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Providing coverage of Alaska and Northwest Canada's mineral industry
August 2009

Vol. 14, No. 35 Week of August 30, 2009

Mining News: Miners explore SW Alaska properties

Full Metal, Kinross acquire gold-silver property near Donlin Creek from Calista Corp.; strategic partners begin drilling prospects

Shane Lasley

Mining News

Full Metal Minerals Ltd. and Kinross Gold Corp. struck a deal with Calista Corp., an Alaska Native regional corporation, to acquire 100 percent of mineral rights to the Russian and Horn Mountain complexes in the Kuskokwim region of Southwest Alaska.

The Russian and Horn Mountain gold-silver targets are located about 25 miles, or 40 kilometers, southwest of the 29-million-ounce Donlin Creek gold deposit being developed by joint venture partners Barrick Gold Corp. and NovaGold Resources Inc.

“Full Metal and Kinross have been researching and prospecting the Kuskokwim area for awhile, and the Russian and Horn Mountain complexes jumped out as amongst the most prospective in the area,” Full Metal CEO and Vice President of Exploration Rob McLeod told Mining News.

The Russian and Horn Mountain Project was generated through a strategic alliance formed between the junior explorer and gold producer in February 2008. The mutually-beneficial partnership tapped Full Metal’s exploration expertise and Kinross’ extensive historical database of mineral properties in Alaska and the Yukon Territory.

“Rob (McLeod) has liked these properties for some time. We like dealing with the Native corporations in Alaska. We find it is a partner of choice,” Full Metal Minerals President Michael Williams told Mining News. “We thought geologically the properties had a lot of merit, and we wanted to put them in the Kinross strategic alliance.”

Russian Mountain

The strategic partners recently started a 2,000-meter core drilling program. The 10- to 15-hole drill program will test multiple targets, primarily at Russian Mountain.

“This is the first time that these two areas have been drilled, so it’s first-pass-reconnaissance-type-drilling, testing multiple targets on wide drilling centers. We’ll look for width and strike potential, as well as gold and silver grades of the mineralized prospects,” McLeod explained.

Surface mapping, soil sampling and ground geophysics are also being completed to identify future drill targets.

Mineralization in Russian Mountain consists primarily of several intrusive hosted zones of gold-silver-copper-arsenic. Six prospects are currently recognized on the Russian Mountain project; three historic (Owhat/Louise, Headwall, and Mission Creek) and three recently identified by Full Metal and Kinross (Bits, Half-Day, and Mac).

There is also evidence for additional mineralized zones along the ridges and talus slopes of Russian Mountain that lack significant exposure. Full Metal reports that mineralized zones that measure 1.5 meters to 10 meters wide have been traced for 600 meters along strike before disappearing beneath the talus, and float material from the mineralization can be found in the loose rocks for another 2,000 meters, suggesting that the mineralization continues under cover.

A grab sample collected from a pit at the Headwall prospect ran 9.28 grams per metric ton gold, 428 g/t silver and more than one percent copper.

The Owhat, Bits, Headwall, and Mission Creek prospects all consist of early zones of tourmaline quartz that are cross-cut by pods of massive arsenopyrite and/or chalcopyrite.

Horn Mountain

Horn Mountain is a volcanic-plutonic complex located 14 miles, or 23 kilometers, southwest of the Village of Crooked Creek, with mineralization similar to Russian Mountain.

A previous grab sample taken from the Saddle prospect, a 2-kilometer-long zone of gold-silver-copper-arsenic mineralization at Horn Mountain, returned grades of 27.45 g/t gold, 769 g/t silver and more than one percent copper.

Mineralization at Saddle occurs within multiple northwest trending zones of tourmaline-quartz veining and within breccias of up to 30 meters wide that include weathered sulfides. The junior says cross-cutting relationships among the veins indicate multiple hydrothermal events.

The explorer also has identified a north-south trending zone of anomalous mineralization 2,500 meters south of the Saddle zone, along the eastern ridge of Whitewing valley. Multiple samples grading up to 9.06 g/t gold, up to 769 g/t silver and up to 0.23 percent copper are noted over a 4-square-kilometer, 988-acre, area. Full Metal said combined, the two zones at Horn Mountain create a 5,500-meter-by-2,000-meter north-south trending prospective area.

Strategic alliance

Full Metal and Kinross have revised the terms of their alliance. The new agreement outlines a budget of US$1.5 million for exploration in Alaska, where Kinross will fund US$1 million, and Full Metal funds US$500,000. The junior has issued a promissory note for US$500,000 due in July 2010 to the gold producer. Full Metal has the option to repay Kinross in cash or issue shares for the full amount.

The Toronto-based major will have a 60 percent interest in the alliance and the Vancouver-based junior will hold the remaining 40 percent interest. The first US$3.0 million on any given property shall be funded on a 60/40 pro-rata basis. Kinross will have the option to increase its interest to 75 percent following the initial US$3 million by solely funding the next US$10 million in exploration expenditure.

“Kinross has established themselves as the premier partner for junior companies exploring for gold, not only with Full Metal, but multiple other excellent junior companies they’ve partnered with. They have an excellent technical team and knowledge of Alaska gold deposits, and have a very hands-on management team from the top on down,” McLeod said.

Calista agreement

Full Metal,on behalf of the strategic alliance, entered into a mining exploration license letter agreement with Calista. The companies have until the end of the year to enter into a comprehensive mining lease agreement.

“The (Calista) Lands and Resource Department has been great to work with,” McLeod said. “Their technical and scientific knowledge of the area is excellent. They are very experienced in mineral exploration through the ongoing work at Donlin Creek.”

Under the terms of the agreement, Full Metal must incur US$3.5 million in exploration expenditures over seven years and pay US$525,000 in advanced royalty payments over seven years. The junior has agreed to spend US$250,000 on exploration and pay US$70,000 during the first year.

After the first seven years, Full Metal will pay annual US$150,000 advanced royalty payments until the start of commercial production. Upon commencement of commercial production, Full Metal will pay a 1.5 percent net smelter returns royalty for precious metals, and a 1 percent NSR for base metals until commercial payback is achieved, or for five years, whichever comes first. Afterward, the company will pay a sliding scale NSR for precious metal ranging from 2 percent if the price of gold is less than US$600 per ounce, escalating to 4 percent if the price is greater than US$1,000 per ounce. After payback, a 3 percent NSR will be payable on base metal production. Additionally, the junior will make annual US$7,500, increasing to US$10,000, scholarship donations over the life of the lease agreement.






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