Junior's shares climb with discoveries

Now that the word is out about ATAC Resources Ltd.'s impressive gold discoveries at the Rau Project in central Yukon Territory, the financial market is taking to the early-stage exploration effort with the enthusiasm of a bear in a beehive.

Atac recently reported impressive results from drilling and prospecting the Osiris and Isis targets on the Sten claim block near the eastern edge of the 185-kilometer-, or 115-mile-long Rau Project. Meanwhile, investors have fueled a run-up in Atac's stock price to about $7 a share from just under $2 in mid-August.

The Rau Project, located in the Mayo Mining District of central Yukon, about 55 kilometers, or 30 miles, northeast of Keno City, consists of 6,979 claims comprising the main Rau property and two satellite properties, the Stoked and the Mouse. Collectively, the claims cover about 1,400 square kilometers, or 540.5 square miles, including 3,855 claims that were staked in late 2009 and early 2010 to cover projected extensions of favorable geology to the east of the claims initially staked in 2006 to cover a strong gold and tungsten stream sediment anomaly. Atac holds a 100 percent interest in the Rau property with no underlying royalties.

A quiet discovery

In 2008, diamond drilling at Rau tested an area beneath the core of the geochemical anomaly, resulting in the discovery of sediment-hosted replacement-style gold mineralization which Atac dubbed the Tiger zone.

Though the discovery propelled Atac to the front of the pack among juniors looking for gold in the Yukon, most of the market's attention remained focused on Underworld Resources Inc.'s White Gold Project to the west. Kinross Gold Corp. acquired that 1.4-million-ounce property in a friendly takeover of Underworld in June.

The drilling intersected thick sections of sulphide-rich material, but also some oxidized mineralization. Last year 8,749 meters of drilling at the Tiger zone successfully extended and more clearly defined the areas of oxide and sulphide mineralization, identifying three mineralized units that are stacked about 60 meters apart. The middle unit, known as the Discovery horizon, was the main focus of exploration activity in 2008 and 2009. Drilling in 2009 also identified a high grade core to the Tiger zone, which was not intersected during the 2008 drilling program.

So far, the Discovery horizon contains the most significant gold intervals observed to date in the Tiger zone, tracing high-grade mineralization about 650 meters along strike, in sections 15-96 meters thick and averaging more than 3 g/t gold surrounded by lower grade material. The horizon remains open along strike in both directions and downdip to the northeast.

New types of mineralization

Near the end of the 2009 drill season, a new type of mineralization was discovered northeast of the Tiger zone. The East zone was discovered in holes Rau-09-44 and Rau-09-61 where sulphide intercepts 90 meters apart averaged 3.71 g/t gold over 36.78 meters and 3.36 g/t gold over 23.06 meters, respectively. This mineralization is characterized primarily by pyrite and quartz replacement within coarse hydrothermal dolomite and iron carbonate and is interpreted as occurring either stratigraphically or structurally below the Discovery horizon.

Atac said recognition of the East zone is significant because it demonstrates that gold can be hosted by different sulphide assemblages within diverse structural and stratigraphic settings.

Additional surface exploration in 2009 identified six new surface zones, which lie between 2.5 and 5 kilometers northwest of the Tiger zone. These zones are defined by strong soil geochemical anomalies and gold-bearing oxide talus samples that returned significant grades of gold, silver and lead.

Season of discoveries

In May, Atac started its 2010 drilling program at Rau, budgeting C$12.5 million for at least 12,500 meters. Since then, spending at Rau has become a moving target with the company working to accomplish as much exploration as possible, including 18,000 meters of drilling, before winter sets in.

On July 8, Atac reported a significant silver-lead-zinc-indium discovery at the Ocelot target located in the western portion of the Rau property. The Ocelot target occurs along both sides of the regional structural corridor that hosts the Tiger zone's gold mineralization, 15 kilometers, or about 9 miles, to the southeast.

Three weeks later, the junior unveiled the Osiris discovery, reporting gold mineralization associated with realgar and orpiment grading 1.92-12.15 g/t gold; soil samples grading up to 17.5 g/t gold; 517 new claims staked to complete coverage of a 150-sq/km area of highly anomalous gold and pathfinder elements in stream sediments; and mobilization of a drill to test the Osiris target.

Carlin-type rocks

Atac geologists say Osiris mineralization, like that in the Carlin Trend of northeastern Nevada, shows alteration assemblages and association with low-temperature arsenic sulphides, realgar and orpiment. Osiris and Isis host rocks are 150- to 250-meter-thick limestone debris flow and turbidite units which occur within basinal silty mudstones.

The "Carlin Unconformity," or Carlin trend, is a geologic feature that represents a period of erosion or non-deposition likely associated with a collision between a tectonic crustal block called a terrane and the North American Plate.

The collision occurred between 250 million to 500 million years ago and induced higher crustal temperatures and pressures which produced numerous hot springs along the suture zone. Several episodes of subsurface magmatism are known to have occurred subsequent to the collision, associated with tectonic forces affecting the entire basin and range. During each of these episodes, and particularly during the Eocene epoch, hot springs brought dissolved minerals including gold and silver toward the surface, precipitating them out along fissures.

