Project generation pays off for junior

The mineral project generator model is paying dividends for Millrock Resources Inc. The junior anticipates exploration on its Alaska gold properties to top US$10 million in 2011, with more than US$9 million to be funded by project partners.

Millrock has attracted senior miners Teck Resources Ltd. and Kinross Gold Corp. to some of the Alaska gold projects it has generated. Additionally, junior explorers Crescent Resources Corp., Brixton Metals Corp. and Ryan Gold Corp. also have forged deals on Millrock properties across the state.

"We have at least a dozen projects in the state, about half of them are presently optioned off to mining companies and junior mining companies," Millrock President and CEO Greg Beischer told Mining News.

In addition to exploration on its Alaska properties, Millrock said project partners Vale Exploration Canada Inc. and Inmet Mining Corp. will spend a combined US$3.1 million on its Arizona porphyry copper-gold projects.

With this level of partner-funded exploration, and a modest inflow of cash from management fees and option payments, Millrock does not anticipate a need to spend about C$4 million in its bank account as its exploration team seeks to generate additional mineral prospects across Alaska.

"We have just over C$4 million in the bank now, and we are not really spending any of our own money to advance Millrock's active exploration projects at this point - we are essentially cash-flow-neutral," Beischer explained.

On top of not needing to go to the markets to raise financing, the project generator's bankroll will likely grow as much of about C$4 million in outstanding Millrock warrants are exercised.

"Right now most of those warrants are in the money, so it is reasonable to expect that most of those warrants will get exercised sometime soon," Beischer said.

Teck steps up at Estelle

Estelle, Millrock's flagship gold property, is slated to have the largest exploration program this year. Teck American Inc., a subsidiary Teck Resources Ltd., has budgeted US$3.46 to investigate this Kahiltna Terrane property in 2011.

Though Teck had two years to reach this level of spending at Estelle, located 105 miles, or 170 kilometers, northwest of Anchorage, the major has opted to accelerate its initial earn-in. Exploration this year, in addition to a geophysical survey carried out on the project late in 2010, will fulfill the Vancouver B.C.-based major's US$3.6 million work commitment, gaining it a 55 percent interest in the gold project. By spending an additional US$5 million on exploration and making cash payments to Millrock of US$400,000, the diversified major can boost its stake in Estelle to 65 percent.

"We have held off on drilling for two years to carry out a comprehensive, systematic, surface exploration program to select the best possible, well-defined drill targets," Beischer said. "This budgetary level gives the project a great chance at early success."

Beischer told Mining News that mobilization to the Estelle property began in mid-June, and the company anticipates a 2,150-meter drill program to begin July 1.

"We were really pleased when Teck stepped up to the plate with what I consider to be a very substantial budget for a first-pass drilling program," Beischer said.

In addition to accelerating the exploration program at Estelle, Teck has increased its ownership of Millrock. Originally taking an equity position in the junior through a private placement in May 2009, the Vancouver B.C.-based major decided to exercise all of the 1,363,636 Millrock warrants it held at a price of C53 cent, providing the junior with proceeds of C$722,727.

The warrants were exercisable for two years at a price of C53 cents in the first year and C63 cents in the second year. Including its newly purchased equity, Teck owns 2,727,272 shares of Millrock, or 3.9 percent, of the currently issued and outstanding shares of the junior.

"I think it was a real vote of confidence when they exercised these warrants early, we really appreciate it," the Millrock CEO told Mining News. "We would rather not dilute our existing shareholders if we can help it, and this move by Teck helps avoid that. They doubled the size of their ownership of our company, and we are glad to have them as shareholders. "

In June, Millrock announced it had expanded the Estelle claims to include, among other things, a prospect investigated by a Teck-predecessor, Cominco, more than 20 years ago. These claims, leased from Anchorage-based On-line Exploration Services Inc. earlier this year encompass a potential extension of the mineralization at the Shoeshine prospect. Millrock also staked various claims surrounding Estelle based on reconnaissance exploration funded by Altius Resources Inc.

"The addition of the new claims increases the chances of Millrock making a significant gold discovery at Estelle," Beischer said.

Cominco, now a part of Teck Resources, first discovered gold on the newly leased claims in the late 1980s. Highlights from the work done by the major include 49.5 meters of surface chip samples grading 1.2 grams per metric ton gold and 9.9 meters averaging 18.1 g/t gold. Drilling by the Teck predecessor also cut 29.6 meters averaging 3 g/t gold on the small claim block north of Estelle Mountain.

The core from this historical work has been stowed in a library in Eagle River, a few minutes drive from Anchorage, providing Millrock geologists an opportunity to study the historical intersections.

"Everytime I hear about budget cuts for the core library I get irritated because you can find ore-bodies with the rocks that are sitting inside that building," said Beischer.

The Millrock CEO told Mining News that examination of the core revealed substantial zones of lower grade gold mineralization present between the structurally controlled zones of veining sampled by Cominco 22 years ago. At modern cut-off grades, these intervening sections add up to mineable resources.

