The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Texas-based explorer looks to cash in on 1.1-million-ounce gold-equivalent discovery and vast blue sky at Alaska property
Contango ORE Inc. co-founder Brad Juneau ventured to Alaska seeking natural gas; today, his Texas-based company is sitting on a gold-copper-silver deposit at its Tetlin project with an initial 1.1 million-ounce gold-equivalent resource and a 760,000-acre land package with enough "blue sky" potential to keep a mineral exploration company busy for decades.
Following five years of systematic exploration, Contango ORE Jan. 23 reported an indicated resource of 5.97 million metric tons averaging 3.46 grams per metric ton gold, 11 g/t silver and 0.25 percent copper for 783,115 gold-equivalent ounces at Tetlin's Peak zone. Additionally, this skarn deposit has an inferred resource of 3.85 million metric tons averaging 2.07 g/t gold, 14.28 g/t silver, 0.23 percent copper for 332,969 gold-equivalent ounces.
Contango ORE President and CEO Brad Juneau said, "The combination of high gold grades - over 4 g/t gold-equivalent extending to the current surface - with easy road access make the Peak Zone one of Alaska's most attractive new discoveries. Equally exciting is the fact that the Peak zone sits within, but covers less than 1 percent of, a 6.5-kilometer-by-5.5-kilometer multi-element soil anomaly known as the Chief Danny zone, where we expect further significant resources may be found going forward."
Above and beyond the nearly certain expansion of the Peak zone and the potential that other similar deposits are lurking in the 13-square-mile Chief Danny area, geochemical and geophysical programs have identified at least a dozen outlying mineral prospects scattered across the more than 760,000-acre land package Contango ORE has assembled at Tetlin.
"While we are very happy with the resource we found, we certainly don't expect that it is big enough to result in a significant mine on its own, but it is something that shows the property is capable of delivering that quality resource and we believe that it can be much larger," Juneau explained during a Jan. 31 interview with Mining News.
Despite the successes it has achieved at Tetlin, Contango ORE is ready to pass the reins to a mining company more adept at developing a mine at Peak and uncovering the vast potential of the greater Tetlin property.
"We feel we have reached the stage of proving sufficient known resources and defined upside to attract a buyer for the company," Juneau said upon releasing the initial resource.
Texas oilman strikes gold
The business-savvy of an Alaska Native chief, keen observation of a Texas-based oilman, exploration skills of a seasoned geologist and a bit of serendipity led to the discovery of an initial 1-million-ounce high-grade gold deposit at the Tetlin project in eastern Alaska.
Juneau, a petroleum engineer with a knack for finding oil and gas deposits in the shallow waters of the Gulf of Mexico, was invited north to evaluate the oil and gas potential of 675,000 acres of Native lands that lie along the overland transportation artery that links Alaska to the rest of North America.
"Chief Danny Adams, who is the chief of Tetlin Village, invited me up there because there was talk of TransCanada laying a gas pipeline from Prudhoe Bay along the Alaska-Canada Highway to tie into the (North American) grid," Juneau recounted.
The proposed route for the now tabled pipeline project would have passed through 26 miles (42 kilometers) of the Tetlin property. If his village's land had natural gas, Chief Adams wanted to seize the opportunity to get it to market.
"Being the clever businessman that he is, he wanted someone to come up and look for natural gas. And, since I am in the natural gas business, (I) was contacted by friends of the chief to go up and look at it," Juneau recalled.
It did not take the Texas oilman long to realize that the geology wasn't right for the natural gas the Native village had hoped was there, but he did think it was prospective for minerals.
With metals exploration falling outside his expertise, Juneau turned to the Alaska Division of Geological and Geophysical Surveys to locate experts in Alaska's complex mineral geology. Following up on a handful of leads provided by state geologists, Juneau convinced Curt Freeman, president of Fairbanks-based Avalon Development to take a look at what he discovered.
"He thought I was either an idiot or criminal, and wasn't quite sure which," Juneau recalled of his 2008 contact with Freeman.
While Freeman may have been skeptical of the Texas oilman's claims, a prospective job just 200 paved road miles (323 kilometers) from his office was worth a look.
It did not take long for the seasoned geologist to realize that Juneau was neither an idiot nor a criminal, but rather a prepared mind that recognized the potential of Alaska's newest gold-copper discovery.
Though Juneau was the one to identify Tetlin's mineral potential, he is quick to give Freeman the credit for the discovery.
Juneau said Freeman and his team at Avalon Development handled every facet of the exploration at Tetlin from personnel and logistics to geological interpretation and orchestrating the successful exploration programs.
