From a Texas oilman discovering rich mineral prospects at Tetlin while investigating the natural gas potential of these Native owned lands to a royalty company setting aside its business model to get in on the ground floor of what is shaping up to be a multimillion-ounce deposit of high-grade gold lying alongside the Alaska Highway, Contango Ore Inc. is adding some intriguing new entries to the annals of Alaska geology.
The latest chapter of the Tetlin story includes a US$11 million exploration program – likely the largest such program in Alaska this year – that aims to prove that the Peak deposit and North Peak zone are actually one large continuous deposit of high-grade gold-copper-silver mineralization.
This robust exploration campaign is being funded by Royal Gold Inc., which is well on its way to earning up to a 40 percent interest in Tetlin by investing up to US$30 million in this expansive and still underexplored project by October 2018.
Finding Peak
Contango Ore President and CEO Brad Juneau was not looking for gold when he ventured into Alaska in 2008. Instead, his privately held company, Juneau Exploration L.P., was investigating the natural gas potential of a large land package owned by the Tetlin Village Council, an Alaska Native group.
Juneau’s exploration of Tetlin did not turn up much in the way of natural gas potential, but the Texas oilman was convinced this roughly 675,000-acre land package was prospective for more solid minerals, such as gold and copper.
To confirm his hunch, Juneau set out to find a geologist familiar with Alaska and willing to take a look at this geologically unknown property. While dubious that an important mineral deposit was hiding in plain sight, Fairbanks-based geologist Curt Freeman agreed to take a look at the property.
It did not take long for Freeman and his team at Avalon Development to get excited about the discovery potential of this enigmatic property. Over the next couple of years, Avalon and Contango Ore identified numerous precious and base metal targets across what is now a roughly 774,000-acre land package made up of the original lands that Juneau leased from Tetlin Village and adjoining State of Alaska lands that the Texas-based company staked to cover similar prospective lands to the west.
While the property turned out to be rife with prospects worthy of serious geological investigation, by 2012 the search was narrowed to a zone in the heart of the Tetlin lease named Peak, after co-founder and original CEO of Contango Ore, Kenneth Peak.
By the end of the 2013 exploration season, 6 million metric tons of indicated resource averaging 3.46 grams-per-metric-ton gold, 11 g/t silver and 0.25 percent copper had been identified at Peak. Additionally, the resource calculation published early in 2014 included 3.9 million metric tons of inferred resource averaging 2.07 g/t gold, 14.28 g/t silver and 0.23 percent copper. In total, this equates to 1.2 million oz. of gold when you calculate in the value of the copper and silver.
As it turns out, Peak is a unique type of skarn deposit that was formed when metal-laden magmatic fluids came in contact with carbonate-enriched sandstones, causing the metals to quickly drop out and result in high-grade concentrations of gold and copper suspended in acidic fluids.
Attracted by the growth potential of the high-grade gold-copper-silver deposit resulting from this process, along with prospects for discovering other similar deposits across the district-scale land package, Royal Gold agreed to become an active partner in Tetlin exploration early in 2015.
Peak Gold, the resulting limited liability joint venture forged between Contango Ore and Royal Gold, completed US$6.8 million of exploration in 2015, a program that expanded the breadth and depth of the Peak deposit as well as discovering Peak North, a seemingly parallel zone of mineralization with similar grades and thicknesses about 250 meters to the north.
“We really like the Royal Gold people, and we really like the joint venture and how it is functioning,” Juneau told Mining News in May. “They have done everything they said they would do, and are very straightforward and open.”
The Contango Ore CEO said Royal Gold’s contribution to Tetlin goes beyond the nearly US$20 million the Denver-based royalty company will have invested in the project by the end of 2016.
“The folks at Royal Gold have definitely made a material impact, both with their capital and their work,” he said.
Making the connection
Peak Gold got an early start on 2016 exploration by kicking off the first-ever winter drill program at Tetlin in February, a program focused on drilling at and around the Peak and North Peak zones.
Using a single rig, the road-supported winter program completed 4,040 meters of diamond core drilling in 19 holes.
“We continue to be impressed with the efficiency of the drilling operations, as we are seeing significant improvements in the cost per foot drilled, which stands currently at approximately $115 per foot,” Juneau continued. “In addition, the number of holes that encounter skarn material, a prerequisite for finding gold in this area, has improved such that most holes find this type of mineralization.”
