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Vol. 15, No. 35 Week of August 29, 2010
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Juniors pour millions into Yukon projects

Drilling, deep-imaging surveys top strategies as juniors join one major and sole producer in seeking new pockets of mineralization

By Rose Ragsdale

For Mining News

DAWSON, Yukon Territory – Hardrock mining explorers are capitalizing on unprecedented investor interest and going after paying gold, silver, copper-rich porphyry, lead-zinc and other metal deposits here with uncommon gusto this summer.

A few years ago, a multimillion-dollar, single-season exploration program would have been a rare commodity in the Yukon. But this year, at least a half-dozen juniors have joined one major, Kinross Gold Corp., and the Yukon’s only producer, Capstone Mining Corp., in forking over megabucks to poke around this picturesque, mountainous country in search of lucrative minerals. Numerous smaller exploration plays also are whipping up a frenzy of activity on the periphery of the larger projects.

All of the explorers are sinking hard-won cash by the millions into just a few short weeks of claim staking, drilling, prospecting and surveying. And they are carrying out these intense exploration campaigns with a new, almost tangible, sense of urgency that appears to reflect not only the uncertain markets but also a conviction that timing is everything, and now is the time for mining in the Yukon.

Rau discovery excites investors

Atac Resources’ Rau gold project is finally getting attention after many months of flying below investor radar.

Atac recently increased its 2010 exploration budget for Rau to C$15 million to drill 15,000 meters, up from an initial program of C$12.5 million for 12,500 meters.

“Rau is the largest exploration play in Yukon, and arguably in western Canada, with the exception of the Selwyn Project,” said Atac President Rob Carne. “The Yukon is at the forefront of brand-new discoveries and that is part of the reason that the territory is on everybody’s radar screen.”

Another reason the Yukon is drawing industry attention is because very little regional exploration is under way among gold miners.

“The industry is in a bit of quiet desperation, and the Canadian industry is doomed to recycling old showings,” he said.

Atac is one of a small group of exploration companies spawned by longtime Yukon mining consultant Archer Cathro Ltd., which got its start in the 1950s and 1960s working for oil and gas companies.

Bill Wengzynowski, president of Archer Cathro, said his firm and independent prospector Shawn Ryan are the only parties who have carried out significant gold prospecting in Yukon Territory in the past decade.

The Rau Project is situated at the northern edge of the Tintina Gold Belt, a curved swath of intense gold mineralization that stretches from southwestern Alaska through Yukon into northeastern British Columbia. Huge gold deposits, including the 33.5-million-ounce Donlin Creek and the Fort Knox and Pogo gold mines lie within the Tintina belt, but “the geology doesn’t stop at the border,” Carne said.

Atac raised C$22 million in the markets in early August, bringing to C$34 million its total cash in the bank. “All of it is based on the Rau discovery,” Carne said.

The company had five drills operating in three camps on the 1,300-square-kilometer, or about 502-square-mile, property in early August, with an objective of demonstrating that Rau is a multimillion-ounce property.

In addition to work done at the Tiger Zone where it discovered gold in 2008, Atac has identified six new surface gold zones by following up high values from grid and widely spaced reconnaissance soil sampling. The best zones are in a 500-meter-wide belt, which lies 2-5 kilometers along strike to the northwest of the Tiger zone, in and adjacent to the northwest-striking structural corridor. Anomalous soil geochemical values stretch intermittently for about 22 kilometers to the northwest along the projected trace of the structural corridor, which is marked by electromagnetic conductors. Surface rock samples collected from talus or recessively weathered areas assayed between 1.0 grams per metric ton gold and 18.5 g/t gold.

Atac planned an aggressive $12.5 million program of mapping, geochemical sampling and diamond drilling involving at least four drills is under way for the Tiger zone area in 2010, as well as systematic first pass exploration of the rest of the property.

In late July, Atac reported another significant gold discovery at Rau, this time near the eastern border of the property. The junior reported gold mineralization associated with realgar and orpiment within its Sten claim block grading from 1.92 to 12.15 g/t gold along with soil samples grading up to 17.5 g/t gold.

Wengzynowski said he named the new gold discovery Osiris, after the Egyptian god of the underworld in honor of the achievements of Underworld Resources Inc., which was acquired earlier this year by Kinross Gold Corp.

Atac quickly staked another 517 new claims to complete coverage of a 150-square-kilometer area of highly anomalous gold and pathfinder elements in stream sediments and mobilized a fifth drill to test the Osiris target.

When asked if Atac hopes to one day sell the Rau gold project to a major mining company for development, Carne said the junior is focused on finding the gold and creating value for its shareholders, believing that the shareholders will decide what happens to the project.

