Discoveries fail to keep up with output

A recent article in the Newsletter of the Society of Economic Geologists discussed ways of addressing an arresting trend in the mining industry that affects Alaska's mining future.

Authors N. Stephen Enders of the Colorado School of Mines and Cliff Saunders of Too Serious Unlimited, showed that the discovery rate for gold has been dropping steadily since 1999, while the gold mined by operating mines worldwide has remained essentially unchanged at about 80 million ounces per year.

The low for ounces discovered coincided with the lowest exploration and development budgets during dark days of 2002 when gold was below US$300 per ounce.

During 2002 only about 30 million ounces of gold were discovered as compared to more than 80 million ounces produced.

From that point on, exploration and development budgets rose and for a few years, so did the gold discovery rate.

By 2005 the dollars spent had risen to about US$1.6 billion worldwide and discovery rates had climbed to more than 40 million ounces and production held steady at 80 million ounces.

But then the bottom fell out: While exploration and development spending skyrocketed to nearly US$3.5 billion by 2008, new ounces discovered plummeted to about 10 million ounces per year.

Production held steady at just under 80 million ounces per year.

So, unless the exploration industry picks up the pace, and dramatically at that, gold producers will eventually deplete existing defined resources and production will have to decline.

For the exploration industry, it's time to get on our game face!

Western Alaska

Zazu Metals Corp. announced additional drilling results from its Lik deposit. Four drill holes were targeted at the transition between the Lik South and Lik North deposits. Holes DDH 207 returned 11.3 meters grading 2.7 percent lead, 7.7 percent zinc and 46.3 grams per metric ton silver; DDH 208 returned 16.8 meters grading 3.5 percent lead, 7.5 percent zinc and 67.6 g/t silver; DDH 209 returned 12.2 meters grading 2.7 percent lead, 7.0 percent zinc and 70.7 g/t silver; and DDH 210 returned 16.8 meters grading 3.02 percent lead, 11.2 percent zinc and 70.1 g/t silver. Additional drilling, metallurgical, engineering and environmental work continues on the project.

Cedar Creek Exploration Inc. announced additional results from its Kelly Creek gold project on the Seward Peninsula.

Initial drilling has been completed at three prospects and recent soil assays have upgraded and expanded three additional prospects to drillable status.

At the South Fox prospect, new analytical data has defined two zones with highly anomalous gold values in soils.

Zone 1 is 1,200 meters long and 50 to 150 meters wide.

It is open in two directions along strike and gold values within the anomaly are up to 284 parts per billion.

The host rocks are graphitic mica quartz schist in contact with micaceous marble.

Zone 2 is 300 meters long and 200 meters wide.

It is open along strike in one direction and gold values within the anomaly are up to 132 parts per billion.

Host rocks include carbonaceous and calcareous schist interlayered in calc-schist and micaceous marble.

At the North Fox prospect, the gold-in-soil anomaly is 500 meters long and up to 300 meters wide.

It is open in two directions along strike and gold values are up to 468 parts per billion within the anomaly.

There is a strong stratigraphic control as the host interval (which includes carbonaceous and calcareous schist and carbonaceous marble) is interlayered with micaceous marble.

At the Jaeger prospect, the gold-in-soil anomaly is 450 meters long and 125 meters wide.

It is open in two directions along strike and gold values are up to 125 parts per billion within the anomaly.

The host rocks include carbonaceous and calcareous schist in contact with schistose and micaceous marble.

On the diamond drilling front, the company has completed over 3,000 meters of drilling including 12 holes totaling 1204 meters at the Kelly Creek Zone 1 prospect, 6 holes totaling 616 meters in the Kelly Creek Zone 2 prospect,4 holes totaling 473 meters at the Wolf prospect and 7 holes totaling 748 meters at the Wolverine prospect.

Initial drilling confirms that carbonaceous and calcareous fine-grained schist and interlayered dark carbonaceous marble are important host rocks at Kelly Creek, Wolf and Wolverine prospects.

Assays are pending.

NovaGold Resources and Barrick Gold are expected to complete a revised feasibility study for the Donlin Gold project in the second half of 2011.

The study will include the use of natural gas, which would provide a lower-cost fuel source for on-site power generation.