The partners had budgeted US$4.4 million for the first phase of 2016 exploration, but between the efficiency of the program and an early spring, only US$1.9 million was spent before breakup.
Winter drilling at North Peak, a deposit not included in the resource but extensively drilled in 2015, continued to return good results:
•TET16192 cut six mineralized intercepts at North Peak, including 13.27 meters averaging 49.19 g/t gold, 4.5 g/t silver and 0.035 percent copper from a depth of 78.5 meters;
•TET16204 cut three mineralized intercepts at North Peak, including a silver-rich 1.82-meter zone averaging 16.34 g/t gold, 328.4 g/t silver and 0.157 percent copper from a depth of 60.95 meters; and
•TET16206 cut 43.43 meters at the North Zone averaging 3.6 g/t gold, 2.08 g/t silver and 0.108 percent copper from a depth of 78.5 meters.
•The most intriguing and potentially the most important intercept came in hole TET16210. Drilled about 200 meters southeast of North Peak and 200 meters northeast of Peak, TET16210 cut two mineralized intercepts, including 43.96 meters averaging 3.28 g/t gold, 30.6 g/t silver and 0.402 percent copper.
Drilled in a zone dubbed Connector, this final hole of the winter program tested an idea that Peak and North Peak may be two parts of a continuous band of skarn mineralization.
Given the grades and thickness of the mineralization are similar to the other Peak zones, the geological model seems to hold up.
“The winter drilling program was successful in expanding the known limits of both the Peak and North Peak zones, and perhaps most importantly found new, significant mineralization in its first drill hole in the Connector Zone that may lead to a better understanding of the relationship between Peak and North Peak and possible further expansion of the mineral system,” explained Juneau.
New entries
As soon as the snow melted and the ground dried, the Peak Gold partners set out to further test their idea that the Peak, Connector and North Peak zones link up to form a roughly 2,000-meter arc of contiguous high-grade skarn mineralization. This would be roughly three times the footprint of the Peak deposit outlined in a resource estimate calculated in 2013.
On June 27, Contango Ore released results from 11 more holes drilled at North Peak and West Peak, a zone immediately west of the Peak deposit.
Highlights from North Peak include:
•TET16211 cut four mineralized intercepts, including 10.31 meters averaging 3.5 g/t gold from a depth of 16.11 meters;
•TET16220 cut three mineralized intercepts, including 26.03 meters averaging 4.67 g/t gold from a depth of 30.2 meters; and
•TET16221 cut four mineralized intercepts, including 17.92 meters averaging 8.23 g/t gold from a depth of 21.61 meters.
All three highlighted intercepts were to the southeast of North Peak, in the direction of the Connector zone.
Highlights from West Peak include:
•TET16218 cut five mineralized intercepts, including 15.01 meters averaging 7.1 g/t gold from a depth of 191.47 meters; and
•TET16219 cut two mineralized intercepts, including 9.9 meters of 1.37 g/t gold from a depth of 37.65 meters.
These holes represent the most northwesterly drilled at Peak-West Peak and other holes are planned further northwest during the second phase 2016 program at Tetlin.
“With the new drill-hole data, we are continuing to find significant thickness and impressive grades of gold,” Juneau commented. “Our immediate goal is to extend the known limits of the deposits we have found, and to provide enough information to provide reliable data on the continuity of the gold distribution in each area.”
The results from this year’s drilling and the more than 14,000 meters of drilling completed in 2015 is anticipated to be included in an updated resource estimate to be calculated after the phase 2 drilling is complete. Considering that drilling has expanded Peak at depth and the lateral extension of the skarn mineralization beyond the deposit, a significant increase in resource should be expected.
Prospecting, meanwhile, continues to identify and prioritize drill targets beyond Peak.
“We are continuing our surface recon program and may carry out additional soil geochemical sampling work to develop new drilling targets this summer” Juneau said. “Our cumulative drilling from 2011 through the present has tested less than one percent of the acreage that we currently have under lease.”
Given the large number of prospects across the huge Tetlin property with geochemical and geophysical signatures similar to Peak that have yet to be drilled, it is likely that at least one of these future drill targets will be the topic of Contango Ore’s next entry in the annuls of Alaska geology.
Or as Juneau put it when Mining News asked about the future of Contango Ore, “I see no reason to do anything different.”
Considering that the Contango Ore share price has rocketed from a low of US$2.43 in February to US$13.49 on June 29, the market seems to agree that staying the course is good policy.
