Freeman report: Alaska mining at pace not seen in more than five years

As anyone can tell you who has tried recently to locate geologists, drill rigs and helicopters, Alaska is not the place to search for any of these commodities.

Mineral exploration and development in Alaska is clipping along at a pace not seen in more than five years and in the process, these activities have sucked up just about all of the people, rigs and aircraft in the state.

Exploration and development projects are spread from Nome to Ketchikan, the Brooks Range to Iliamna.

The metals being sought cover the period table and with good reason - metals prices remain strong and stable and demand curve forecasts look promising.

The only downer so far this season has been a plague of wildfires raging across Interior Alaska which have threatened the Pogo mine site, temporarily closed the Fort Knox operation and prevented fixed wing and helicopter support from reaching field programs over an area the size of Texas.

With the monsoon season approaching the fires will go out and the drill masts will start sprouting again as Interior tries to catch up with the rest of the state.

Western Alaska

St. Andrew Goldfields Ltd. said that in anticipation of the mine re-start, it has begun the process to obtain an Environmental Protection Agency water discharge permit for its Nixon Fork gold-copper property near McGrath. The company expects to complete baseline work for the permits this fall and hopes to have the permit in hand by the spring of 2005.

The company also indicated that it plans to re-treat some of the former operating mine's tailings because newly installed mill recovery equipment should be able to recover significant gold and copper from existing tailings. Auger drilling in the existing tailings pond has indicated grades ranging from 0.16 ounces of gold per tonne to 0.9 ounces per tonne. Preliminary metallurgical test work has indicated up to 36 percent of this gold resource could be recovered by the improved gravity circuit. Up to 80-90 percent of the remaining gold may be recovered by the proposed metallurgical process that will be used to treat future underground ore.

The company also announced results from 8,000 meters of exploration drilling on the C3000 and C3300 zones where new drilling succeeded in extending mineralization an additional 60 meters below previously mined levels.

Results from the C3000 area included hole N04U011 which returned 3 meters grading 46.9 grams of gold per tonne, hole N04U014 which returned 1.5 meters grading 14.3 grams of gold per tonne, and 2.2 meters grading 51.5 grams of gold per tonne.

Drilling results in the C3300 area included hole N04U027 which returned 8.5 meters grading 27.1 grams of gold per tonne and 6.7 meters grading 34.7 grams of gold per tonne, hole N04U028 which returned 4 meters grading 46.2 grams of gold per tonne; hole N04U030 which returned 11 meters grading 79.3 grams of gold per tonne, hole N04U036 which returned 5.5 meters grading 299.5 grams of gold per tonne, hole N04U043 which returned 4.4 meters grading 71.6 grams of gold pertonne, hole N04U049 which returned 10.1 meters grading 74.5 grams of gold per tonne and hole N04U056 which returned 10.4 meters grading 69.4 grams of gold per tonne.

The underground exploration program is expected to continue through year-end and is targeted to add an additional 120,000 tonnes of material to current indicated resources of 69,000 tonnes grading 32.4 grams of gold per tonne or 71,900 ounces of gold. An additional 76,000 tonnes grading 26.4 grams of gold per tonne or 64,400 ounces is classified as an inferred resource.

Northern Dynasty Minerals said it had raised additional capital to be used to advance its Pebble copper-gold project near Iliamna. The C$33.5 million program planned for 2004 has three main components: diamond drilling to convert the currently outlined inferred mineral resource to measured and indicated categories; to advance project engineering for completion of a bankable feasibility study in 2005; and to conduct environmental and socioeconomic studies meeting the requirements for a federal Environmental Impact Statement as well as other state and federal permits.

Four diamond drill rigs currently are working on the project and additional drilling capacity is being sought. By mid-June the company had completed 22,000 feet of the planned 130,000-foot program for 2004. In addition to resource development, some of this drilling is directed toward testing sites for tailings impoundment and surface facilities and to obtain rock quality characteristics for pit planning.

Liberty Star Gold said four priority targets have been identified by airborne magnetics surveys conducted earlier this year on its Big Chunk copper-gold property near Iliamna. The four magnetic anomalies will be the subject of immediate ground follow-up. In addition, a detailed satellite imagery analysis has used the signature of the adjacent Pebble deposit alteration to identify three additional exploration targets on the Big Chunk property. An extensive ground geochemical program over these intended targets and surrounding areas is under way.

