Yellowjacket gears up for production

Now that Prize Mining Corp. and Eagle Plains Resources Ltd. have completed modifications on a 350-metric-ton-per-day mill at the Yellowjacket Gold Project near Atlin in northwestern British Columbia, the processing of stockpiled mineralized bulk sample material is under way.

The joint venture partners June 4 reported completion of the small mill and milling will proceed under an existing bulk sampling exploration permit, while they await approval of a new permit under British Columbia's Small Mines Act.

Jamie Mathers, a spokesman for the project, said June 18 that Prize Mining and Eagle Plains are hopeful that they will receive the Small Mines Permit within the next month. Once in place, it will allow for up to 75,000 metric tons of annual production.

The Yellowjacket Project anticipates 35,000 metric tons of production during 2009 and commercial production activity is expected to begin by the third quarter.

Once the remaining 5,000 metric tons of the bulk sample is processed and the new permit is obtained, the partners intend to begin full-scale bedrock mining and milling operations.

'Nugget' effect in deposit

Prize Mining and Eagle Plains, meanwhile, are working without a current mineral resource estimate for the property.

Located about 97 kilometers, or 60 miles, due east of Skagway, Alaska and 15 kilometers, or 8 miles, east of Atlin, the Yellowjacket Project is situated in the Pine Creek Valley, an area subjected to extensive placer mining for more than 110 years.

Homestake Mineral Development drill tested the property and calculated a (pre-NI 43-101) preliminary resource estimate of 453,500 metric tons grading 10.26 grams per metric ton gold in the late 1980s.

Gold mineralization at Yellowjacket consists of coarse gold hosted in quartz stockworks and silicified zones in brittle volcanic and altered ultramafic rocks. Gold mineralization occurs along a prominent fault structure, which is interpreted to control the distribution of placer gold reported in the area.

In 2003, Calgary, Alberta-based Prize Mining Corp. (formerly Muskox Minerals Corp.) optioned the property and exploration continued. Drilling during the next three years yielded exceedingly high-grade gold but the results were sporadic.

The coarse gold mineralization at Yellowjacket has a pronounced "nugget effect," where adjacent samples within the same mineralized zone can have widely varying gold values. Consider hole TW05-2, for example. It encountered wide swings in gold grades over about 30 meters, ranging from a 21.45-meter intersection grading 11.49 g/t gold to a 2.62-meter-wide intersection grading 853 g/t gold, including 0.91 meters grading a spectacular 2,397.59 g/t.

Prize Mining also took channel samples of the bedrock surface and found similar wide variations in gold grades.

Mathers said a well-known mining consultant advised Prize Mining to extract bulk samples to assess the resource rather than continue spending money on drilling core samples.

As a result, the company in 2006 began a bulk-sampling program to evaluate the deposit in an economic framework.

Positive metallurgical tests

Prize Mining hired engineering, metallurgical and environmental consultants to carry out permitting, pit design, mill design and fabrication work.

Excavation activity began in 2007 under a 10,000-metric-ton bulk sample permit. A modern milling facility was constructed, and includes a 1,000-kilowatt generator, ball mill, SAG mill, feeders, pumps, conveyors, three Knelson concentrators, magnetic separator, Diester and Gemini tables and an on-site assay laboratory.

Metallurgical tests indicated preliminary recoveries of 81 percent and that the high-grade gold zones at Yellowjacket can be processed using gravity-only extraction methods. Head grades averaging 9 grams per metric ton were back-calculated from gold production values obtained from the weighted mineralized blocks processed.

Test work done on the rock units excavated from the pit have found them to be non-acid generating. During the bulk sample test, no chemicals or additives were used in the processing or extraction of the gold.

Low-cost advantages

Consultants retained by Prize Mining recommended the recent modifications to the mill circuit that boosted capacity to 350 metric tons per day and are expected to increase gold recovery to 90 percent.

Samples for head and tail grades from a 10,000-metric-ton bulk sample taken in 2008 are currently being analyzed by ACME Laboratory Ltd. in Vancouver and results are expected soon.

In April, Cranbrook, B.C.-based Eagle Plains purchased 40 percent interest in the Yellowjacket Project by providing C$2 million in working capital. These funds were used to clear existing liens and obligations on the property, in addition to completing the mill upgrades and covering costs related to engineering, permitting and environmental compliance.

Eagle Plains will, in turn, receive 60 percent of all proceeds of production up to $2 million, at which time it will revert to a 40/60 working interest. Eagle Plains also will have the option of increasing its working interest to 60 percent by making another $2 million in payments to Prize Mining by the sixth anniversary of the agreement.

The joint venture's overall operating costs are low. Capital costs are already paid, milling costs average less than 1.5 g/t gold and mining costs, so far, have been offset by placer production.

The project also boasts a good relationship with local First Nations, low reclamation costs, good infrastructure including power, and access to skilled local workers, contractors and vendors.

Mathers said the JV partners also have been making bars from gold mined so far at Yellowjacket and "selling them as they go" to help finance the operation.

Prize Mining and Eagle Plains are also considering enclosing the newly completed mill, Mathers said. "If they can do that at a reasonable cost, it would enable them to run the mill year-round and thereby, boost output considerably," he added.