The natural gas option would require building a 315-mile-long, 12-inch buried pipeline from Cook Inlet to the mine site.

The partners then plan to prepare and file construction and operations permit applications for the project, now estimated to carry a capital cost of about $6 billion.

Proven and probable reserves at the project now stand at 33.59 million ounces in 467.7 million metric tons grading 2.23 grams per metric ton gold.

Additional measured and indicated resources include 4.29 million oz in 39.8 million metric tons grading 3.36 g/t gold and an additional inferred resource of 4.41 million oz in 58.4 million metric tons grading 2.35 g/t gold.

Let me save you the trouble: total Donlin Creek resources in all categories tally up to a galaxy-class 42.29 million oz.

Fire River Gold Corp. announced that by late August the mine had shipped over 30 metric tons of copper concentrate containing 18 percent copper, 779 g/t gold, and 398 g/t silver.

The concentrate contains higher grades with lower moisture content than shipped when the mine was in operation in 2007.

Gravity separation has recovered approximately 500 ounces of gold in the gravity concentrate, which will be poured into a 30-kilogram dore bar.

Total gold recovery has averaged 78 percent (24 percent from gravity and 54 percent in the copper concentrate) which is close to forecasts.

The mine is currently producing about 170 metric tons per day at a grade of 18 g/t gold.

The mine and mill should be fully operational and near capacity at 150 tpd of fresh ore from the mine by the end of October.

By late spring of 2012, ore feed from the mine will be supplemented by recovering an additional 100 tpd of tailings from an existing tailings pond, which grades approximately 7.6 g/t gold.

The company had received a US$1.8 million advance payment for the first 42.6 metric tons of copper-gold concentrate shipped from the project.

And the company announced results of on-going exploration/development drilling, including hole N11-163 which returned 4.6 meters grading 66.4 g/t gold, 76.8 g/t silver and 4.1 percent copper and hole N11-175 which returned 3.5 meters grading 110 g/t gold, 21.6 g/t silver and 1.2 percent copper, including 1.9 meters grading 205 g/t gold, 40 g/t silver and 2.2 percent copper.

Surprising to some, not so surprising to others was the news that Northern Dynasty minerals ltd. is looking to sell its 50 percent interest in the Pebble copper-gold-molybdenum project. Not surprising given the high profile nature of the project and that fact that, when the 2011 budget has been consumed, the Pebble Partnership (Northern Dynasty and partner Anglo American plc) will have expended US$410 million on the project since the partnership was established in 2007. The article that Reuters put out announcing this not-so-newsworthy-news was full of misleading tripe that has plagued this property since Northern Dynasty first acquired the project.

In a refreshingly frank news release, Millrock Resources Inc. updated its activities at its Humble property in the Togiak Terrane about 80 kilometers (50 miles) northeast of Dillingham, Alaska. The planned drilling program commenced in mid-August, but the company said it "has been problematic and has progressed poorly." Kinross Gold Corp. is funding exploration work to earn a majority interest in the project. Operations are continuing at this point, but it is uncertain how much useful information will be extracted from the drilling. Surface geochemical sampling was completed over the entire land package with assays pending.

Interior Alaska

Miranda Gold Corp. announced that Agnico-Eagle USA Ltd. commenced drilling on Miranda's Ester Dome project in the Fairbanks District.

Agnico plans to drill about 4,500 feet in six holes.

Drilling is designed to test an approximately 5,900-feet-long-by-590-1,640-feet -wide northwest trending soil anomaly associated with a cluster of intrusive plugs and dikes cutting quartzite and schist.

The soil anomaly is defined by a 20-parts-per-billion gold contour and contains surface values in soils from non-detectable to 1.0 g/t gold.

Assays received from rock samples in the area range from non-detectable to 18.3 g/t gold.

Stockwork quartz veining has been observed in drill road cuts.

Small placer gold workings are located in drainage immediately down slope from the soils anomaly.

The most recent drilling on the project was in 1998 when Placer Dome Exploration intersected 6 meters of 92.6 g/t gold with an additional 3 meters of 17.6 g/t gold in two holes.

The latter intercept was in the last hole drilled by Placer Dome and is within the southern edge of the soil anomaly.

