Pacific Ridge amends Fyre Lake option

VANCOUVER – Pacific Ridge Exploration Ltd. Dec. 29 said it has amended the terms of an agreement that gives BMC Minerals Ltd. an option to purchase Pacific Ridge's Fyre Lake property in Yukon Territory.

BMC is a private United Kingdom-based resource company that is developing the Kudz Ze Kayah volcanogenic massive sulfide project in southeast Yukon. The project is designed to operate for at least nine years, producing high-grade zinc, copper, and lead concentrates with significant gold and silver credits.

The Fyre Lake property, which is located in the Finlayson Lake area of the Watson Lake Mining District in southeast Yukon, is owned 100% by Pacific Ridge. The property covers 3,352 hectares (8,283 acres) and hosts "Besshi-type" copper-cobalt-gold volcanogenic mineralization.

The potential of the Finlayson Lake Camp was recognized in the mid-1990s with the discovery of the Kudz Ze Kayah VMS deposit situated 30 kilometers (19 miles) north of Fyre Lake and the Wolverine VMS deposit 30 kilometers (19 miles) to the northeast of Fyre Lake.

Exploration to date at Fyre Lake has partially drill-defined the Kona massive sulfide deposit as well as two additional targets with potential for further VMS deposits.

According to a 2018 calculation, the Kona deposit hosts 1.8 million metric tons of surface mineable indicated resource averaging 1.4% (25,000 metric tons) copper, 0.6 g/t (32,000 oz) gold, and 3 g/t (186,000 oz) silver; plus 300,000 metric tons of surface mineable inferred resource averaging 1.3% (4,000 metric tons) copper, 0.3 g/t (3,000 oz) gold, and 3 g/t (30,000 oz) silver.

In addition, Kona hosts 1.2 million metric tons of underground indicated resource averaging 1.5% (17,000 metric tons) copper, 0.9 g/t (34,000 oz) gold, and 5 g/t (187,000 oz silver; plus 7.2 million metric tons of underground inferred resource averaging 1.7% (126,000 metric tons) copper, 0.6 g/t (149,000 oz) gold, and 4 g/t (822,000 oz) silver.

Four years ago, Pacific Ridge closed an option agreement with BMC Minerals, giving the UK company the option to acquire a 100% interest in Fyre Lake. Under that agreement, BMC was granted two options whereby it pledged to make payments of C$2.2 million in the case of a one-year purchase option, or in two years by paying C$300,000 in January 2018 and C$2.42 million two years after closing.

In addition, if the option is exercised, BMC agreed to make a bonus payment of C$1 million if, and when, BMC's Kudz Ze Kayah property achieved commercial production for one year. BMC paid a refundable deposit and initial option payments of C$375,000 (C$25,000 in November 2016 and C$350,000 in January 2017) and an interim payment of C$1.2 million in December 2018.

In April 2020, however, the juniors re-negotiated the payment schedule. Previously, the final payment to Pacific Ridge of C$1.22 million was due upon BMC obtaining production financing for Kudz Ze Kayah, but no later than Dec. 31, 2020.

Under the option's revised terms, BMC paid C$250,000 to Pacific Ridge in April 2020 and agreed to pay C$1.2 million when BMC received a Type A Water license for the development of its proposed ABM Mine (at Kudz Ze Kayah), but not later than Dec. 31, 2021.

However, BMC did make the C$250,000 payment to Pacific Ridge and will now pay C$850,000 by Dec. 31, 2022, or within 10 business days of BMC listing on an internationally recognized stock exchange, whichever comes first.

Under the new option terms, BMC will pay C$75,000 to Pacific Ridge every six months until the final payment of C$850,000 is paid, with the next payment due on June 30, 2022.

District's exploration history

The first significant modern exploration activity in the area began after the Geological Survey of Canada released a regional silt and soil geochemical survey. A follow-up geochemical sampling program undertaken by Cominco in 1993 led to the discovery of a mineralized cobble in one of the surface drainages. Ground-based electromagnetic and magnetic geophysical surveys in the vicinity identified a coincident response target, and follow-up diamond drilling in 1994 discovered the ABM deposit. Cominco completed a prefeasibility study in 1995 and won permits for mine development in 1998.

Cominco, at a time of low metal prices, then moved its focus to the Red Dog deposit in Alaska, and the KZK project remained effectively dormant until January 2015, when BMC acquired it from Cominco's successor, Teck Resources Ltd.

