Junior chases more gold at Dublin Gulch

Victoria Gold Corp. is heading into its second season of exploring its Dublin Gulch gold property 85 kilometers north-northeast of Mayo in central Yukon Territory in hopes of expanding the Eagle Gold Project and following-up on promising 2009 trenching results in the Olive and Shamrock zones.

Nearly one year after acquiring StrataGold Inc., the former owner of Dublin Gulch, Victoria is still happy with the deal.

"We acquired StrataGold because we liked their Yukon assets," said Victoria President and CEO Chad Williams. "There are only two ways to gain gold assets - find them or buy them. We've done both."

In one year, Victoria's gold resources have doubled, climbing to 6 million ounces, of which nearly one-third is probable reserves.

The Eagle deposit is the major actor in this transformation, with an NI 43-101-compliant resource of 4.3 million ounces of gold, including probable reserves of 1.75 million ounces contained in 66.14 million metric tons of ore grading 0.82 grams per metric ton, calculated using a gold price of $900 per ounce.

The project's other attributes include road accessibility, a low waste-to-ore ratio, attractive metallurgical characteristics that may make the deposit amenable to lower cost heap leach processing, nearby hydroelectric power and a settled aboriginal land claim.

Dublin Gulch's 1,896 quartz claims, 10 quartz leases, and 1 federal crown grant quartz claim also hosts the Mar Tungsten Deposit, which has 95 million pounds in estimated tungsten resources.

Price sensitive project

Victoria released the results of an independent pre-feasibility study in March that demonstrated robust economics at Eagle under an open-pit mining scenario. It outlined a gold mining operation with annual production of 178,868 ounces by 2014 at a cash cost of $464/oz and total capital costs of C$240 million, excluding a C$38 million contingency cost.

"Eagle will be a very substantial gold mine in due course," Williams told investors in New York April 22.

At a gold price of $1,050/oz, the Eagle deposit could yield 3.1 million ounces, reflecting its sensitivity to price fluctuation, Williams said.

He described the deposit as being "highly unusual" and a geological twin to the Fort Knox Mine near Fairbanks, Alaska, where owner Kinross Gold Corp. recently opened a heap leach operation. Kinross is also a 20 percent shareholder of Victoria.

Like Fort Knox, the Eagle deposit's mineralization is suitable for heap leach mining.

"Eagle is the only heap leachable gold deposit in Canada," Williams said.

Victoria envisions building an open-pit mine initially at Eagle with an operating life of 10 years and progressing to an underground mine after year 10. The deposit boasts uniform gold mineralization and is open at depth and in every direction laterally.

While prospectors have found placer gold on the 34,576-hectare, or 133.5-square-mile, Dublin Gulch property for 100 years, the source of that gold remains a mystery. Victoria aims to test some of the property's older mining areas this summer.

"The historic openings, or shafts, line up, which we believe indicates a continuous gold zone across the property," Williams said.

2010 exploration under way

Victoria budgeted C$5 million for 2010 exploration at Dublin Gulch, a sum believed to be the largest ever spent on the property in one field season. The exploration program, which is currently underway, has three objectives:

Add gold ounces to Eagle's existing reserve/resource base; 2,100 meters will be drilled immediately to the west of the existing reserves. If successful, this could materially change the location of the western edge of the current open-pit design, thereby driving improved economics and extending the mine life.

Define resources in new zones on the Dublin Gulch property; 4,700 meters will be drilled to potentially define initial gold resources at the Shamrock and Olive zones located up to 2 kilometers, or 1.24 miles, northeast of the Eagle zone. The Shamrock and Olive zones are new targets for the company.

Generate new drill targets with reconnaissance exploration between Eagle and Olive and to the west of Haggart Creek.

Williams said Victoria will look to its vice president of exploration Raul Madrid to direct the exploration campaign. Madrid is credited with 13 gold discoveries in his career, he added.

First Nation and financing

Victoria signed a memorandum of understanding May 20 with the Na-cho Nyak Dun First Nation of Mayo, Yukon Territory, regarding the Eagle Gold Project. The MOU with Na-cho Nyak Dun First Nation is an important first step towards the completion of a detailed agreement to address the socio-economic and impact benefits associated with mine construction and operation at Dublin Gulch and other high-potential gold exploration targets in Yukon Territory.

"We have had an exploration cooperation agreement in place with Victoria since 2008 and are pleased to be moving forward with them through this MOU with an eye toward developing an IB agreement that will cover the development of the mine," said Na-cho Nyak Dun Chief Simon Mervyn. "We are interested in progressive sustainable development with responsible partners, and anticipate Victoria meeting those responsibilities."

Victoria and the Na-cho Nyak Dun anticipate signing the IB agreement by the end of 2010.

To fund its 2010 exploration in Yukon Territory, Victoria said it recently closed a non-brokered private placement flow-through offering that raised gross proceeds of about C$4.3 million, reflecting the 4.1 million common shares issued at C$1.05 per share, a premium of more than 20 percent over Victoria's closing price on April 20. The flow-through shares will be subject to a four-month hold period.

Williams said Victoria's shares are trading well under $25, which means the junior is significantly undervalued in the markets compared to its peers.