Millrock Resources Corp. has announced core drilling results from the Uncle Sam gold project. Significant results from the Lone Tree prospect included hole LT-001 which returned 1.06 g/t gold over 6.8 meters, hole LT-005 which returned 0.58 g/t gold over 33.83 meters. Host rocks for mineralization include both metamorphic rocks (schist, gneiss) and, to a lesser extent, granitic intrusive rocks with the best mineralization associated with faults and shear zones. Assay results are pending on a property-wide soil geochemical survey completed earlier in the year.

International Tower Hill Mines Ltd. released an updated resources estimate and a revised preliminary economic assessment for its Livengood gold project.

Highlights of the updated preliminary economic assessment include a processing rate of 91,000 tpd with average annual production over the first five years of 664,000 ounces of gold and 562,000 ounces gold per year over the entire 23-year life of mine.

Cumulative pre-tax cash flows came in at US$3.1 billion with a net present value of US$1.2 billion (at a 5 percent discount rate).

The internal rate of return was 14.1 percent with a payback period of 4.9 years using a base case gold price of US$1,100 per ounce.

The estimated initial capital cost was US$2.19 billion, including US$323 million in contingency and owner's costs and an additional US$585 million in sustaining capital costs over the 23-year mine life.

Average cash cost of production was US$557 per ounce over the first five years of production and average life of mine cash cost was US$703 per ounce.

As for the new resource estimate, at a 0.22 g/t gold cut-off, which is about the average grade for the heap leach option described in the company's recent preliminary economic analysis, the project contains measured and indicated resources of 933 million metric tons grading 0.55 g/t gold, containing 16.5 million oz gold.

The deposit contains an additional inferred resource of 257 million metric tons grading 0.50 g/t gold, containing 4.1 million oz gold.

The Livengood deposit now contains total resources of 20.6 million oz gold, making it only the second Alaska gold deposit to reach this world-class size (Donlin Creek is the other).

The current surface mine resource is largely constrained by lack of drilling on the current resource limits, suggesting significant expansion potential remains.

Corvus Gold Inc. and joint venture partner First Star Resources Inc. announced an update of its activities the LMS project.

A phase 2 drill program included seven drill holes (2,332 meters) with assays pending.

First Star intends to commence phase 3 drilling in September with the aim of producing a resource estimate on the project in 2012.

Significant results to date include a 250-meter extension of the known mineral deposit confirming at least 700 meters of down-dip continuity, with the deposit still open, extension of the main alteration and mineralization system 500 meters to the west and completion of an airborne LIDAR survey which identified a number of anomalies and structural targets for future follow-up.

Alaska Range

Corvus Gold Inc. and partner Ocean Park Ventures Corp. announced additional results from 897 grab and chip rock samples from the Golden Range target on their Chisna project.

Gold values from these samples ranged up to 79.8 g/t gold and averaged 1.37 g/t gold.

A total of 152 of these samples returned greater than 1 g/t gold and 34 samples returned greater than 10 g/t gold.

Gold mineralization at the Golden Range target is hosted in sheeted, silicified and sulfide-bearing vein systems with thicknesses from less than 1 meter to more than 20 meters.

Mineralization is associated with a major northwest-trending structural system traced over 9 kilometers (5.6 miles).

Diamond drilling is still in progress with results pending for most of this work.

Rhyolite Resources Ltd. announced initial assay results from the first hole drilled at the Low prospect on its Paxson gold project. Significant results from hole WG11-05 include 3.2 g/t gold over 2.4 meters and an additional 1.9 g/t gold over 27.4 meters. Assays are pending on additional drilling conducted on the project.

Alix Resources Corp. announced an update on the 2011 program at its Golden Zone gold-silver-copper property in the Valdez Creek District.

A total of 1,943 meters of HQ core were drilled in 12 holes at the Riverside, Breccia Pipe, GAS, Long Creek and BLT Zone prospects.

Two deep holes were completed at the Breccia Pipe deposit to test the mineralized breccia pipe at depth and to provide mineralized material for future continued metallurgical testing.

Both of the holes encountered significant widths of visible mineralization in brecciated intrusive rock to their respective bottoms (309.2 and 264.9 meters).

In addition stream sediment sampling consisted of 185 new samples along with 14 stream sediment samples.