"I would be silly to take credit for anything other than finding and hiring Curt Freeman from Avalon," the Contango ORE CEO told Mining News "All I did was take a lease, hire Curt and turn him loose - and funded him."
Hitting the Peak
Seeking funds to advance his vision at Tetlin, Juneau turned to longtime associate and Contango Oil & Gas President Ken Peak, who did not shy away from investing the venture capital necessary to complete the extensive reconnaissance exploration required to reveal the potential of a large and previously unexplored property. And, his Texas-based company had the means to raise these funds during a period of uncertainty for the traditional mineral exploration sector.
Under Peak's leadership, Contango Oil & Gas purchased Tetlin from Juneau, a move that funded the early stages of the project and provided a vehicle for the formation of Contango ORE.
From the reconnaissance programs carried out from 2009 through resource definition drilling in 2013, Contango ORE and its parent company have invested some US$25 million on the systematic exploration programs that led to the delineation of 1.1 million gold-equivalent ounces at the Peak deposit and the discovery of more than a dozen other prospects on which the company has yet had the opportunity to fully follow up at Tetlin.
It was in 2010, after two seasons of geochemical and geophysical programs which identified a number of promising targets across the large Tetlin property, that Contango Oil & Gas spun-out an independent company focused primarily on exploring Tetlin.
The newly formed Contango Ore opted to focus its initial drilling at Chief Danny, a nine-square-mile (23 square kilometers) prospect area that encompasses the Peak zone.
TET1105, the discovery hole at Chief Danny, cut 3.7 meters averaging 3.1 grams per metric ton gold, 300.2 g/t silver and 0.26 percent copper. TET1107 - drilled about 100 meters to the north - cut 6.4 meters grading 7.4 g/t gold, 4.9 g/t silver and 0.15 percent copper.
Encouraged by these results, Core revisited the Discovery zone in 2012.
After drilling four holes at the Discovery zone, Contango Ore drilled, in the parlance of the oil and gas industry, a wildcat hole at a geochemical-geophysical target some 500 meters to the northeast. This fifth hole of the 2012 program, TET1216, tapped the Peak zone.
The top 114 meters of TET1216 cut multiple layers of gold-copper-silver enriched mineralization, including: 25.8 meters averaging 7.83 g/t gold, 23.5 g/t silver and 0.05 percent copper; 6.7 meters averaging 3.5 g/t gold, 15.8 g/t silver and 0.54 percent copper; 13.7 meters averaging 2.77 g/t gold, 1.4 g/t silver and 0.05 percent copper; and 32.6 meters averaging 3.74 g/t gold, 2.6 g/t silver and 0.11 percent copper.
The grades and thicknesses improved over the next two holes drilled into the newly discovered Peak zone: TET1217 cut 49.1 meters averaging 11.22 g/t gold, 21.6 g/t silver and 0.09 percent copper, from a depth of 7.9 meters; and TET1218 cut 58.5 meters averaging 14.45 g/t gold, 9.1 g/t silver and 0.24 percent copper.
Particularly high-grade copper intercepts were encountered in the southeastern portion of the currently defined zone. Highlights of this drilling include 36.6 meters averaging 0.31 g/t gold 71.6 g/t silver and 1.11 percent copper from a depth of 118.9 meters in hole TET1238; and two thick copper-rich zones intercepted in hole TET1260 - 32.6 meters averaging 0.06 g/t gold, 28.7 g/t silver and 1.34 percent copper from a depth of 116.4 meters.
With the 2012 drill program outlining a sizable zone of mineralization rich in gold, copper and silver, Contango ORE set its sights on establishing a maiden resource at this exciting discovery in 2013.
Peak, who was diagnosed with a brain tumor in 2012, did not survive to see the fruition of the Alaska mineral exploration company that he had helped create.
"Ken Peak was the man who took the project to the point of discovery, through his personal investment, steadfast leadership, and faith in Curt and his team," Juneau recalled. "Sadly Ken passed away last year, and hopefully the Peak Zone will grow into a substantial mine that would be worthy of his name."
Maiden resource
Despite tough market conditions for more conventional exploration companies, Contango ORE, with ties to investors in the oil and gas industry, was able to raise US$14.2 million to fund its 2013 exploration campaign.
With its coffers full, the company invested roughly US$10.3 million on a program primarily aimed at establishing a maiden indicated resource at the Peak.
