Junior eyes potential of Brewery Creek

A strategy outlined by Golden Predator Corp. early in the year to focus most of its exploration resources in 2011 on three advanced exploration projects in Yukon Territory has morphed in recent weeks into unblinking attention on the one past gold producer in the company's portfolio - the Brewery Creek Project.

"Due to the nature of the mineralization and the grade and consistency, we've certainly accelerated the budget on Brewery Creek … "Our entire thinking about the project has changed," Golden Predator Chairman and CEO William M. Sheriff told investors during a teleconference May 11.

Because of its exploration-driven approach, Golden Predator intends to spend C$6 million at Brewery Creek - triple the sum the company originally envisioned investing in the project this year.

"It's overwhelmed our C$15 million Yukon budget for 2011," said Sheriff, who acknowledged his growing excitement about the project.

The projected investment also will fulfill Golden Predator's obligation to earn into a 75 percent interest in a joint venture with Alexco Resource Corp. at Brewery Creek.

"We've already had discussions with our JV partner about moving quickly to production in very short order," Sheriff said.

Originally a 793-claim, 12,656-hectare, or 34,298-acre, project, the size of Brewery Creek has grown with Golden Predator's interest. Additional staking has boosted the project's size to more than 1,100 claims covering about 22,250 hectares, or 55,000 acres.

Historic gold production

Viceroy Resource Corp. produced 278,484 ounces of gold from seven near-surface oxide deposits along the Reserve Trend at Brewery Creek in a heap leach gold mining operation from 1996 through 2002. Shut down in 2002 due to low gold prices, the mine site is located 55 kilometers, or 34 miles, due east of Dawson City, Yukon, and is accessible by paved and gravel roads from the junction of the North Klondike and Dempster highways.

The Brewery Creek project holds all necessary permits, including its Class 3 Mining Land Use permit which is required to conduct additional exploration.

The project is authorized under a Type A Water License with an expiry date of Dec. 31, 2021, subject to the restrictions and conditions contained in the Yukon Water Act and Regulations.

The project also has a production license with an expiry date of Dec. 31, 2021 and the 93 mining leases covering mine facilities, pits, waste dumps and adjacent drill indicated deposits have expiry dates beginning in 2016.

In addition, Viceroy negotiated the terms for a socio-economic accord with the Tr'ondek Hwech'in First Nation with respect to the Brewery Creek project.

Sheriff said Golden Predator is amending the project's permits to encompass the recent discoveries and is currently renegotiating the benefits agreement with the Tr'ondek Hwech'in.

In June 2009 the company signed a letter of intent with Alexco to acquire up to a 75 percent interest in the Brewery Creek project. Golden Predator also can earn a 50 percent interest in certain barite deposits present on the claim group. The project is also subject to two underlying royalty agreements with third parties: a "sliding scale" royalty on the next 21,516 ounces of gold production; and a 5 percent net profits royalty on profits from gold production.

The claims comprising the Brewery Creek Project were initially staked in 1987 by Noranda Exploration Ltd. and by 1989, most of the mineralized zones eventually mined were identified through detailed geochemical surveys. Since 1989, more than 175,000 meters of trenching and drilling was completed on the project with much of the exploration drilling completed to depths of 50 meters or less and focused on defining the near-surface oxide potential.

Viceroy officially opened the Brewery Creek Mine on June 12, 1997, and conducted ongoing reclamation to the site which closed in 2002. Small exploration programs focusing on deeper sulphide gold mineralization have been conducted by various operators. From 2005 to 2009, Alexco completed reclamation activities on the majority of the previous operations.

Winter discovery

The dramatic turnaround at Brewery Creek reflects the spectacular drill intersections encountered during the junior's 2011 winter exploration program that began in February.

Designed to expand the Bohemian Zone discovered to the east of known mineralization in 2010, the winter drilling resulted in a second discovery at the Schooner Zone, some 250 meters farther to the east. Overall, the winter drilling resulted in discovery of significant mineralization on 24 of the 25 holes drilled.

Among the results:

Hole BC11-198 intercepted 74 meters averaging of 7.08 grams per metric ton gold including 57.5 meters of 8.90 g/t gold beginning at a depth of 6 meters;

Hole BC11-199, the easternmost hole of the program, intercepted 51.6 meters averaging of 1.71 grams per metric ton gold starting at a depth of 20 meters with the hole bottoming in 2.85 g/t gold from 69.5 meters to its final depth of 71.6 meters;

Hole BC11-183 intercepted 28.0 meters of 5.06 g/t gold beginning at a depth of 46.0 meters in hole BC11-183, including 13.5 meters of 8.78 g/t gold beginning at a depth of 53.5 meters; and

Hole BC11-176 intercepted 32.9 meters of 3.01 g/t gold beginning at a depth of 42.6 meters.

"The excellent results of this winter's drilling program have resulted in a significant eastern expansion of the Bohemian discovery. This clearly redefines the potential of the Brewery Creek project as a larger and higher grade gold deposit," said Sheriff. "This latest discovery illustrates the great untapped potential of the entire Brewery Creek Project area, which remains greatly underexplored."

Sheriff said the new discoveries cover an estimated 750-meter strike length by about 25 meters wide and 100 meters deep, which works out to be about 5 million metric tons of rock by volume.

New exploration targets

Golden Predator May 10 reported completion of an airborne geophysical survey that identified nine major gold exploration targets consisting of four previously unidentified sites as well as five enhanced target sites. These sites will be systematically tested as the company's drill program intensifies throughout the year.