Eastern Interior

Kinross Gold said first quarter 2004 results from its Fort Knox-True North operations include 75,980 ounces of gold produced at a total cash cost of $290 per ounce compared to 91,214 ounces of gold at a total cash cost of $260 per ounce during the first quarter of 2003. Mill throughput for the quarter averaged 35,750 tonnes per day at an average grade of 0.81 grams of gold per tonne. Recovery was down slightly at 81 percent and total operating costs were $376 per ounce.

Although production was down over last year's first quarter production rates, the planned suspension of mining at the True North pit and expected lower than average grades meant that first quarter gold production was slightly ahead of planned rates and total costs were 6 percent below planned levels. The mine continued its planned pit expansion that should bring an additional 1 million ounces of gold into the mineable category over the next several years. Due to curtailed production from True North total 2004 gold production from Fort Knox is estimated at 340,000 ounces at a cash cost of $220 per ounce.

Mother Nature has accomplished what low gold prices could not: shut down Kinross Gold's Fort Knox gold mine! Two particularly virulent wildfires have been raging through the Fairbanks dstrict and in late June Alaska Division of Forestry officials closed roads and issued an evacuation order for a large area north of Fairbanks that included the Fort Knox mine. The mine took steps to slowly shut down the 40,000 tonne per day operation and leave a care and maintenance crew on-site. All equipment that could be moved was clustered in the open pit where the likelihood of fire damage was considered minimal. The shut down lasted only a few days but proved once again who is REALLY in control.

Freegold Ventures Ltd. said it has concluded an agreement with Nautilus Alaska Inc. to acquire Nautilus' rights to a 20-year lease on the Tolovana gold property adjacent to Freegold's Golden Summit project in the Fairbanks district.

Previous drilling on the Tolovana property intersected disseminated and high grade gold values in intrusive and associated metamorphic rocks including hole 96-26 which returned 10 feet grading 1.488 ounces of gold per ton and hole 98-01 which returned 800 feet grading 0.021 ounces of gold per ton and 110 feet grading 0.064 ounces of gold per ton.

Mineralization remains open to the east, west and to depth.

Exploration in the Tolovana area is expected to commence in July.

Under the terms of the agreement Freegold will assume all of Nautilus' obligations under the lease, which include making annual payments ranging from $1,000 to $1,500 per month for the duration of the lease. The property is subject to a sliding scale net smelter return royalty ranging from 1.5 percent if gold is below $300 per ounce to 3 percent if gold is above $400 per ounce. In addition, Freegold has made a cash payment of $7,500 on signing and will issue 400,000 shares on regulatory approval and, during the first five years of the agreement, an additional 200,000 shares within 30 days of a minimum 200,000 ounce mineral resource being calculated on property.

Teryl Resources Corp. said it has acquired the Fox Creek prospect adjacent to its West Ridge property in the Fairbanks district. Previous work at Fox Creek included one reverse circulation hole drilled by Cyprus-Amax in 1995 to a depth of 255 feet along the schist-granite contact. A 30-foot zone from 65 to 95 feet averaged 0.03 ounces of gold per ton and was associated with elevated molybdenum and arsenic.

Terms of the acquisition agreement include $10,000 on signing and on each anniversary date. The owner retains a 3 percent net smelter return royalty which Teryl has an option to purchase for $1,000,000 prior to the date of production or $1,500,000 after the production date. Exploration plans for the property were not disclosed.

The biggest news of the month came in early May when Teck Cominco Ltd., Sumitomo Metal Mining Co. Ltd. and Sumitomo Corp., the participants in the Pogo Joint Venture, said the EPA permit appeal filed by Northern Alaska Environmental Center had been withdrawn and construction of the mine could proceed. Alaska Gov. Frank Murkowski, EPA representatives, Alaska Department of Natural Resources representatives and representatives of the mine owners and the center held marathon meetings with a mediator before coming to terms on and agreement calling for increased oversight at some parts of the mine in exchange for the center's withdrawal of their appeal.

Prior to settlement of the appeal about 160 workers had been laid off from the construction sites along the proposed 49-mile access road and at the mine site itself. Shortly after the settlement was announced, workers were rehired and construction work started anew, however the cost of the shutdown will not be known for some time and the damage the appeal did to the Alaskan mining industry will be felt for years into the future.