Highlights from the 69-hole drill program completed in 2013 include:
TET13062 cut 64.8 meters averaging 13.1 g/t gold, 21 g/t silver and 0.48 percent copper;
TET13063 cut 40.5 meters averaging 16.6 g/t gold, 36.1 g/t silver and 0.73 percent copper;
TET13082 cut 87.6 meters averaging 4.03 g/t gold, 19.3 g/t silver and 0.30 percent copper;
TET13088 cut 138 meters averaging 3.62 g/t gold, 11.4 g/t silver and 0.11 percent copper.
TET13098 cut 84.4 meters averaging 4.99 g/t gold, 16.7 g/t silver and 0.17 percent copper;
TET13100 cut 95.9 meters averaging 5.75 g/t gold, 6.9 g/t silver and 0.14 percent copper;
TET13107 cut 159.3 meters averaging 7.01 g/t gold, 6.6 g/t silver and 0.10 percent copper;
TET13110 cut 96.9 meters averaging 9.06 g/t gold, 4.3 g/t silver and 0.09 percent copper; and
TET13117 cut 134.8 meters averaging 4.85 g/t gold, 2.9 g/t silver and 0.08 percent copper.
While expanding and establishing an inaugural resource at Peak, the 2013 program included the continued investigation of other zones with a similar geophysical and geochemical signature.
"The Peak zone stands out as one of those really highly conductive and magnetic zones, and if you look around nearby, there are a dozen other places that you should go look because they have a similar geophysical signature," Freeman explained.
Some of these geophysical-geochemical targets are located within the larger Chief Danny area and in close proximity to the Peak zone that they resemble.
"In June 2013, we acquired new airborne data, and based on interpretation of these data, along with existing reconnaissance data, core data, and other data sources, we have identified several exploration leads both inside and outside the Chief Danny area, as well as a deeper target underneath the Peak zone," Contango ORE explains.
Tors, a promising target about five miles (eight kilometers) east of Peak, and Chisana, a prospect situated about 7 miles (11 kilometers) further east, were two of the leads that were followed up on during 2013.
More than 1,400 augur soil samples were collected from Chief Danny, Tors and Chisana in 2013 - an effort that has refined drill targets at these prospects that stretch across the northern section of the Tetlin lease.
Further afield, reconnaissance crews collected 368 stream sediment and pan concentrate samples across the Eagle property, 56,500 acres of state of Alaska mining claims extending west from the 675,000-acre Tetlin lease. While rudimentary, the visible gold in pan concentrates and copper in stream sediments is reminiscent to the early work that led to the discovery of the Peak zone, roughly 15 miles (25 kilometers) to the east.
Pan and stream sediment sampling have identified another nine targets south of Chief Danny that are in various stages of readiness, from pan samples begging for follow up to drill ready prospects.
Cashing in discovery
Contango ORE was founded on the philosophy that "virtually all the mining industry's value creation occurs through the discovery of mineral deposits that can be developed into a commercially viable ore body." But, unlike the oil and gas business from which Juneau and his company are rooted, there is a major money and time investment between discovery and recovery.
With more than 1 million ounces of gold outlined at Tetlin and ample evidence that this initial deposit likely only provides a peek at the property's potential, Contango ORE believes the Tetlin project is an attractive gold asset for a mining company.
"I have met with several industry executives and that seems to be widely accepted," Juneau told Mining News.
Contango ORE has secured the expertise of Petrie Partners Securities, a Colorado-based investment banking firm best known for its work in the oil and gas sector, to broker a deal with a mining company that can develop the Peak zone and realize the upside potential of the greater Tetlin property.
"We have a lot of faith in their ability to identify folks who will be able to do all that and help us craft a transaction where everyone benefits," Juneau said.
A merger, outright sale or joint venture are among the options being considered.
Petrie Partners will be tasked with negotiating the unlimited potential of the Tetlin property.
When asked about putting a price on the 12-plus prospects identified on the Tetlin property, Juneau told Mining News, "I don't intend to give that away."
"I am sure buyers will have their own unique prospective on how they want to value that and approach that," he added.
With a number of mining companies already showing an interest in Tetlin, Contango ORE president and CEO believes it won't be long before his company has secured a deal on the exciting gold property.
"We are already started on marketing this and I expect to have a direction with who we are going to work with relatively soon," he said.
Juneau hinted that a deal could be put together before the start of the 2014 exploration season in Alaska.
"If we are going to have a new owner or partner or both, we would certainly want to take their view into account," he explained, when asked about planning for the upcoming program.
If a deal does not materialize in time, Contango ORE entered into 2014 with more than US$4.4 million in the bank, and there are plenty of drills available to exploration companies with cash.
"The good news about this downturn is you do not need to make decisions far in advance, so we feel the timing is appropriate to go out and see if we are going to do a transaction; and if we don't, we have time to go out and do our own drilling," he said.
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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