Golden Predator digs in

“We think the Yukon is the place to be and three years in, we’ve got a lot of years ahead of us,” said William M. Sheriff, chairman and CEO of Golden Predator Corp.

Sheriff said he believes Yukon Territory is in the infancy of a major gold mining boom.

“This is the next Nevada, and it’s the last frontier for gold exploration in a First World country. Placer miners are still getting easy gold. That’s not true for the rest of the world,” he said. “I think over the next 30 years, there will be 100 gold discoveries here. That’s not just conjecture, it’s reality.”

Golden Predator has attracted considerable attention in recent months with the aggressive acquisition of a dozen or so mining projects and additional acreage across Yukon and northern British Columbia, including 750,000 kilometers of claims near the eastern border of Yukon.

Sheriff said the company aims to make its mark as a gold producer focused on the Yukon. Referring to Kinross Gold Corp.’s recent acquisition of the 1-million-ounce-plus White Gold deposit in west-central Yukon, which was discovered by Underworld Resources Inc. in 2008, he said: “Our objective is not to sell to Kinross. Our objective is to be Kinross.”

Golden Predator pulled out the stops this year, spending $7 million to mount exploration programs at six different projects in Yukon. Drill rigs are busy at the Eureka, Clear Creek, Antimony, Brewery Creek and Gold (Scheelite) Dome projects. Drilling also is scheduled at the Cynthia project, acquired in July from longtime prospector Ron Berdahl.

To stretch the budget as far as it can go, Sheriff has embraced the use of reverse circulation drilling in a big way, reasoning that he can get more holes drilled faster with an RC rig during the short, sub-arctic summer than he could using core rigs for every penetration.

“We average one hole a day with the RC rigs, and if we can stay a month, we could make 50 holes,” he said.

Golden Predator also purchased a four-plex in the community of Faro for the bargain basement price of C$69,000 for permanent housing of workers, rather than spend money on temporary camp housing at project sites.

Mike Burke, head of Mineral Services for the Yukon Geological Survey, said the junior’s enthusiasm stems in part from the Yukon being relatively unexplored. At Clear Creek, he said Sheriff got excited when he learned that only 65 holes had been drilled on the property.

“Sixty-five holes don’t mean anything, especially when one-third of them bottoms in 1 gram-per-metric-ton gold,” Sheriff told Mining News. “A similar deposit in Nevada would have thousands of holes.”

Selwyn prepares to drill through the winter

To the east, Selwyn Resources Inc. is grappling with the makings of a super-giant at the Selwyn Project, the world’s largest undeveloped lead-zinc deposit.

“Very few systems in the world are on the scale of 10s of kilometers,” said Jason K. Dunning, vice president exploration at Selwyn. “We’ve drilled it off at 40 kilometers now, and there’s probably 60 to 80 percent of the basin that’s still virtually unexplored.”

Dunning said no words can adequately describe the property. “Everything is open ended. Nothing has been closed off. It’s still open to interpretation and that’s the beauty of it. Even at depth, it’s open in all directions,” he said. “You may hit a fault, and that’s a good thing. Because what you do is step into the next fault panel. And we’ve done this consistently over the years.”

The Selwyn property, formerly known as Howard’s Pass, is very different from anything else in its peer group, according to Dunning.

“Even Red Dog and Century are small compared to what this can be. In terms of metal content, Red Dog is on par. Selwyn has a lower grade than Red Dog but it’s a much larger system because it’s not capped like Red Dog,” he said.

Because of Selwyn’s recent efforts to finalize a C$100 million, 50-50 joint venture deal with China-based Yunnan Chihong Investment Co., the company’s 2010 exploration budget has remained a moving target. The JV is required to produce a bankable feasibility study for the project.

“Since 2005, we’ve drilled almost 94,000 meters of core in 373 drill holes, and we spent almost C$51.5 million directly on exploration,” Dunning said. “If the budget holds true over the next couple of years, we’ll probably spend another C$50-65 million, depending on the level of development and depending on what we have to do to meet that bankable feasibility.”

Two drills were spinning at Selwyn in mid-August, and Dunning said he was preparing to start a third drill.

“I’ve also been given approval to start looking for three more (rigs) to start in September,” he told Mining News. “That’s going to change the equation on what our 2010 budget will be.”

Dunning said the junior plans to continue exploring the property all winter.

“We’re not going to stop. Our camp is fully winterized, and we can drill all year round. We’re set up to go all winter,” he said. “The Don Creek produces water all winter, so there’s no worry about freeze-up. We’ll take a break for Christmas, maybe have a caretaker crew to keep the roads and airstrip open and the camp hot, so we can return in January and ‘pitter-patter, get at ’er.’ ”

Dunning said people thought he was “nuts” when he led a year-round exploration drilling program at the Wolverine Project in southeastern Yukon before Selwyn’s owners sold that project to another Chinese company several years ago.