BMC completed a drill out of the ABM deposit in 2015, and step-out exploration drilling toward the end of the 2015 field season resulted in the discovery of the adjacent Krakatoa zone, located immediately east of the original ABM zone.

The KZK claims cover the strike extension of the ABM host stratigraphy, with the only intensive exploration work completed in the immediate vicinity of the deposit. Even then, drill testing around the deposit was limited to a maximum of about 200 meters vertical depth. As a result, the highly prospective KZK claims are considered relatively untested by modern exploration standards.

A mine at Kudz Ze Kayah

The Kudz Ze Kayah project area lies some 23 kilometers (14 miles) south of Finlayson Lake and 25 kilometers (16 miles) west of the shuttered Wolverine mine.

The KZK project comprises five blocks of mineral claims – the KZK claim block (BMC – 100%), centered on the ABM deposit; the Pelly claim block (BMC – 100%), located immediately adjacent to the Wolverine mine; the Fyre Lake claim block, comprising the Fyre Lake (option to purchase) centered on the Kona deposit; and the Tsa Da Glizsa claims (BMC – 100%); and the Wolf claim block (BMC – 100%), centered on the Wolf deposit.

The 159-square-kilometer (61.4 square miles) KZK claims encompass the ABM deposit and the nearby GP4F occurrence. Both the ABM deposit and massive sulfide mineralization at GP4F are of the volcanic-hosted massive sulfide (VHMS) mineralization style.

The ABM deposit is estimated to contain probable reserves of 13.4 million metric tons averaging 0.9% copper, 1.5% lead, 5.9% zinc, 1.3 g/t gold, and 131 g/t silver, with 125,800 metric tons copper, 207,200 metric tons lead, 789,800 metric tons zinc, 559,000 ounces gold and 56.6 million oz silver in contained metal.

ABM's indicated mineral resource is 18.3 million metric tons of grade 0.9% copper (164,000 metric tons), 1.9% (345,800 metric tons) lead, 6.3% (1.15 million lb) zinc, 1.4 g/t (827,200 oz) gold, and 148 g/t (87.3 million oz) silver. It also hosts an estimated inferred resource of 800,000 metric tons, grading 1% (8,000 metric tons) copper, 1.7% (13,300 metric tons) lead, 7.2% (57,800 metric tons) zinc, 1.2 g/t (29,600 oz) gold, and 148 g/t (3.7 million oz) silver.

BMC Minerals reported completion of an updated positive feasibility study for its proposed ABM Mine at Kudz Ze Kayah in November 2020 that followed up on an initial feasibility study reported in June 2019.

Described as a silver dominant polymetallic mine (with exceptional credits from zinc, gold, and copper), the proposed ABM mine will require US$376 million in capital to achieve production and is estimated to have a mine life of nine years, after-tax net present value of US$617 million and internal rate of return of 45.9%. First production is anticipated in late 2023.

"The updated feasibility study confirms development of a project (at ABM) with mining and processing occurring at an average rate of 2 million (metric tons per year), with ore mined from both open pit and underground, (and) being treated through a concentrator processing facility to be located adjacent to the mine," said BMC Minerals President Scott Donaldson.

No buyer for Wolverine

PricewaterhouseCoopers, the receiver appointed in August 2019 for the assets and liabilities of bankrupt Yukon Zinc Corp., owner of the defunct Wolverine Mine, recently told the Yukon Supreme Court that it is unlikely to find a buyer for the troubled property and intends to transfer the mine back to the Yukon government by fall of 2022.

The receiver went to court last fall to get authorization to borrow another C$850,000, on top of previously approved charges of C$14.5 million needed to carry the derelict mine through to March 2022.

PricewaterhouseCooper had undertaken a detailed sale process for Wolverine but was unsuccessful in securing a buyer for the long-troubled mine.

Wolverine was one of the early mines permitted by the northern territory after its devolution in 2003, and, thanks to the transfer of responsibility from the federal to the territorial government, the Yukon government is responsible for clean-up costs for all mines it permits.

Yukon Zinc, a quasi-state Chinese company, operated Wolverine for three years before shuttering the mine in January 2015.

Since the receiver took over, the mine's care and maintenance costs have averaged about $350,000 per month or $4.2 million per year. PricewaterhouseCooper has notified the court of its intention to begin to transfer the mine back to the Yukon government by next fall if all goes as planned.

CORRECTION: This article was updated on Feb. 2, 2022 to accurately and correctly state the current mineral resource estimates for the Kona, ABM, and Wolf deposits. The previous resources included in the article were outdated. North of 60 Mining News apologizes for any confusion this might have caused.