Millrock plans to sink at least one hole near this historical discovery during the 2011 field season.

First drilling at Estelle

This year's exploration program will provide for the first drilling at Estelle since Millrock picked up the expansive property from International Tower Hill Mines Ltd. in 2008.

The project generator said geologic features and extensive surface geochemical anomalies at Estelle - which belongs to a belt of porphyry deposits that stretches from Southwest Alaska along the Alaska Range and into Yukon Territory - indicate the potential for large, bulk-minable, intrusive-related or porphyry-style gold deposits.

Four main zones of large-scale anomalous gold and pathfinder element geochemistry - Shoeshine, Oxide Ridge, RPM and Stoney - have so far been identified across the 24,600-hectare (60,790 acres), land package.

Shoeshine and Oxide Ridge have been the primary focus of past exploration by Millrock and are expected to receive the bulk of this year's drilling. Both prospects were identified by sampling the broken rocks collected at the base of steep slopes characteristic of this region of the Alaska Range. Testing this talus helped company geologist dial in on the source of the gold-bearing rocks collected in the rubble that had eroded from the bedrock.

At Shoeshine, talus sampling conducted in 2009 outlined a 300- by 1,000-meter anomalous zone. The average grade of 49 samples taken from the rubble field in is 0.585 g/t gold. One sample of porphyry rock cut by sheeted quartz veinlets was reported to return assays of 13.13 g/t gold. Numerous talus samples with grades in the 3 g/t to 5 g/t range also were collected.

Sampling at Oxide Ridge outlined a similar zone measuring 200 meters by 300 meters. The average grade of 24 talus fines samples taken here in 2008 is 2.32 g/t gold.

By 2010 Millrock geologists had narrowed down the bedrock source of the gold mineralization found in the talus at Shoeshine and Oxide Ridge.

SH-2010-042, a chip sample traverse at the Shoeshine prospect, located in the southern portion of the Estelle claim block, averaged 9.1 g/t gold over a width of 27 meters. Four other samples from Shoeshine returned assays between 1.1 and 5.9 g/t gold.

At Oxide Ridge - a prospect about 12 miles, or 20 kilometers, north of Shoeshine - two samples returned 1.6 and 1.8 g/t gold, each over a traverse of three meters.

Millrock said Oxide North, a new mineralized zone with disseminated arsenopyrite and tourmaline, turned up anomalous gold values in talus fines sampling. This zone is located about 1.6 miles, or 2.5 kilometers, north of the Oxide Ridge showing.

The Stoney prospect is a 4,000-meter-by-60-meter massive sulfide vein with intermittent areas of high-grade gold.

Beischer told Mining News that the veining at Stoney, coupled with geophysical indicators, signal to Millrock geologists that porphyry mineralization may be lurking nearby. While an alluring target, Stoney will likely not be drilled in 2011.

"We really feel the best potential is at Oxide Ridge and Shoeshine. We actually may not get around to drilling Stoney, Beischer explained.

RPM, a new gold-zone discovered by Millrock geologists in 2010, also probably won't see drilling this year. This new gold prospect has the distinction of being hosted in hornfels sediments and intrusive rock, as opposed to the strictly intrusion-related mineralization found at Oxide Ridge, Shoeshine and Stoney.

While RPM and Stoney may not see drilling in 2011, these prospects as well as much of the rest of the enormous Estelle property will likely be scoured by Millrock geologists as they continue to seek new targets for future programs.

"At Estelle, we could continue to do surface surveys probably for a couple of field-seasons yet, and keep refining and finding more drill targets," said Beischer.

For now the project generator is excited about finally getting to drill its flagship gold property in Alaska.

"We have some excellent targets, so it is time to get down to it," the Millrock leader told Mining News.

Kinross drills Humble

Kinross, another major that has teamed up with Millrock to explore Alaska, is currently estimated to spend around US$1.5 million on exploration at the newly acquired Humble property in Southwest Alaska and another US$400,000 at the Council gold project on the Seward Peninsula.

At Humble, the partners have carried out soil sampling and induced polarization geophysical surveys in preparation for a eight-hole, shallow drill program anticipated to start in mid-August.

"It is just the very first phase, but it is pretty exciting when you think about what could be there," Beischer said.

Humble, formerly known as the Kemuk prospect, was originally explored by Humble Oil Co. for its iron potential, due to its extremely strong magnetic signature.

Samples from drilling conducted by Humble Oil in the late 1950s has provided Millrock geologists with a peek at what lies below the surface at Humble.

"What we know of the geology, it is really reminiscent of the Pebble deposit. We have got a strong geochemical anomaly. We have got ZTEM geophysical anomalies that are coincident with the geochem, and we know by the little bit of drilling that was done by the Humble Oil Company back in the 1950s that the right kind of rocks are down there," Beischer told Mining News.

In 2010, Kinross and Millrock struck a deal in which the major has the option to earn a 60 percent interest in an area of interest, which includes the Humble claim group, in return for spending US$4 million in exploration expenditures by the end of 2013, paying the project generator US$200,000 and reimbursing the junior for staking the claims. Kinross has the option to increase its ownership of the copper-gold prospect by incurring an additional US$6 million in exploration expenditures by the end of 2016.