IP survey IDs deep deposit at Minto

Capstone Mining Corp. undertook a property-wide Titan-24 deep penetrating induced polarization survey early in the 2010 season at the Minto copper-gold-silver mine. Minto is Yukon’s only producing mine. The IP survey identified a number of chargeability anomalies in areas untested by previous drilling, including the Wildfire discovery, one of the strongest and most extensive IP anomalies yet identified at Minto.

Capstone reported additional drilling results Aug. 17 at Wildfire that found high-grade copper-gold mineralization 76-110 meters deep at the deposit. The company said follow-up drilling will continue with two drills on Wildfire, and its 2010 exploration budget for Minto has been increased by another C$1.5 million to allow for systematic drill testing of the prospective discovery and other targets generated from the IP survey.

The addition brings the total exploration commitment to C$7 million, the highest annual exploration budget ever allocated for the Minto Mine and a reflection of the company’s belief that significant opportunities exist for continued increases of mineral resources and mineral reserves on the property.

“The high-grade Wildfire copper-gold discovery at Minto continues to spread,” said Capstone President Stephen Quin. “With an additional C$1.5 million in exploration funds, we are positioned to systematically drill test the entire anomaly, as well as begin the evaluation of a number of other prospective targets identified during the recent geophysical survey,” he added.

Coffee yields gold-rich results

Though well into its second season of exploring the prospective Coffee property in west-central Yukon, Kaminak Gold Corp. still isn’t quite sure how much money it will pour into the project in 2010.

“It’s hard to predict exactly,” Kaminak President and CEO Robert L. Carpenter told Mining News during a tour of the property Aug. 10. “We think we will drill 10,000 to 15,000 meters in 2010, and spend about C$8 million.”

The junior had completed 10,000 meters in 43 holes in early August and based on assay results from the first 24 holes, was enjoying a 75 percent success ratio.

Carpenter said this bodes well for the success of the grassroots project.

“This isn’t something that’s been lying around for 10, 20, or 30 years. There are very few places in the world where you can do that and we’re standing on one of them right now,” he said.

This summer, Kaminak is focusing on five of the 11 targets where it has reported high-grade gold intercepts so far – Kona, Americano, Latte, Supremo and Double Double. On Aug. 11, Kaminak added to another round to a barrage of exciting drill results from the

Coffee Project this summer by reporting assays from drill hole CFD-27 in “Double Double” zone, which returned an intercept of 6.3 g/t gold over 35 meters. The Double Double zone is located 1 kilometer, or five-eighths of a mile, east of the Latte zone and an equal distance south of the Supremo zone.

Like the other four zones, Double Double was discovered through drilling underneath a gold-in-soil anomaly, according to Carpenter.

“This summer we’ll get drill results from five of 11 targets that we have,” he said. “Keep in mind that we have 11 world-class targets on the Coffee property. We think at the end of this summer, if we’ve got the right hits, and we can demonstrate a number of discoveries of gold of different widths over 10, or 15 kilometers of property. We hope that will show there is potential for big deposits here.”

Kaminak hopes to demonstrate that the Coffee property, which lies some 25-30 kilometers, or 16-19 miles, south of Underworld Resources Inc.’s 1-million-ounce-plus White Gold discovery, also hosts a substantial gold resource.

Or as the prospector who staked and optioned both the White Gold and Coffee claims, Shawn Ryan, puts it: “It looks like Coffee could be White Gold’s big brother.”

Carpenter already has visions of the area becoming a major gold camp.

“Our objective here is to put together a world-class asset, and by that we mean 3 million to 5 million ounces of gold,” said Carpenter. “If we didn’t think that geologically we could sit 3 million ounces of deposits here, then we wouldn’t be here. All the footprints and checklists are here for big deposits.”

To truly show the property’s potential, Carpenter said the most promising targets must be thoroughly tested. The work, so far, has revealed that the Supremo zone, where the discovery hole was drilled in 2009, is not one but six different structures, while the largest zone actually is the Americano zone.

“We don’t know if Latte is the best. We don’t know if Supremo is the best. … We’ve drill tested all of them and a number of those holes are at the lab right now,” he added.

Porphyry giant yields silver resource

Another 25 kilometers, or 16 miles, to the southeast is situated the Casino Property, a sprawling giant porphyry deposit previously estimated to contain 8 million ounces of gold, 4.4 billion pounds of copper and 475 million pounds of molybdenum in proven and probable reserves.

