HighGold to explore CIRI gold property

Constantine Metal Resources Ltd. May 21 said it has finalized a deal to lease the Johnson Tract gold property from Cook Inlet Region Inc., an Alaska Native regional corporation more commonly known as CIRI.

Situated about six miles west of Cook Inlet and roughly 125 miles southwest of Anchorage, the 20,942-acre Johnson Tract property hosts a gold and base metals deposit that is reminiscent of the historical Eskay Creek Mine in neighboring British Columbia and a 7.5-mile stretch of prospects that provide a gold-focused exploration company plenty of upside potential.

With Johnson Tract secured, Constantine Metal Resources is forming HighGold Mining Inc., a publicly listed junior exploration company to spin its gold properties into.

"Finalizing the Johnson Tract lease agreement is a significant milestone in the evolution of Constantine that will allow us to take the next step and spin out our high-quality gold assets in Alaska and Timmins into HighGold," said MacVeigh.

Advanced Johnson Tract

CIRI identified the gold-silver-zinc-copper-lead potential of Johnson Tract while seeking lands to select under the Alaska Native Claims Settlement Act (ANCSA).

There are two section to Johnson Tract property selected by CIRI in 1976 – South Tract, an 11,342-acre land package that hosts the main deposit and includes both surface and subsurface rights; and North Tract, a 9,600-acre section of mineral rights only with several additional high-grade prospects.

This package of private lands is situated within the Lake Clark National Park.

Following its selection of this land in 1976, CIRI was granted special rights, ratified by U.S. Congress and approved by the Alaska Legislature, that entitles the Southcentral Alaska Native corporation transportation and port easements through park lands for the development of the rich mineral potential on its inholdings.

Under a joint venture with CIRI, Anaconda Minerals discovered the Johnson Tract deposit in 1982 with a hole that cut 102.6 meters grading 10.94 grams per metric ton gold, 8.01 percent zinc, 0.75 percent copper, 2.13 percent lead and 8.5 g/t silver.

A 50-meter section of this high-grade discovery intercept averaged 20 g/t gold, 9.4 percent zinc, 1 percent copper, 2.8 percent lead and 12.7 g/t silver.

Other highlighted intercepts from drilling the Johnson Tract deposit include:

• 36 meters of 13.41 g/t gold, 2.01 percent zinc, 0.41 percent copper and 3.57 g/t silver in hole 82-7;

• 71.4 meters of 20.94 g/t gold, 5.21 percent zinc, 1.23 percent copper, 1.51 percent lead and 9.81 g/t silver in 88-34;

• 99.7 meters of 10.07 g/t gold, 6.34 percent zinc, 0.9 percent copper, 1.27 percent lead and 6.68 g/t silver in 93-65; and

• 112.2 meters of 10.34 g/t gold, 5.01 percent zinc, 0.66 percent copper, 1.48 percent lead and 6.35 g/t silver in 93-69.

In all, 88 holes were drilled on the Johnson Tract property over a 12-year span.

Two holes drilled at Difficult Creek, situated about three miles northeast of the Johnson Tract deposit, demonstrates the property's wider potential.

• DC-001 cut three meters of 7.54 g/t gold, 3.72 percent zinc, 0.11 percent copper, 1.15 percent lead and 27.4 g/t silver; and

• DC-02 encountered 13 meters of 8.57 g/t gold, 4.7 percent zinc, 0.5 percent copper, 0.9 percent lead and 37.7 g/t silver.

Difficult Creek is one of at least nine prospects areas spanning a 7.5-mile stretch of the property, most of which have seen little or no drilling.

The mineralization identified during this historical exploration is interpreted to have formed in a sub-sea floor setting that is similar to the well-known precious- and base metal-rich Eskay Creek deposit in British Columbia's Golden Triangle.

Westmin Resources Ltd., which took over exploration at Johnson Tract, considered the potential of shipping ore to a mill at its Premier Mine near the town of Stewart in northwestern B.C. for processing. Metallurgical testing at the time indicated good gold and base metals recoveries.

These plans, however, were shelved due to falling gold prices at the time and Johnson Tract reverted to CIRI in the late 1990s and has seen no further exploration over the ensuing two decades.

Agreement reached

The Johnson Tract lease agreement between Constantine and CIRI has been crafted to accommodate advanced exploration, development and mining of this advanced staged gold exploration property.

Under the lease agreement, Constantine (or HighGold) will make annual lease payments of US$75,000 to CIRI for the first five years, escalating to US$150,000 from year six until a mine is established at Johnson Tract.

A minimum of US$10 million of expenditures and at least a pre-feasibility level study for Johnson Tract over the initial 10-year term of the lease is also required, including US$7.5 million of spending during the first six years.

Following the successful completion of the initial 10-year term, the lease at Johnson Tract will transition to a development term, which provides five years to reach a production decision. During this term, annual expenditures of US$2 million are required until a mine construction decision is made.

Upon completion of a decision to develop a mine at Johnson Tract, CIRI has a one-time right to back-in to the project and participate to a maximum 25 percent interest.

CIRI will also receive net smelter return royalties of 2 to 3 percent on base metals and a gold price adjusted NSR royalty of 2.5 to 4 percent.

"We are pleased, and look forward to, working with CIRI in the exploration and development of the Johnson Tract Property," said MacVeigh.

Forming HighGold

While details of the spin-out have yet to be announced, Constantine plans to list HighGold on the TSX Venture Exchange and issue shares to current shareholders on a pro rata basis. At the same time, HighGold is expected to raise initial capital through a private placement financing.

With the gold assets moved into HighGold, Constantine will continue to focus on Palmer, an advanced staged volcanogenic massive sulfide exploration project in Southeast Alaska.

South Wall-RW, the main deposit at Palmer, hosts 4.68 million metric tons of indicated resource averaging 5.23 percent (539 million lb) zinc, 1.49 percent (154 million lb) copper, 30.8 g/t (4.2 million oz) silver, 0.3 g/t (40,900 oz) gold and 23.9 percent (1.12 million metric tons) barite; plus 5.34 million metric tons of inferred resources averaging 5.2 percent (612 million lb) zinc, 0.96 percent (113 million lb) copper, 29.2 g/t (4.5 million oz) silver, 0.28 g/t (43,600 oz) gold and 22 percent (1.17 million metric tons) barite.

A second deposit known as AG Zone hosts another 4.26 million metric tons of inferred resource averaging 4.64 percent (435 million pounds) zinc, 0.12 percent (11 million lb) copper, 0.96 percent (90 million lb) lead, 119.5 grams per metric ton (16.4 million ounces) silver, 0.53 g/t (72,500 oz) gold, and 34.8 percent (1.48 million metric tons) barite.

"The board and management believe that this structure will allow Constantine shareholders to realize the value in the gold properties while retaining the growing value that the Palmer base metals project provides," said MacVeigh.

While the HighGold leadership has yet to be announced, it is expected that some of the current Constantine Metal management will transition to executive positions of the new gold explorer.

–SHANE LASLEY