analytical quality assurance and quality control parameters. Additional REE and Specialty Metals grades were announced on Dec2/2011. Archived drill core from some of the historic drilling was examined, re-sampled and re-analyzed by DNI as part of its verification sampling program in 2008-2009. All samples from 2011 drilling were re-analyzed for REEs in December 2011 by Activation Labs, Ancaster, ON, by Fusion and Trace Element Fusion ICP (Code 8). Labiche Formation intercepts from archived historic 1997 drill core were re-sampled and re-analyzed by Activation Labs, Ancaster, ON, by  Fusion and Trace Element Fusion ICP (Code 8) for consistency with DNI's more recent data.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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We seek Safe Harbour. This announcement includes forward looking statements. While these statements represent DNI's best current judgment, they are subject to risks and uncertainties that could cause actual results to vary, including risk factors listed in DNI's Annual Information Form and its MD&As, all of which are available from SEDAR and on its website.

SOURCE DNI Metals Inc.