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Mining News: Sold: Turnkey gold mine near McGrath Pacific North West Capital agrees to buy Nixon Fork; high-grade gold mine comes complete with equipment, stockpiles and permits Shane Lasley Mining News
Pacific North West Capital Corp. has agreed to pay $500,000 to acquire an option to purchase a 100 percent interest in a company that owns the Nixon Fork gold mine.
Pacific North West Capital said it paid $100,000 to Mystery Creek Resources Inc., an Alaska subsidiary of St Andrews Goldfields Ltd. upon signing a letter of agreement to the transaction.
The Vancouver, B.C.-based junior has until Feb. 15 to exercise the option. A payment of $100,000 is required on closing of the purchase of the Mystery Creek shares and the balance will be paid in equal installments May 1, July 1 and Sept. 1.
Mystery Creek’s primary asset is Nixon Fork, which is located 56 kilometers, or 35 miles, northeast of McGrath, Alaska. The company operated the high-grade gold mine for nine months in 2007. The company shut down operations in early October of that year to complete additional drilling to better define the resource. In the spring of this year St. Andrew put Nixon Fork up for sale.
Terms of the mine’s sale are subject to regulatory approval and satisfactory completion of a due diligence review by Pacific North West Capital. The company said it intends to complete due diligence by Feb. 15 and establish an appropriate strategy to continue development of the project.
The Vancouver B.C.-based company said it will conduct a comprehensive re-evaluation of mine reserves/resources, metallurgy, mining scenarios, and permitting and a financial analysis of the mine in 2009. These studies will form the basis for a planned re-start of mining operations.
Turnkey gold mine With the purchase of the Nixon Fork Mine, Pacific North West Capital has a turnkey gold mining operation complete with equipment, stockpiles and permits.
The Nixon Fork Mine includes a 200-metric-ton-per-day flotation plant with a gravity gold separation circuit, a sulfide flotation circuit, and a newly constructed CIL gold-leaching circuit. The mine also boasts a fleet of mining vehicles, a power plant, maintenance facilities, an 85-person camp, office facilities, and five aircraft landing strips. The company reports that the mine and equipment are currently winterized and under a care and maintenance regime.
Mining and processing operations at Nixon Fork are fully permitted and bonded. Alaska Department of Natural Resources Mining Section Chief, Rick Fredericksen told Mining News the bonds and permits for the mine are in place and current.
Some 2,100 metric tons of ore is stockpiled at the mine, and about 116,000 metric tons of mill tailings are ready to be processed in the CIL circuit.
Revaluating the resource Though everything is in place to reopen the mine, Pacific North West Capital does not plan to start up underground mining until 2011. Geologist Greg Myers, the company’s vice president of business development, told Mining News that the junior intends to re-evaluate the resource and economics of the project.
“Basically we want to go back into the engineering studies and the metallurgical studies and re-evaluate the resource and the mine plan; and make sure it is on track and makes sense,” Myers said.
Myers said the first thing the company plans to do is compile all the information that has been generated to date and get it put into a three-dimensional model so the company can look at it objectively and decide were more exploration work needs to be done.
St Andrews completed an in-house resource update based on drilling it completed in 2007 and 2008. Pacific North West Capital reports a current reserve of 220,000 ounces of gold at 25 grams per metric ton, and a resource of about 162,000 ounces of gold at 18.6 g/t, both containing about 1.2 percent copper. The company said the current resource/reserve would provide for a nine-year mine life and additional drilling should at least double the resource.
The recent drilling, according to Myers, “was right in the underground mine resource area. We would like to step out a little bit from that and look at the project a little more globally and see if we might be able to expand some of the other target areas and bring those into more of a resource category.”
Pacific North West Capital said it plans to produce a technical report in late 2009 that incorporates the St Andrews’ drill data and with data collected by the company over the coming drill season.
Myers said the company will do an extensive study of the metallurgy in order to better understand the copper and silver potential of the property.
“We definitely want to expand the understanding of the resource and take advantage of the copper that is going to be associated with the mineralized zone.” Myers said. “I am not sure from the work that has been done to date where the silver reports; if it is with the gold, if it’s with the copper, or if it’s something separate. We want to evaluate those three things and make the most of it.”
Reprocessing and placer potential Though the new owner of Nixon Fork does not plan to fire up the mill until 2011, the company hopes to reprocess tailings through the CIL circuit as early as 2010. Myers said metallurgical studies will need to be completed before a decision is made on reprocessing the tailings.
The company also plans to evaluate the property for its placer potential. There was some placer gold produced on the property in the first half of the 20th Century but, according to Myers, no modern placer mining has occurred on the property. Pacific North West plans to complete some trenching and possibly some limited drilling on Nixon Fork’s placer deposits in 2009.