The companies indicated that all major project permits have been received and full scale project construction was resumed in early June but curtailed in late June due to large wildfires burning due west of the mine which threatened personnel and equipment working on the project. This fire and several others have disrupted mineral exploration throughout Interior Alaska due to heavy smoke, high winds and extremely dry conditions.

Rimfire Minerals increased its landholdings around the Beverly, Boundary and SE Surf properties in the Goodpaster district southeast of the Pogo deposit. Rimfire also said it had signed an option agreement with AngloGold USA Exploration on the Beverly property. Previous exploration at Beverly was limited to reconnaissance-scale prospecting, mapping, airborne geophysics and soil sampling. Results include a 1,000 meter by 1,000 meter gold and pathfinder soil anomaly, strongly anomalous silt samples (to 1,020 parts per billion gold) and float boulders assaying up to 2.4 grams of gold per tonne.

Under terms of the agreement, AngloGold may earn a 50 percent interest in the joint venture by spending $1 million and paying Rimfire $200,000 in staged cash payments over four years. AngloGold may increase its interest to 70 percent by incurring an additional $600,000 in exploration expenditures. AngloGold also agreed to make cash payments totaling $75,000 at certain exploration milestones as required by an underlying purchase agreement. Rimfire may also elect to have AngloGold, for an additional 5 percent participating interest, carry the costs required to bring the property to commercial production. Immediate exploration plans were not released.

Alaska Range

Nevada Star Resources announced plans for 2004 exploration on its MAN project in the central Alaska Range.

The company plans on focusing its exploration work on the northern sections of the MAN property, in particular, the Canwell, Rainy, Eureka, and Broxson areas.

Work to be performed will include geophysics (3-D magnetic-inversion, universal time-domain electromagnetics and max-min electromagnetics), and rock and soil sampling.

Groundwork is scheduled to start in June followed by a 2,000 meter reverse circulation drilling program in August.

The southern section of the MAN project is under joint venture with Anglo American Exploration (Canada) Ltd., who will perform exploration independent of Nevada Star's efforts on the remainder of the project.

Full Metal Minerals Ltd. said drilling has begun at its Gunsite copper-gold project in the Talkeetna Mountains.

Four to six diamond drill holes totaling 750 meters are planned as an initial phase.

Underlain by a Cretaceous dioritic batholith, the property hosts intrusive hosted copper-gold mineralization in subhorizontal fractures and veins over an area of at least four square miles.

Mineralization consists of both structurally controlled and disseminated porphyry-type copper-gold mineralization.

Four areas of high-grade copper-gold mineralization are present on the property.

Two of these zones, Prescott Point and Prescott West, will be drill tested.

The Prescott Point showing contains up to 10 percent disseminated bornite and chalcopyrite in diorite.

Twelve samples taken by previous operators across a width of 7.4 meters averaged 1.5 percent copper and 3.4 grams of gold per tonne.

A grab sample taken from outcrop at the heart of the Prescott showing where the sulfides are dominantly bornite assayed 4.38 percent copper and 6.0 grams of gold per tonne while a 7.4 meter chip sample assayed 2.3 percent copper and 3.4 grams of gold per tonne.

The Prescott West showing area occurs approximately 300 meters west of the Prescott Point showing and extends to the west for an additional 1,400 feet. A 60 meter high cliff face exposes the highest density of mineralized fractures and quartz veins found on the property and is commonly stained green from malachite mineralization. A grab sample taken from an eight-inch quartz vein in this area assayed 2.81 percent copper and 3.0 grams of gold per tonne.

Canalaska Ventures Ltd. said final approval has been received from the TSX Venture Exchange on the proposed acquisition by Freegold Ventures Ltd. of Canalaska's Rainbow Hill project in the Valdez Creek district.

Under the terms of the agreement, Freegold may earn up to a 50 percent interest in the Rainbow Hill project by incurring exploration expenditures of $2 million over six years, making cash payments of $160,000 over four years, and issuing 300,000 shares over four years.

Freegold may increase its interest to 60 percent by completing a positive feasibility study, and to 65 percent by placing the project into commercial production.

