Sudbury Contact drops Tonkin Springs (September 18, 2001)

Having completed a three-year, $2-million work commitment, Sudbury Contact Mines (SUD-T) has decided to withdraw from the Tonkin Springs gold project in central Nevada.

Sudbury Contact, a 57%-held subsidiary of Agnico-Eagle Mines (AGE-T), originally picked up a 60% interest in the 39-sq.-mile property in 1999 by acquiring Gold Capital, a wholly owned subsidiary of Globex Mining Enterprises (GMX-T).

Sudbury Contact’s partner on the project, Denver-based U.S. Gold (USGL-O), will now own the project outright.

“In the present gold environment, it was difficult to justify additional expenditures on the property,” says Sean Boyd, Sudbury Contact’s CEO. “However, we remain committed to Nevada and its potential.”

“We are sorry to see Sudbury Contact withdraw as their efforts have increased the value of the project, but we can understand that it does not meet their corporate objectives at recent gold prices,” says William W. Reid, U.S. Gold’s president, in a prepared statement

Reid says U.S. Gold will look at establishing gold production itself — first from the existing oxide gold resource and later from the larger sulphide gold resource.

The company says a 30,000-oz.-per-year oxide heap-leach operation could be cranked up relatively cheaply because infrastructure (including a new pad which could easily be modified for heap-leach operations) already exists at Tonkin Springs.

The company also plans to look at the possibility of finding a partner to aid in production, which is subject to operating permits and financing.

The property comprises 1,192 lode mining claims with 12 linear miles centred along the Battle Mountain trend. Resources stand at 1.4 million oz. gold in 31 million tons of oxide and sulphide material averaging 0.045 oz. per ton.

Recent work on the property, including geologic mapping, geochemical sampling, geophysical surveying and 63,575 ft. of reverse-circulation drilling in 107 holes, failed to increase the project’s original resource estimate. Additional metallurgical testing and a scoping study were also completed.

Open-pit production at Tonkin Springs originally began in 1985 but stalled during a US$31-million expansion project.

In 1990, a bio-oxidation and carbon-in-leach facility was constructed and production was again recommended. Since then, the operation has seen several operators.

Sudbury Contact will write down the project’s $24-million carrying value to nil in the third quarter.

“We have opened up a new regional exploration office in Reno, headed by our exploration manager Mark Abrams, and have since acquired three new properties,” says Boyd.

The company acquired the 87-claim Snowbank Canyon project, 30 miles north of Ely, Nevada.

This property is subject to a 1% net smelter return royalty payable to Inmet Mining (IMN-T).

Before Inmet closed its exploration office in Nevada, the company identified large jasperoids, arsenic, antimony, mercury and a disseminated gold system on the property. Sudbury Contact plans a drill program once surface field work is complete.

Some 20 miles south of Newmont Mining‘s (NEM-N) Rain gold mine in Nevada’s Carlin trend, Sudbury Contact recently leased the Pony Creek property. Previous drilling there has identified mineralization on the south end of a rhyolite porphyry stock. Similar mineralization was found north of the intrusive. Sudbury Contact is compiling all of the geologic data.

Sudbury Contact has also negotiated a lease on 130 lode mining claims, 43 miles northeast of Fallon, along the western front of the Stillwater Range.

The claims cover a number of gold and tungsten occurrences. Gold mineralization occurs in quartz-sulphide-calcite veins ranging up to 20 ft. thick. A two-mile, east-west-trending belt hosts the veins. It is more than 3,000 ft. wide.

Fifteen veins have been identified. Mineralization reaches to a depth of 800 ft.