“As far as the placer work, depending on how we go with our permitting to get into some test work in 2009, then the idea would be to expand that into 2010 and, hopefully, have the tailings reprocessing and have the placer into some kind of limited production.”
90 years of hardrock at Nixon Fork Placer gold was discovered in the immediate Nixon Fork area in 1917 and lode gold discovered in 1918 when Yukon-Treadwell Co. and others began working deposits through shafts and open cuts. This work continued intermittently through 1964, reportedly producing 41,440 ounces of gold, 11,282 ounces of silver and 41,440 pounds of copper.
The modern era of Nixon Fork began when Battle Mountain Gold explored the high-grade gold deposit in 1984. Myers was part of the Battle Mountain team that discovered Nixon Fork.
From 1995 to 1999, Nevada Goldfields Inc. operated a high-grade underground gold mine at Nixon Fork that recovered 137,749 ounces of gold and 2.1 million pounds of copper, with additional silver credits. The average production grade was 42 grams per metric ton of gold, with an average production cost of $266 per ounce. The mine was closed due to declining gold prices.
St Andrew Goldfields purchased the mine in 2003. From 2004 through 2008, the major spent about $15 million on upgrades to processing facilities and mine infrastructure at Nixon Fork. During this period, the company conducted 9,381 meters of reserve-resource definition drilling, updated a reserve-resource estimate and completed additional metallurgical testing.
St. Andrew began production at the Nixon Fork Mine in January 2007. During nine months of production through September 2007, workers ran 18,105 metric tons of ore extracted from the upper portion of the 3300 zone of the Crystal deposit through the mill with an average head grade of 17.1 g/t gold. The ore grades came in at substantially less than those outlined in an independent technical report prepared for the mine in October 2006. The report envisioned a proven reserve of 47,000 metric tons at 34.05 g/t gold and a probable reserve of 137,500 at 18.05 g/t gold.
St Andrew said it encountered production problems at Nixon Fork due to what engineers described as the irregular geometry of the mineralized zones of the 3300 ore-body. In October 2007 the miner suspended production, saying it would concentrate on an underground drill program to better define the geometry of the gold resource on the property.
In early 2008 St Andrew decided to sell Nixon Fork and other non-core assets in order to focus on its flagship asset, the Holloway-Holt gold mine, which is located at the eastern end of St Andrew’s land package in the Timmins Mining Camp in northeastern Ontario.
“The decision to sell Nixon Fork reflects our strategy to continue to focus our efforts and resources on bringing our Holloway Holt property into production as soon as possible,” said Jacques Perron, St Andrew president and CEO.
St Andrew completes definition drilling Since then St Andrew has completed 6,930 meters of underground core drilling. According to Steve Teller, who oversaw Nixon Fork for Mystery Creek Resources while it was on care and maintenance, a majority of this program was infill drilling on the 3300 ore-body.
A few exploration holes also were drilled toward the J5A ore-body and intercepted the downdip extension of the known mineralization.
“The Nixon Fork gold skarns are a challenging target, but the reward is high,” Teller told Mining News in May. “During this winter’s drilling program, we had 109 intercepts with grade that exceeded 1 ounce per metric ton, including 61 intercepts in excess of 2 oz/t and 19 intercepts in excess of 5 oz/t.”
Results from the infill drilling represent a better picture of the mineralization in the ore-body.
“We tightened up the definition of the ore-body considerably, as far as knowing exactly where it is and knowing how much is there,” Teller told Mining News Dec. 19.
The nearly 7,000 meters of drilling, according to Teller, changed the configuration of the ore-body. A NI 43-101 compliant resource estimate including this drilling has not been completed.
The company placed Nixon Fork in care and maintenance when the drilling ended in late March.
The bottom line In addition to the $500,000 purchase price, Pacific North West Capital estimates it will take about C$1 million in capital expense to start up the mine, and C$18 million per year to operate Nixon Fork, with annual production totaling 40,000 ounces of gold.
Myers told Mining News that the company estimates production costs will average $460 per ounce of gold.
Much of the initial work being performed, according to Myers, is aimed at trying to bring down that rate.
The company foresees the high-grade gold mine generating an estimated C$5 million per year net annual income, averaged over the mine’s life.
Pacific North West Capital said it is currently expanding its commodity focus to include advanced-stage gold and base metal properties, while continuing to develop its platinum group metal portfolio. The company said the acquisition of the Nixon Fork Mine fulfills this corporate objective.
Pacific North West Capital also reported having about C$7.4 million in working capital and securities.
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