The Rainbow Hill project is upstream from placer gold producing streams which have produced more than 500,000 ounces of gold since the early 1900s.

The Rainbow Hill project is centered on Gold Hill and Lucky Hill where most of the known lode gold occurrences of the district are found.

Immediate plans for the project were not released.

Alaska newcomer MAX Resource Corp. said drilling has commenced at its Gold Hill project south of the Denali Highway in the eastern Valdez Creek district. The initial phase of the diamond drilling will test high-grade mineralization encountered in prior drilling by Amax and General Crude Oil. The program will consist of from four to seven diamond drill holes planned to intersect values that included 1.5 meters of 15.0 grams gold per tonne, 1.5 meters of 8 grams gold per tonne, 1.5 meters of 22.9 grams gold per tonne, 1.2 meters of 15.6 grams gold per tonne and 1.10 meters of 54.3 grams gold per tonne.

Values of 8.6 parts per million of gold were found by the U.S. Bureau of Mines in a regional rock sampling program.

This area will be sampled and mapped to find the extent of these high-grade surface samples.

The mineralization on the Gold Hill prospect is related to intrusive events which occurred on Gold Hill and nearby West Hill.

The mineralization occurs as disseminations and on fractures and appears to be structurally controlled.

The alteration and mineralization occur over an area of at least two square miles.

MAX recently staked a 1,659 hectare area west of the Gold Hill property that encompasses areas of outcrops containing high gold grades that will be explored during the drill program.

Welcome to Alaska MAX Resources!

Northern Alaska

Little Squaw Mining Co. said results of a geological evaluation of the Little Squaw gold property indicate the Mikado, Eneveloe, Summit and Little Squaw veins are parallel, low-sulfide orogenic quartz vein deposits that have potential to host significant high-grade gold resources. In addition, more than 20 other poorly explored gold prospects exist on the project. The veins are up to four miles long and up to 400 feet wide. The report also recommended that potential for up to 300,000 ounces of placer gold exists in lower Big Creek and Little Squaw Creek. Plans for future work were not announced.

Silverado Gold Mines Ltd. announced results of drilling activities at the Mary's Bench East deposit at its Nolan gold project in the Brooks Range. The drilling consisted of 79 reverse circulation drill holes, 22 of which outline an S-shaped placer gold deposit approximately 300 feet long by 50 feet wide. The holes yielded results ranging up to 1.022 ounces of gold per bedrock square foot. Individual holes returned grade of up to 1.022 oz/bsf (Hole 15). The average grade indicated by drilling was 0.06 oz/bsf, which compares favorably with past mining recoveries on the benches at 0.04-0.05 oz/bsf.

The gold-bearing gravels are 30 to 50 feet below surface and are accessible to extraction by surface mining. Additional placer and lode exploration work is planned for the summer. The company also said lode exploration had begun above Archibald Creek and the Buried Channel where past placer mining has been conducted. Surface geophysics and overburden drilling will be conducted to help target later reverse circulation and/or core drilling in the area.

Southeast Alaska

Kennecott (70.3 percent) and Hecla (29.7 percent) announced first quarter 2004 production from the Greens Creek mine on Admiralty Island. The total cash cost per ounce of silver at Greens Creek for the quarter was 98 cents, a whopping 41 percent decrease over first quarter 2003 costs of $1.67 per ounce. The average grade of ore mined during the quarter was 16.69 ounces of silver per ton. During the first quarter the mine produced 2,505,775 ounces of silver, 22,680 ounces of gold, 5,802 tons of lead and 18,287 tons of zinc.

Total production costs for the quarter were $3.39 per ounce of silver produced versus $4.39 per ounce for the first quarter of 2003. The company continued its planned $1.9 million, 40,000 foot surface exploration drilling program, most of it in prospective areas west of the mine. An additional 40,000 feet of drilling, budgeted at $2 million, will be drilled from existing underground workings.

Coeur d'Alene Mines said the Alaska Industrial Development and Export Authority received legislative approval to issue bonds of up to $20 million to finance the acquisition, development, improvement and construction of port and related facilities at Slate Creek Cove and Cascade Point in Berners Bay in southeast Alaska. These proposed facilities would facilitate the access to planned mine operations at Coeur's Kensington mine.