During a recent interview, Atac President Rob Carne said a narrow swath of land from Nevada north to Yukon was actually North America's beach-front real estate during that long ago era, with a subtropical climate and geologic features offshore similar to the Great Barrier Reef.

The Carlin trend, discovered in the 1870s, is one of the world's richest gold mining districts, having produced more than 70 million ounces by 2008 worth around US$85 billion at 2010 prices. Its belt of gold deposits is about 8 kilometers, or 5 miles wide, and about 65 kilometers, or 40 miles, long, extending in a north-northwest direction.

At the Rau property, the resulting limestone karst "was the perfect reactive host rock" for heated fluids containing mostly gold and some silver mineralization," he said, adding that "the fluids were hot because the faults (at Rau) are so deep."

Over time, a narrow carbonate platform formed with fairly crumpled rocks and some folding in the deposits, Carne said.

New gold district

In August, Carne said Atac suspected that the Rau property hosts district-style mineralization rather than a single intrusion.

Atac CEO Graham Downs Sept. 1 said the initial results from the first Osiris drill hole confirmed that belief.

"We have completed a 1,400-sq/km detailed stream sediment sample survey, covering 160 kilometers of strike length. Initial results of that work are very encouraging and numerous targets for follow-up work in 2011 have already been identified," Downs said.

Atac said its first diamond drill hole at the Osiris target intersected 9.26 grams per metric ton gold over 31.13 meters within a larger interval that averaged 4.65 g/t gold over 65.20 meters. An accelerated exploration program was initiated immediately to evaluate additional targets in the area.

On Sept. 16, the explorer reported seven drill holes completed with two more planned for the current season. Six of the drill holes tested a 300-meter section across the apex of a moderately plunging antiform that hosts the gold mineralization in drill hole OS-10-01 within the Osiris limestone unit.

One drill hole has been completed at the Isis zone, which is located in the overlying Isis limestone about 900 meters west of Osiris, and within a separate structure. It exhibits many of the same geological features as the Osiris zone.

Atac also completed a 12-square-kilometer detailed soil sampling grid over the discovery area resulting in the expansion of the Osiris and Isis targets to 250-by-1000 meters and 200-by-700 meters, respectively.

Two additional gold anomalies called the Conrad and Eaton showings have gold-bearing mineralization in outcrop associated with orpiment and realgar.

At the Conrad Showing located about 2 kilometers, or 1.24 miles, east of the Isis zone, four representative rock samples collected from a 200-meter-long portion of the anomaly graded 21.4, 21.9, 40.3 and 66.6 g/t gold, while a continuous channel sample taken across the width of a partially exposed portion of the zone assayed 14.89 g/t gold over 2.30 meters.

The Eaton discovery is 400 meters to the southeast of the Conrad showing and is characterized by a large area of clay alteration and limited grab samples that grade from trace to 1.02 g/t gold.

Both showings will be drill tested this fall;

A third anomaly called the Isis East zone was also identified. It is characterized by an area of gold and arsenic soil geochemical anomalies that lie in the Isis limestone unit, about 100 meters stratigraphically higher than the Osiris zone and within the same antiformal structure.

The explorer also reported very encouraging preliminary results from a regional stream sediment sample survey. One stream 4 kilometers, 2.5 miles, east of the Osiris zone and two streams located 10 and 20 kilometers, or 6 and 12.5 miles, west of the Osiris area have returned highly anomalous arsenic values. These new areas, plus any additional stream sediment anomalies, will be followed up with detailed prospecting and soil sample surveys in 2011.

No signs of placer mining have been detected on the property, Carne said.

The latest drill results from the Osiris horizon support Atac's contention that the target mineralization is distinctly different in character from that of the Tiger zone in that realgar and orpiment appear to be the primary gold-bearing minerals - rather than pyrite and arsenopyrite.

Market reaction

Shares of ATAC Resources Ltd. extended market gains Sept. 8, rising C$1.22, or 20 percent, to C$7.22, before retreating to about C$6.65 a share on Sept. 23. Since spring when the stock was trading for about 40 cents a share, investors have snapped up the shares like candy. Much of the gain has come since news of the Osiris discovery reached the markets in late August and early September.

Industry analysts are beginning to tout the project's potential to investors.

Macquarie Private Wealth Inc., for example, Sept. 16 said it initiated coverage of Atac largely because the junior's management has more than 150 years of collective exploration experience and Atac is starting to document a potential new sediment-hosted gold belt at the Rau project, its flagship asset.

"Our primary focus in this report is ATAC's Osiris target, which we believe has many geological similarities to Nevada's Carlin Trend. For various reasons discussed, our confidence in Osiris is significantly greater than would normally be the case for a one-hole play, however, we must caution investors that Osiris remains an early stage play, and at this stage our analysis and valuation are inherently speculative," the Toronto-based money manager said in a statement.

Macquarie also noted that Atac is well-funded, with C$30 million in cash.

Indeed, Atac has raised a total of C$34 million in cash in two private offering in less than a year; the latest was C$22 million in August, primarily due to the Rau project discoveries. The junior currently has about 90.5 million shares outstanding, including large amounts held by Strategic Metals Ltd. (10.8 percent), The Rule Family Trust (9.3 percent) and several institutional investors, led by Tocqueville Asset Management LP (3.67 percent).