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A small Canadian miner plans to enlist an army of ore-munching bacteria to help it extract base metals from a shale deposit in northern Alberta, embracing a technology that sounds more like science fiction than a promising new mining technique.

Not only is the process already being used in Finland, its proponents say it could one day revolutionize base metal mining by allowing ore to be pulled out of shale deposits that were once impossible to tap.

Toronto-based DNI Metals is counting on so-called bioheap leaching to produce a suite of eight metals, plus rare earths, from its Alberta Black Shale project, located some 900 km (560 miles) north of Calgary.

'There's no rocket science to this,' DNI Chief Executive Shahe Sabag told Reuters ahead of the Prospectors and Developers Association of Canada (PDAC) convention, opening Sunday in Toronto.

'They are bacteria that live on sulfur and iron the way we live on protein and carbs,' Sabag said in an interview before the PDAC gathering, an event that brings investors together with small companies like DNI that need financing.

To extract nickel, zinc and other metals from the shale - a sedimentary rock found in shallow deposits - ore is dug up, piled onto a leaching pad and irrigated with the bacterial mix, which Sabag calls 'bugs.' The tiny organisms chew up the rock and expel the metals as waste. The metals are then piped into a refinery and separated.

SHALLOW OPEN PIT

The technology, proven on the industrial scale in the mid-2000s, makes it possible to mine black shale deposits, previously considered off limits to mineral exploitation.

'We've know about black shales for several hundred years,' said Sabag. 'People have tried to get metals out of them ... but all the traditional techniques we've had for extracting metals from rock don't work on black shales.'

The benefit of shale is the deposits are large and flat, enabling miners to dig a shallow open pit. They are big enough to produce metals for decades, and processing is cheaper than the traditional smelting method, said Sabag.

That said, only a single mine - operated by Finland's Talvivaara - is actually producing metals with bioheap leaching technology. It has faced numerous delays in ramping up to its full rate of 50,000 tonnes of nickel a year since starting production in 2008.

With such a limited track record, the process could prove a hard sell for DNI, which needs $1-billion to get its project going.

'We do have a knowledge gap on the Street, because everyone thinks the capex are too high,' said Sabag, referring the capital costs of the project. 'But a billion-dollar capex to put a project like this into production is nothing.'

Even so, DNI was one of the top-performing junior mining stocks in 2011, and its shares are up 77% so far this year.

The explorer has so far outlined a 250 000 short-ton resource at its Alberta Black Shale project, which contains nickel, zinc, copper, molybdenum, uranium, vanadium, cobalt and lithium, along with rare earths.

With exploration still in its early stages, Sabag expects that resource - an estimate of the available ore - to grow.

'Our dream, at the end of the day, is probably for a 2 or 3 billion tonne deposit,' he said. 'You know the rule in the mining business: Go big or go home.'

GAME PLAN

Located in a region of Canada best known for its oil sands, the Alberta Black Shale project is made up of six large deposits in a land which total 2 720 square km, or nearly the size of the US state of Rhode Island.

The sheer size of the area affected by the operation could raise some environmental flags, especially in light of the controversy surrounding the development of Alberta's oil sands.

'Some people want to call this green mining, I wouldn't go that far,' said Sabag. 'You will disturb trees and plants and flora and fauna, because you are looking at substantive holes in the ground.'

With permitting still far away, the plan for now is to complete a scoping study at the first deposit, known as Buckton, by the end of 2012. At the same time, DNI will conduct drilling to define the other five deposits.

Once the entire resource is outlined, Sabag hopes to sell the project off to a large base-metal producer such as Teck Resources or a consortium of end users.

In the right hands, Sabag thinks Buckton could begin producing within four years, with the other five deposits to follow.

'We can produce a lot of metal over a long, long period of time,' he said. 'So if you're a steelmaker out of China or Korea or Japan, this is exactly the kind of deposit you want to own.'

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