The explorer analyzed and characterized the extensive exploration data and the nature of mineralization in previously mined areas at Brewery Creek as a guide to identify and prioritize other targets in the eastern region of the property.

The known mineralization is associated with quartz monzonite intrusions, which typically show a magnetic low response from hydrothermal destruction of magnetite. "The cooler colors, blue, represent low magnetic susceptibility, which is an indication of hydrothermal fluid flow and destruction of magnetite in the intrusive (rock)," Sheriff said.

The nine individual areas-of-interest identified in the airborne survey correlate strongly with anomalous gold in soils.

The current drill program is planned to include an additional 20 holes and will focus on the extension of mineralization along strike and down dip from the latest discovery.

"We're doing infill drilling between the Bohemian and Schooner zones and stepping out to the east, and we will adjust our plans based on the drilling results," Sheriff said.

The explorer planned to add a second diamond core rig in May to its Brewery Creek campaign and to bring in a reverse circulation rig in June.

In addition, the company is looking at the open pits on the property, considering going underground to access higher grade core areas and studying the heap leach pads, onto which Viceroy loaded ore containing 400,000 ounces of gold and produced about 279,000 ounces at a 65 percent recovery rate. The gold mineralization left on the pads has been oxidizing for 15 years.

The main area of mineralization at Brewery Creek lies east to west-northwest in the Reserve Trend, which stretches 14 kilometers, or 9 miles, and only about 6 kilometers, or 3.72 miles, has been extensively explored, he said.

"We're just opening the door on Brewery Creek. We're realizing that there is an important high-grade aspect to the new Bohemian and Schooner zones. The new Bohemian-Schooner area lies in the middle of one of the coolest areas on the airborne survey and directly east of some of the more heavily drilled and mined areas," Sheriff said.

When the soil geochemical anomalies that Golden Predator identified are superimposed on the magnetic lows in the airborne survey, a number of targets jump out immediately, he added.

Of the new areas of gold mineralization identified at Brewery Creek, Sheriff said significant portions of it are oxide and mixed oxide-sulphide, while some of it is sulphide toward the bottom of the drill holes.

"But our preliminary tests suggest that even the sulphide (mineralization) can be dealt with," Sheriff said.

A technical report on the Brewery Creek project by prepared in July 2009 by Richard M. Diment and Ronald G. Simpson, titled "Technical Report on the Brewery Creek Gold Project, Yukon Territory, Canada," contains a NI 43-101 indicated resource of 3.98 million metric tons grading 1.135 g/t gold (145,000 contained ounces) and an inferred resource of 2.2 million metric tons grading 2.01 g/t gold (142,000 contained ounces), using a cutoff grade of 0.5 g/t gold.

Golden Predator had planned to complete a new NI 43-101 resource estimate for Brewery Creek in 2011, but will now release it later in the year.

"We've had very successful drilling since 2009, even from previously mined areas at Brewery Creek, so we will be expanding the resource estimate," Sheriff said. "It will be larger than previously anticipated, based on the recent discoveries."

Sheriff said the junior's plans for production at Brewery Creek are exploration-driven.

"We could see some early production in 2013, but if our exploration is successful and we build up the resource, it will take a bit longer to get to production," he said. He added that successful reactivation of the heap leach pad, believed to contain about 150,000 ounces of gold, could generate output within 14 months.

Other projects

Golden Predator's focus early in the year on staking has paid off with a significantly larger claims package in Yukon Territory. The company now controls more than 10 percent of the quartz claims in the Yukon and expects its land position across the territory to expand to more than 4,000 square kilometers, or 1,544 square miles.

The explorer plans to spend the lion's share of the remaining C$9 million of its 2011 exploration budget at its two other advanced projects, Clear Creek (C$3 million) and Grew Creek (C$2.5 million).

Of its six other advanced projects and three pipeline projects in the Yukon, Sheriff said the company's 20 or so geologists will focus primarily on mapping and geophysical work this season.

He observed that it was the work of a team of geologists that spent more than two years doing additional mapping and integration of data from previous exploration that led to the successful drilling at Brewery Creek.

"Mapping and structural analysis is the key to our success at Brewery Creek," he said. "Good geological preparation results in discoveries."

The Golden Predator CEO told Mining News May 24 that it will spend about C$600,000 each on two pipeline projects in Yukon, including the mountaintop Antimony Project located about 10 kilometers, or 5 miles, north of Brewery Creek. Noting that the company obtained encouraging underground drill results in 2009 at Antimony and lackluster cores in 2010 from surface drilling, Sheriff said the project is at the "make it or break it point."

"We will try to prove up something in the underground on it this year because we need to make something of it or get rid of it," he explained.

At its Rogue District and Harlan projects in eastern Yukon, the company plans to invest C$1.8 million and C$1.0 million, respectively, in "good science" this year, and hopefully, delineate good drill targets for next year at Rogue and drill a potential Carlin-type deposit at Harlan, beginning in July, Sheriff said.

The Harlan property, explored by Viceroy and NovaGold Resources Inc. in the late 1990s, consists of 67 claims covering about 1,400 hectares, or 3,459 acres, and is located in the Mayo Mining District of Yukon Territory. The property, accessible by helicopter, covers two large mineralized alteration zones associated with small mid-Cretaceous Tombstone suite dykes and sills. Grab samples taken within the alteration zones have returned values up to 6.5 g/t gold (Yukon Assessment Report #094286).

In 2010, Golden Predator signed an option agreement with Alexco to acquire a 75 percent interest in the property.

"(Harlan is) the best prospect in the vast land position that we staked in East Yukon Territory," Sheriff added.