New gold producer eyes Yukon startup

KETZA RIVER - Now that Yukon-Nevada Gold Corp. is a producer at its Jerritt Canyon Mine in Nevada, the Vancouver, B.C.-based miner is poised to develop a mine at its gold- and silver-rich claims here in the southern Yukon.

After three years of exploration drilling and even longer cleaning up an abandoned mining camp left behind by another mining company, Yukon-Nevada is targeting 2010 for initial gold production and ramping up to 60,000 ounces in annual output in 2011.

In 2007, the company upgraded measured and indicated resources at Ketza River to 646,000 ounces and estimated another 112,800 ounces of inferred resource. Geologists also increased the grade of the project's measured and indicated gold to 4.9 grams per metric ton from 2.8 grams.

Based on an independent NI43-101 technical report prepared in April, Ketza River is set to begin preparations for both open pit and underground mining with cutoff grades of 1 g/t for material within the optimized pits and 3 g/t for resources that would be mined underground.

The pits were optimized using a price of $1,000 per ounce gold, an 85 percent recovery rate and 45-degree pit slope, the company said.

Yukon-Nevada, which owns 100 percent of the Ketza property, envisions building a carbon-in-pulp mill, 46-worker camp, truck shop and warehouse to augment existing structures on site.

With its good road access, a strong relationship with the Kaska First Nation and the nearby Ross River Dena Council, Yukon-Nevada has set in motion a variety of plans that could propel the company to the front of the pack among those with Yukon mining projects nearing production.

Good drilling results

Management hired mining veteran Erika J. Shepard in April as the project's chief geologist to help transition the project from exploration to production.

Since then, Shepard has worked to get a better grasp on how mineralized zones on the property are oriented and how best to mine them.

"We divide the property into two geological domains with different styles of mineralization," she told Mining News June 23.

Shepard said dramatic geological events occurred millions of years ago that left behind manto and chimney structures in carbonate-hosted replacement deposits and quartz-sulfide fissure veins and quartz-breccia in siliciclastic rocks in various zones that stud the mountainsides and valley floors both on the surface and at depth on up to 100 square miles of claims.

These zones include Tarn, Peel, Nu-Break, Ridge Oxide, Shamrock, Lower Gully and Lower QB.

"Part of the focus this year is to take the known zones and try to expand them out," Shepard said. "We're pretty pleased so far."

The reason: Drillers at Ketza River are continuing to encounter high-grade intersections.

Yukon-Nevada June 13 reported more favorable drill results. Two diamond drill rigs completed more than 9,600 meters of drilling in 66 holes between April 10 and June 9, and were targeted to expand the margins of known mineralization.

Drilling highlights include 5.15 meters of 13.6 g/t gold in the Peel Target of the Manto Zone and 7.27 meters of 56.0 g/t gold from the QB Target of the Shamrock Zone.

These results could potentially increase current resource estimates for the project.

Further drilling for delineation of the proposed open pits will continue through the year, the company said.

Shepard said she would like to drill more intercepts at the top of the zones to be able to improve the strip ratio in the open pits.

As of May 31, drillers had completed more than 18,344 meters, or 60,183 feet, and have another 6,710 meters, or 22,014 feet, to drill in the current 2008 exploration program. However, new targets will be added in August when the company gets more lab assay results.

"We plan to follow up on the good intercepts in our current drilling and to explore the Shamrock zone," Shepard said.

New facilities for new production

Meanwhile, Project Manager Terry Eisenman, who also is CEO of Monarch Mining and a major shareholder of Yukon-Nevada, is tackling the logistics of preparing for production.

A new mill will be built under the supervision of Yukon-Nevada President and CEO Graham Dickson, who is an expert at building mills for mines, Eisenman said.

Plans also include building a new camp for permanent mine employees and vacating the old camp facility for use by the construction crew initially and other purposes after mine startup.

When Yukon-Nevada took over the property, the company had to repair 161 broken windows and patch a large hole in the side of one building, Eisenman said.

He also spearheaded the massive cleanup that brought recognition of the company's reclamation efforts when it won an environmental award in 2007 from the Yukon Government.

Eisenman said he doesn't understand why more miners don't do reclamation work as they explore and develop mines, noting that the approach is more efficient and saves money on the reclamation bond all mining companies must post to pursue projects in Yukon.

"It's like doing the dishes after you have eggs," he said. "In the morning, it's easier and cheaper to clean up then rather than later".

Bryony McIntyre, manager of mineral management for the Yukon Government, said Eisenman's approach makes sense.

"As they progressively reclaim the areas where they have finished their work, they can get a portion of their money back," she said. "So it ends up being cheaper in the long run."

Community is key

A big part of Eisenman's push is to involve locals in the company's future at Ketza River.

A summer jobs program for teens, an effort to recruit and train lab analysis technicians and strategies to help Kaska Nation members start their own business es is meeting with some success, Eisenman said.

One of the frustrations that Yukon-Nevada has encountered at Ketza River is the long delay that is typical of getting back results of analysis of core samples from the lab, and in one case, the loss by the lab of all the surface samples from higher elevations that crews collected one summer. Having onsite lab technicians would help to alleviate some of this frustration.

"We're also sending out three people to train as millwrights," he said.

Eisenman is also studying ways to reduce costs and improve the method for preparing mine waste as dry tailings.

The project manager said he will soon begin quarrying limestone on the property situated above various gold-rich zones at Ketza River.

The limestone will be used to build roads on the property, and once those roads are built, a First Nations contractor will be encouraged to quarry and sell the limestone for other uses.

Eisenman said this will keep the material out of the waste pile and provide another source of revenue for a local business.

Looking ahead

Yukon-Nevada is preparing a pre-feasibility study this summer and will do ongoing environmental base line studies on areas of the property where it hasn't drilled yet.

"With open pits, we have water tests done above and below anything we're going to do, so that smoothes out the permitting," Eisenman said. "We're looking ahead to build background data so that anything we find, we won't have to wait a year to get going."

At some point in the future, Yukon-Nevada will turn its attention to nearby Silver Valley where ore rich in silver and other minerals would assay for $3,000 per metric ton if it were mined and sold at current prices, Eisenman added.