Millrock is currently managing exploration at Humble, a duty Kinross may elect to take over at any time.

Millrock and Kinross have decided not to drill the Council gold property near Nome this year. Instead, the partners in the project are stepping back to conduct additional surface work in preparation for a drill program in 2012.

"We are really going to figure out the structure, so we are doing structural mapping, more geochemistry and high-resolution magnetic (surveys) and we will get ready to drill next year," Beischer explained.

Similarly, Ryan Gold Corp. has budgeted C$600,000 for additional reconnaissance work at the Bluff gold property located a few miles southwest of Council.

Uncle Sam gets its share

Drills have been turning at the Uncle Sam gold property in Interior Alaska since early March. Kicking off the early-season exploration with an auger drilling program designed to pull soil samples from the horizon beneath windblown overburden in areas that had not been tested by previous operators and to confirm previous sampling in some areas.

Crescent Resources, which optioned Uncle Sam from Millrock late in 2010, reported that the auger drilling was successful in extending the zones of anomalous gold mineralization at the Lone Tree and Christmas prospects at the gold project located about 45 miles, or 75 kilometers, southeast of Fairbanks.

A total of 2,100 meters of core drilling is planned in the program which is budgeted at US$2.2 million. Concurrently with the drilling program, surface exploration work will be done to develop additional drilling targets.

Beischer explained that traditional surface geochemistry does not work well in the valleys at Uncle Sam due to a thick blanket of frozen wind-blown silt typical of much of Interior Alaska. For this reason, in addition to the auger program and traditional geochemistry, Crescent and Millrock have opted to carry out geophysical surveys to refine targets below the overburden.

Drilling will initially focus on the Lone Tree and Wolf gold prospects.

At Lone Tree, drilling will target a gold-in-soil anomaly that measures about 4,000 meters in length and up to 1,000 meters wide. The 2011 drilling is designed to expand on areas of gold mineralization outlined by previous operators as well as the work conducted earlier in the year. USC-011, drilled by Kennecott Exploration in 2001, cut 19.22 meters averaging 2.03 grams per metric ton gold. USC-013, another Kennecott hole, intersected six meters averaging 1.79 g/t gold and 14 meters averaging 1.65 g/t gold.

At Wolf, drilling will target another gold-in-soil-anomaly measuring over 2,000 meters in length and 1,000 meters in width. Hole USRC-22, also drilled by Kennecott, intersected 4.45 g/t gold over 15.54 meters at this prospect. Crescent said this area has not been fully tested and the 2011 drill program will focus on confirming previous results and expanding the area of known mineralization.

Upcoming Kahiltna projects

Millrock has generated additional gold and copper prospects in the Kahiltna Terrane, including Cristo claims, a large group of claims east of Estelle beyond Kiska Metals Corp.'s Whistler gold-copper property.

This land package is anchored by Monte Cristo, a large tonnage intrusive-related gold deposit or gold-rich porphyry prospect, and the St. Eugene prospect, which hosts a copper-gold-molybdenum porphyry system initially discovered in the 1970s.

Over the course of the 2009 and 2010 field seasons, Millrock geologists collected 80 rock samples and 213 soil samples at the Cristo claims. This prospecting turned up gold-copper mineralization at St. Eugene and gold-only mineralization at Monte Cristo.

Millrock says mineralization at the St. Eugene prospect occurs in three separate zones hosted by hornfels adjacent to a diorite intrusion. Rock and soil samples have outlined a 700-meter-long zone with rock samples up to 1 percent copper and 2.1 grams per metric ton gold.

At Monte Cristo, rock samples with grades up to 4.2 g/t gold and talus fines samples returning assays up to 3 g/t gold Millrock geologists have outlined mineralized zones on two ridges about 300 meters apart. The glacial debris area between these zones has yet to be tested.

In October Brixton and Millrock hammered out a final option agreement on the Cristo claims. Brixton can earn a 100 percent interest in the property by spending US$5 million on exploration, paying Millrock US$330,000 and issuing that company 2 million Brixton shares, plus 2 million purchase warrants with an exercise price of C$1 per share.

According to the Brixton Metals website, the company plans to continue the map and soil and rock sampling carried out by Millrock as well as conduct airborne geophysics and complete 2,000 meters of drilling at St. Eugene in 2011.

Revelation, another Kahiltna Terrane property generated by Millrock in 2009, is a 5,760-acre pluton-hosted gold target that is positioned about 30 miles, or 48 kilometers, west of Millrock's Estelle property and about 3 miles, or 4.8 kilometers, northwest of International Tower Hill Mines' Terra gold property.

Beischer told Mining News that Millrock geologists will continue to investigate Revelation and other projects the company has generated in the Kahiltna Terrane.

"We have staked quite a number of claim blocks in the general area. We will be advancing all of those, including Revelation, and we are open to finding partners for these projects," he added.

Author Bio

Shane Lasley, Publisher

Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.

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