Western Copper Corp. envisions Casino becoming a 90,000-metric-ton-per-day mine that would pay off its projected $2.1 billion in capital costs in 3.2 years. The junior hopes to apply for operating permits in early 2011 with the goal of beginning mine production in 2014-15.

Western Copper is spending C$6 million on exploration at Casino this year, bringing to 27,000 meters new drilling on the property since 2008. The drilling has extended the flat-lying shallow copper and gold-enriched supergene zone to a 2.0-kilometer by 1.2 kilometer, or 1.24-mile by .75-mile, area.

In June, Western Copper reported that the average core length of the supergene from current drilling is about 80 meters, and the copper and gold-enriched zone remains open to the north for further expansion.

“We believe the discovery of significant additional near-surface supergene mineralization has the potential to considerably improve the project’s economics,” said Western Copper Chairman and CEO Dale Corman.

Of the 33 holes drilled and assayed during Phase 1 of 2010 exploration, 29 holes returned significant mineralization. Highlights include assay results from hole CAS-073, which returned 114 meters of 0.97 percent copper-equivalent mineralization in the supergene zone and 110 meters of copper, gold and moly mineralization for a copper-equivalent grade of 0.69 percent in the deeper hypogene zone.

“We’re just finishing up the second phase of drilling,” said Jack McClintock, consulting geologist and former global exploration manager with BHP Billiton. “We’ve re-logged 60 percent (90,000 meters) of the old core and as well as evaluated all of the new assays and developed a new geological model.

As a result, Western Copper believes Casino is geologically simpler than previously thought and has a lower stripping ratio.

“Most of the stuff that’s going to come off the hill is going to go straight into the mill with very little waste,” Corman said. “That’s what gives this deposit an advantage over others. It has a very, very low stripping ratio."

With the latest drilling, the company also determined that Casino also hosts a significant silver resource.

“We did the prefeasibility study without silver, Corman said. “This time, it’s in the model at a grade of 1.5-2.0 g/t silver, resulting in about 2 million ounces of silver production per year.

He said the silver output should pay for transportation of concentrates shipped from the proposed mine.

Drills, IP survey target Freegold Mountain’s secrets

At least three other juniors have mounted multimillion-dollar 2010 gold exploration campaigns in Yukon, including Northern Tiger, Victoria Gold Corp and Northern Freegold Corp.

Northern Freegold had spent C$3.5 million on exploration at its huge 200-square-kilometer, or 77-square-mile, Freegold Mountain Project by mid-August and anticipated additional spending for a second phase of its 2010 program.

“We’re doing RC drilling in the Nucleus zone and diamond drilling in the Revenue zone and we’re making a decision about the second phase as we speak,” Northern Freegold Chairman and chief operating officer Bill Harris told Mining News Aug. 14.

“When you have hundreds and hundreds of targets and seven or eight deposits, the question is which one are you going to focus on next?”

Revenue, a potentially 24-kilometer-long copper-gold anomaly, is attracting a lot of the junior’s attention this summer, while Freegold Mountain’s other six or more known gold deposits are getting additional prospecting, soil sampling and geophysics but no drilling this year. As of Aug. 10, Northern Freegold had drilled about 4,400 meters of the 5,500 meters planned at Revenue in the first phase and about 3,000 meters of the 4,500 meters planned at Nucleus.

The Nucleus zone, a 1.5-kilometer-by-1.2 kilometer, or 1-mile-by-0.75-mile, gold deposit with a 1-million-ounce inferred resource calculated in 2009 appears to be perched atop to the side of the much larger Revenue deposit.

But Harris said the junior has much more to learn about the two deposits.

“Most of the drilling at Nucleus was done with 50-meter step-outs. We feel we’ve got that figured out pretty well,” Harris said. “We’re now doing 200-meter step-outs.”

Because of its larger size, the junior began drilling at the Revenue zone with 200-meter step-outs, in fences of holes along a 3-kilometer, or 2-mile, length.

“We’re not sure how these deposits connect. That’s what we are trying to figure out this year,” he said.

Northern Freegold project geologist Debbie James said the Revenue zone is shaping up to be a significant orebody with mineralization dipping to depths of 200-250 meters.

The junior is hoping that results of a Titan 24 deep-imaging IP survey this season will detect any deeper mineralization down to 750 meters.

“If we hit something deep, we will have something pretty significant,” James added.

When asked how Freegold Mountain’s potential gold resource compares with the White Gold and Coffee properties to the northwest where recent gold discoveries have been reported, Harris said the two exploration plays may prove to be siblings, but Freegold Mountain could be the “granddaddy of them all.”

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