Project looks for lessons at Fort Knox

Victoria Gold Corp. made considerable progress in 2010 toward building a gold mine at its Eagle Gold Project in central Yukon Territory, including reinforcing a pledge of environmental responsibility to the First Nation of Na Cho Nyak Dun with a quick trip across the border to Alaska.

Managers of the Toronto-based junior invited members of the First Nation of Na Cho Nyak Dun to tour a new heap leach processing project at the Fort Knox gold mine hundreds of miles to the west near Fairbanks.

The reason? If all goes well, Victoria will build a similar heap leach facility for the Eagle project.

Of the three major gold projects under way in Yukon Territory, Eagle is by far the most advanced, Victoria Executive Vice President John McConnell told Mining News in a recent interview.

"We will certainly be the first gold project to go into production in the Yukon," he said. "And Eagle is just a dot on the entire Dublin Gulch land package."

Not only is Dublin Gulch big, covering 30 kilometers, or 19 miles, east-west by 14 kilometers, or 9 miles, north-south in the Mayo Mining District, the property is very prospective for a number of commercial-size mineral deposits.

"We feel like we have the most prospective property out of everything we have looked at in Yukon Territory," McConnell said.

Victoria recently reported plans to re-start exploration at Dublin Gulch in early 2011 to follow up on multiple encouraging gold exploration results generated in its 2010 campaign - many months ahead of the traditional start for the exploration field season north of the 60th parallel.

Project in permitting

In December, Victoria submitted a final project proposal for the Eagle project to the Yukon Environmental and Socio-Economic Assessment Board, outlining an open-pit, heap leach gold mine with an eight-year mine life that targets production startup at about 170,000 oz/yr gold in the third quarter of 2013.

A feasibility study is under way, and the junior envisions the permitting process being completed in 12 to18 months and mine construction requiring 12 months. In addition to completing the final feasibility study by next fall, Victoria must secure quartz mining and water licenses to support mine development and craft an impact-benefit agreement with the Na Cho Nyak Dun.

"Our property sits within the center of the traditional territory of the Na Cho Nyak Dun First Nation. We had no legal obligation to offer the tour, but we see it as our job to consult with the local First Nations as a professional way to operate," McConnell said. Consultation with the Na Cho Nyak Dun and local communities is also required under Yukon Enviromental Socio-Economic Assessment Act in developing the Eagle Gold Project proposal.

A resource in Kinross

The Eagle deposit, geologically similar to gold mineralization at Fort Knox, has a NI 43-101-compliant probable reserve of 1.751 million ounces of gold contained in 66.141 million metric tons of ore grading 0.823 g/t calculated at a gold price of $900/ per ounce.

Fort Knox, an open-pit mine in production since 1998, completed construction of a heap leach expansion project in 2009 that is projected to double its life-of-mine output to 2.9 million gold ounces and extend production by another six years to 2018. The mine is owned by a subsidiary of Kinross Gold Corp., which is also a major shareholder of Victoria with about 19 percent of the junior's outstanding shares.

"Kinross has been a big supporter of Victoria, both financially and technically," McConnell said. "It's good to have a third party look at our plans, and they are a great source of other ideas. It's a great relationship to have."

Modern heap-leach processing is a low-cost, environmentally sound, but sometimes misunderstood, method for extracting gold and other minerals, especially from lower grade ore.

Victoria first floated the idea for the Fort Knox tour in 2009 during consultation with the Na Cho Nyak Dun's elders and found them very receptive to it.

"To NND citizens, the cyanide and reclamation issues appeared to be the biggest concerns which prompted Victoria Gold to host an additional workshop on September 26, 2010," the Na Cho Nyak Dun said a statement Dec. 8.

McConnell said the week-long workshop included a reception in Mayo on Sunday where the company provided background on Victoria and the Eagle Project as well as information about the Fort Knox Mine.

"Through this workshop, Victoria Gold provided feedback and answered questions from the community, shared technical information and ensured proper consultation. Victoria Gold offered NND the opportunity to participate in a tour of another mining operation in Fort Knox, Alaska, which uses similar technology to extract gold, as the one proposed. NND gratefully accepted to participate in this tour following this workshop."

Twelve Na Cho Nyak Dun members, including elders, council members and several young people, accompanied four Victoria representatives on a flight to Fairbanks where they took ground transportation the 25 or so miles to the mine for the tour.

Eye-opener at Fort Knox

NND members who took the Fort Knox tour reported that the experience was very informative, and well-organized.

"They found that it was a very clean operation. Everyone was very impressed with this project. Most of the concerns from NND citizens in regards to the Fort Knox operation were circulating around safety and reclamation," the First Nation said.

Once the group arrived back in Mayo, they were invited out to the Eagle Gold mine site, which is located about 50 kilometers, or 31 miles, by road northeast of Mayo. A majority of participants found the experience of visiting the Eagle Gold project site, "very informative and on schedule. They found staff to be very open to discuss and answer their questions regarding the project," the Na Cho Nyak Dun said.

One tour participant said: "It was easier to visualize the proposed Eagle Gold operation after seeing a bigger operation in Fort Knox," according to the First Nation.

Still, the First Nation said its citizens' biggest concerns regarding the proposed operation "circulate again around reclamation."

Under Yukon regulations, a comprehensive reclamation and closure plan must be

prepared and submitted for approval as part of the project's Quartz Mine License application and be updated at least every five years throughout the operating mine life. Moreover, Victoria must provide financial security for the project's full financial liability and outstanding financial liability must be re-assessed at least every two years to reflect the impact of operations and progressive reclamation.

Reclamation, safety concerns

Still, "reclamation needs to take place at the same time as production, not at the end of the project. If this production ceases, so will the reclamation, because it is an expense. Reclamation needs to happen during the life of the mine," the Na Cho Nyak Dun said.

Some of the members suggested that Victoria create job training opportunities for the NND within the Eagle Gold project, including a program to train middle-aged citizens and youth for a better understanding of the mining process.

"The biggest concerns dwell upon safety, clean up, and closure of the project," the First Nation said. "NND wishes to see the mining company reclaim the historic tailings ponds in the area as per the negotiations regarding closure."

Na Cho Nyak Dun members praised Victoria for being really concerned about the environment, as opposed to some other mining companies.

"One citizen would have liked to see more councilors and staff members attend the tours. In fact, NND wishes to have the opportunity to send other NND members who did not attend the tour to Fort Knox to witness a similar ore extraction process as the one proposed at the Eagle Gold Site within the traditional territory of Na Cho Nyak Dun First Nation," the group said.

Others expressed concerns about safety for the wildlife and access to hunting for First Nation people.

The Na Cho Nyak Dun said it wants to ensure that Victoria follows the principles of responsible mining and sustainable development.

"Several citizens believe that this is a great opportunity for our region with proper mitigation measures and a respectful relationship in place; this should be an excellent project," the First Nation said. "NND is in support of the mining initiative and is in favor of mining, in general. Overall, NND had a good favorable tour to Fort Knox, Alaska and to the Eagle Gold site near Mayo, Yukon Territory. NND shares the vision of a strong relationship with Victoria Gold through meaningful consultation with NND citizens. NND is looking forward to sustainable prosperity within the spirit and intent of the First Nations Agreements."