The company also said its draft environmental impact statement and other state and federal permits were released for public comment in late June.

The company said results from a revised feasibility study using a new geologic model have updated the property's mineralized material inventory, indicating the opportunity for a 50 percent increase in mine life beyond the initial 10-year estimate. This effort identified higher-grade mineralized material surrounding the main Kensington vein system and includes an estimated 2.4 million tons measuring 0.302 ounces of gold per ton.

Freegold Ventures and Pacific North West Capital said Lonmin Plc has elected to proceed with the 2004 exploration program at the Union Bay platinum project north of Ketchikan. The 2004 exploration budget is set at $1.2 million and will be 100 percent funded by Lonmin. Exploration began in early June with a detailed geological mapping and sampling program and an airborne magnetic and electromagnetic survey. A 9,000 foot core drilling program will begin in mid June.

The initial drill program will target the Continental and Chevelle zones where rock sampling in 2003 returned values ranging from 1 to 14 grams platinum per tonne. The mineralization is hosted by rock types similar to those previously reported at the North and Jaguar Zones, which lie five kilometers to the east. In addition, a separate zone of copper, platinum and palladium bearing sulfides was discovered at Cannery Creek on the western side of the project. The zone remains open to the north and east.

Bravo Venture Group Inc. announced initial drilling results from its Woewodski Island project in southwest Alaska.

The company completed its initial 1,557-meter, nine-hole drill program on three of 10 targets now identified on the 77 square kilometer property.

Assay results are now available for the first three holes of the first-ever drilling at the Mad Dog target.

Significant drill intervals include 5.3 meters grading 437 grams of silver per tonne, 3.79 percent lead and 18.45 percent zinc in hole MD04-01, 17 meters grading 223 grams of silver per tonne, 0.97 percent lead and 11.27 percent zinc in hole MD04-01, 2.3 meters grading 131 grams of silver per tonne, 0.59 percent lead and 15.98 percent zinc in hole MD04-02 and 1.8 meters grading 361 grams of silver per tonne, 3.78 percent lead and 10.95 percent zinc in hole MD04-03.

Geologic interpretation suggests that MD04-01 drilled very close to a vent area, with MD04-04 (assays pending) intersecting an up-thrown block on the west. Significant mineralization should continue to the south and southwest under Mad Dog Island, down dip of current drill holes. Drill results for the final hole at Mad Dog, three holes at the Lost Lake and two holes at the East Lake targets are expected over the next few weeks. The company indicated that field work is continuing at Woewodski, including additional sampling of younger shear-hosted "blue quartz" veins, where several initial grab samples contain plus 10 grams per tonne of gold.

Other

Alaska Rep.

Hugh "Bud" Fate introduced a bill that was recently signed into law that removes one of the more draconian stipulations from the Alaska mining regulations.

Under previous regulations, failure to pay rents or file paperwork on state claims prior to Nov. 30 meant the claims became null and void with no opportunity to repair the damage for at least one year.

Under the recently signed law, mining claim owners who fail to pay claim rents or file required annual labor will be able to "claw back" their claims by paying the rents due and by paying a late penalty equal to the amount of the rent originally due.

The bill was passed unanimously by both houses of the Alaska legislature.

Well done Bud!

The brilliant wit Will Rogers once said that "everyone is ignorant, only on different subjects." In a May 21 Opinion piece in the Anchorage Daily News, Port Allsworth resident John Branson incorrectly stated that cyanide would be used to recover gold from rock if the Pebble copper-gold deposit ever becomes an operating mine.

In Mr. Branson's mind the cyanide would pollute the countryside while "hundreds of bulldozers transform the rolling tundra hills into a gaping pit…" Perhaps I am ignorant but I know of no mine on this planet that utilizes "hundreds of bulldozers" and anybody who is familiar with the Pebble deposit and deposits like it around the world can tell you that cyanide is not used to recover the gold.

It seems that John Branson is ignorant about mining.

Author Bio

Curt is President of Avalon Development Corporation, a mineral exploration consulting firm based in Fairbanks, Alaska. He is a U.S. Certified Professional Geologist with the American Institute of Professional Geologists (CPG #6901) and is a licensed geologist in the State of Alaska (Lic. # AA 159).

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• Phone: 907-457-5159
• Contact Curt Freeman