Winter Nolan work promises summer payoff

Silverado Gold Mines Ltd. has completed its winter excavation program at the Nolan Placer Gold Project, where it installed a new portal to access virgin placer deposits in the gold-rich Swede Channel.

Having completed the first important leg of the project, company crews said they had stockpiled more than 5,500 bank cubic yards of frozen pay gravel by March at the Nolan property, which lies within the Arctic Circle about 280 miles north of Fairbanks in the historic Koyukuk Mining District.

Nolan is 100 percent owned by Silverado. Recorded gold production from the Nolan Creek-Hammond River area placer deposits, since discovery in 1901, totals nearly 200,000 ounces. The largest portion of this production was from Nolan Creek and its tributaries and benches, ground now held by Silverado. The company also holds property on the adjoining Hammond River placer deposits.

Silverado said it encountered gold in the floor of Swede Channel when the tunnel "reached the virgin ground section of the Swede Channel at the bedrock gravel contact level."

Gravel stockpiled for summer

The frozen pay gravel was stockpiled for thawing and sluicing in June and July to remove gold for sale. Total yards of gold-bearing combined gravel and bedrock obtained for the year from the bulk sample program was dependent on when the operation shut down due to springtime weather conditions.

When the winter underground program ended, crews sealed off the tunnel entrance to keep out warm summer air to preserve the underground development workings for more gold-bearing gravel extraction next winter. The next development phase is scheduled to begin in October.

Meanwhile, water ponds are being cut and gold recovery equipment will undergo upgrades as the company prepares to process the stockpiled gold-bearing gravel and bedrock, beginning when the water runs around mid-June.

Silverado also plans to do some drilling this summer to further delineate gold-bearing gravel for extraction next winter. The project is running substantially under budget, according to company officials.

Silverado has said it plans to operate year-round for many years at Nolan, which is extensively mineralized.

Anselmo: story to tell in September

Garry Anselmo, Silverado's chairman, president and CEO, declined to comment on the bulk sampling project April 12, saying he would reserve comment until after gold recovery is complete this summer.

"We expect to have a story to tell in September," he said.

A bulk sample of 7,625 bank cubic yards of gravel was taken from the area in 1998-1999 and yielded 623 ounces of gold, or 0.08 ounces per yard.

In prior years, Silverado has extracted about $10 million in jewelry grade gold from various areas of the property and the gold sold for an average premium of 33 percent above gold prices, due to the high purity (22.3 to 23.4 karat or 93 percent to 97 percent pure gold) and due to its abundant character, the company said.

Under Silverado's ownership through 2003, 18,507 ounces of placer gold has been recovered from channel and bench deposits in the Nolan Valley. The largest nugget recovered to date weighed 41.35 ounces and was valued at $16,000 by weight. It sold for $50,000, a premium of 212 percent.

Most nuggets produced from Nolan have been suitable for jewelry.

Bundtzen: well-researched plan

Tom Bundtzen, an independent geologist who assessed the project, said in a report released in February that Silverado successfully completed the first year of a two- to three-year underground development project focused on Swede Channel. He said Silverado completed a well-researched plan to bulk sample and mine frozen gravel deposits of the Swede Channel using underground mining technologies. He also said the company benefited from good management decisions, a competent crew, and a conservative work force.

"The writer has never seen placer gold concentrates at any time during his career that has such a high ratio of coarse-to-fine gold," Bundtzen said of his visit to the Nolan property in February. "Nearly 75 percent of the gold by weight was in three large nuggets, ranging from 180-290.6 grains (0.375-0.605 ounces) in weight; much of the remainder is also coarse gold."

Bundtzen estimated that no more that 10-15 percent of the gold is minus 30 mesh or smaller. "Due to the relatively small sample size, no mesh studies were completed and this can be only regarded as a qualitative conclusion," he added.

Bundtzen also noted that Silverado receives an average premium of 66 percent above market prices for its nugget gold by selling directly to jewelers. When included with the gold dust recovered, Silverado's gold sales from Nolan averaged 33 percent above gold prices. Bundtzen said gold grades in the six sample sites range from nil to 29.52 ounces per cubic yard and average 12.36 ounces per cubic yard.

Samples not representative

However, the results cannot be considered to be representative of the placer deposit being developed, because the samples were selected on the basis of the location of metal detector anomalies found at the bedrock-channel interface in specific non-random localities, Bundtzen explained. The sample sites must be considered to be selected high-grade examples, and do not constitute average gold grades for the deposit.

Still, "the results of the panned concentrate samples do indicate that localized, very high grade auriferous zones are present in the Swede Channel currently being evaluated by the bulk sample program. The abundance of sulfides in all of the gold-bearing heavy mineral concentrates strongly implies that the lode source for the sulfides and perhaps the gold must be in immediate proximity to the placer deposit," he concluded.

The geologist said he did not rigorously estimate size and grade of the deposit; however the average weighted grade of previous Silverado mining projects on Mary's Bench and in the Swede Channel area is about 0.145 oz gold per cubic yard.

Bundtzen said he also plans to conduct additional tests on the samples.

"The mine operations have been carried out in an efficient manner and the technical information from past and present operations has proven very useful in understanding the deposit," he said, noting that economic efficiency is a key element in ensuring the project's financial success.