Upgraded geologic and hydrothermal alteration mapping was conducted on the GAS, Long Creek, South Long Creek and Geoff's anomaly prospects.

A total of 308 soil samples were collected in three grids and a line at the Long Creek, GAS, GAS East and Geoff's South areas.

Other prospects drilling in 2011 include the Riverside, Gas, Long Creek Assays are pending.

Kiska Metals Corp. reported additional data from its Whistler project.

Significant results include hole WH11-033 which returned 218 meters averaging 0.55 g/t gold, 3.87 g/t silver and 0.11 percent copper (0.83 g/t gold equivalent) from the Raintree West target, hole WH11-034 returned 77.3 meters averaging 0.58 g/t gold, 1.6 g/t silver and 0.19 percent copper (0.99 g/t gold equivalent) from the Raintree North target.

At the Island Mountain prospect, hole IM11-018 in the Breccia Zone averaged 0.73 g/t gold, 2.50 g/t silver, 0.11 percent copper (1.00 g/t gold-equivalent) over 135 meters, effectively extending the Island Mountain Breccia Zone 100 meters to the west.

Breccia Zone mineralization has now been intersected over a 250-by-150 meter area and to depths of 400 meters.

Other targets drilled in the Island Mountain area include the Super Conductor and Tea Cup prospects.

The Super Conductor anomaly covers a large area measuring 1,100-by-2,100 meters on the east flank of Island Mountain in largely overburden covered terrain.

Hole IM11-21, drilled into this anomaly, returned two gold-bearing intervals that averaged 0.61 g/t gold equivalent over 21 meters and another averaging 0.45 g/t gold equivalent over 30.0 meters.

To the west of Island Mountain, drilling at the Tea Cup anomaly intersected the weak to moderate gold-copper mineralization including 35.5 meters that averaged 0.58 g/t gold equivalent in hole IM11-17.

Brixton Metals Corp. announced commencement of exploration work on its Kahilt property in the western Alaska Range. Exploration will be focused on the St. Eugene porphyry gold-copper prospect where initial work will consist of soil and rock geochemical surveys and geological mapping. The St. Eugene prospect is a 5-kilometer-by-2-kilometer (3-mile-by-1.24 mile) anomaly, as defined by alteration and soil-rock geochemical surveys. Rock grab samples have returned up to 2.2 g/t gold and 1 percent copper to date.

Redstar Gold Corp. has announced commencement of drilling at its Unga Island epithermal gold project near Sand Point. Details regarding this program were not released.

Northern Alaska

Andover Ventures Inc. announced final assay results from drill holes at its Sun volcanogenic massive sulfide project in the Ambler District.

Significant results from the Sun deposit include hole Sun 11-28 which returned 10.01 meters grading 2.56 percent copper, 0.81 percent lead, 4.47 percent zinc, 63.8 g/t silver and 0.22 g/t gold.

Drill hole Sun 11-28 was drilled in a 250-meter wide gap in the Sun deposit and indicates continuity of grade between the two sides of the deposit.

Below the massive sulfide noted above, this hole intersected abundant stringer chalcopyrite and sphalerite suggestive of the feeder zone for the deposit.

This stringer zone included 6.45 meters grading 1.19 percent copper, 0.20 percent lead, 1.05 percent zinc, 22.0 g/t silver and 0.003 g/t gold.

The company intends to calculate updated resources for the project to be released shortly.

Southeast Alaska

Quaterra Resources Inc. and Grande Portage Resources Ltd. announced additional drill results from the Herbert Glacier gold project near Juneau. Significant results include hole 11D-1 which returned intersected 3.05 meters averaging 2.314 ounces of gold per ton and 3.1 ounces of silver per ton including 0.71 meters of 6.628 ounces of gold per ton and 5.61 ounces of silver per ton. The company also indicated that visible gold was observed in two of seven holes drilled about 500 meters west of hole 11D1. Assays on these new holes are pending.

Heatherdale Resources announced that it has earned its 60 percent interest in the Niblack volcanogenic massive sulfide deposit from Niblack Mineral Development Inc. Since its formation in June 2009, the joint venture has completed about 130,000 feet of underground drilling at the project. The partner also announced that the project had received priority permitting that allows the joint venture to drill test several high priority exploration targets located on federal lands designated as inventoried roadless area.