Vancouver —
Last year the company acquired the leasehold rights to the past-producing McDermitt-Cordero mines, which produced mercury in the form of cinnabar (HgS) and corderoite (Hg3S2Cl2). The Cordero mine operated from 1930 until 1970 and produced more than 115,000 flasks of mercury (1 flask = 34.5 kg) from underground operations, as well as from small pits along strike. The McDermitt open pit, which was operated by Placer Dome between 1975 and 1989, produced more than 400,000 flasks of mercury, and reserves were pegged at 460,000 flasks.
In May of last year, Gold Canyon performed due-diligence sampling on the Cordero property. Twenty-nine rock samples were taken from the B and G pit areas and analyzed. Results indicated high-grade gallium mineralization, with a peak value of 145.6 grams gallium per tonne. Samples from new zones, which had not previously been sampled, returned up to 222.6 grams per tonne. All of the samples taken along the M-fault zone at Cordero averaged 82.5 grams gallium per tonne.
The metal gallium resembles aluminum, though it has several unique properties that make it highly valuable to the computer and communications markets. The largest single use of the metal is in the form of gallium-arsenide semiconductors. It is used in integrated circuits in cell phones, power converters, microwave amplifiers, satellites and satellite dishes, as well as missile guidance systems. Emerging technologies are utilizing the metal for opto-electronics — more specifically, light-emanating diodes (LEDs), blue lasers, fibre optics, light and heat detection photo cells, and night vision devices. In medicine, gallium nitrate is used to scavenge aluminum from bones and other tissues in order to reverse bone loss and treat Alzheimer’s and Parkinson’s diseases.
Gold Canyon believes there is a strong market developing for gallium, and says demand should increase 20-30% through to 2004. Currently, 95% of the world’s gallium is produced as a byproduct of aluminum and zinc production.
In June 2001, Gold Canyon signed a 15-year lease, renewable for up to 15 additional years, and has rights to all metals found on the property except for gold and silver, which are retained by the owner, Tech Industries. In return Gold Canyon paid Tech US$5,000 accompanied by a 3% net smelter return royalty (NSR). In addition, the junior explorer assumed a 1% NSR payable to Cordero Mine. The agreement stipulated that Gold Canyon is to pay advance minimum royalties totalling US$7,000 in year one, US$8,000 in year two and US$10,000 throughout the remaining term of the assignment, which would be credited against any future royalties.
The Cordero property consists of 17 whole and fractional unpatented mining claims, which cover the northeast-trending M fault zone. This zone measures 1,700 by 135 metres and remains open along strike.
More claims
Gold Canyon subsequently picked up 70 unpatented claims from Tech Industries, and these are contiguous with the Cordero claims. This property, dubbed Caley, is subject to a lease agreement similar to that which is in effect at the Cordero claims. The company says these claims would provide enough space for mine infrastructure if necessary.
More recently, the junior staked ground that covers roughly 300 acres around the Cordero and Caley claim groups. These claims cover an area that may represent an offset extension of the mineralization identified on the Cordero claims.
The McDermitt open pit and Cordero underground mine are situated about seven miles southwest of the town of McDermitt. Access is provided by paved and gravel roads from town. Powerlines and well water are easily accessible. Annual rainfall is less than 10 inches, occurring through the spring and summer, and temperatures range between minus 10 in the winter and 100 in the summer.
The property lies on the southeastern margin of a saucer-shaped volcanic vent known as the Cordero Caldera complex. Numerous past-producing mercury mines and prospects dot the periphery of the caldera. The caldera floor is flat, whereas the hills that form the rim rise up to 3,000 ft. above the valley floor.
Geology
The McDermitt caldera complex consists of five nested calderas. These host extensive mercury, lithium, and uranium deposits in an area that measures about 45 by 35 km. Basement rocks consist of Mesozoic-aged granodiorite and sediments overlain by Tertiary-aged basalt, andesite and dacite volcanic flows. A younger period of explosive rhyolitic volcanism formed the calderas and deposited five cycles of welded tuffs.
The vertical extent of oxidation in the Cordero mine area reaches depths of 300-500 metres, depending on the proximity to permeable fault zones. The M-Fault is exposed in small pits, as well as at the larger Corderito and McDermitt pits.
In August 2001, Gold Canyon began mapping and sampling and subsequently identified three more gallium-bearing zones, which are believed to be unrelated to the M fault zone. These are named North Ruja, Southwest Extension and White Hills.
In October, the company kicked off a first phase of reverse-circulation drilling in order to test targets along the M fault zone, as well as at the North Ruja and Southwest Extension zones. Thirty drill holes, or 2,769 metres, were completed to an average depth of 95 metres.
The two highest-grade intercepts occurred in holes C-6 and C-15. Hole C-6 cut 114 metres averaging 60 grams gallium per tonne starting from surface. Included within this intersection was a 21-metre interval averaging 136 grams gallium, as well as a 7.6-metre section that ran 224 grams gallium per tonne. Hole C-15 cut 126.5 metres averaging 61 grams gallium per tonne, starting from a depth of 13.7 metres. This interval included a 16.7-metre section that averaged 183 grams gallium per tonne and a 7.6-metre section of 266 grams gallium. The hole bottomed in mineralization. Hole C-15 was collared 304 metres northeast of hole C-6, along strike. Both holes cut the hangingwall of the M fault zone.
Other highlights from drilling are as follows:
q Hole 1A intersected 22.8 metres averaging 60.8 grams gallium starting from a depth of 3 metres. Included was a 14.6-metre interval of 103.4 grams gallium.
q Hole 5 cut 19.8 metres averaging 66.4 grams gallium starting at 7.6 metres down-hole. This included 6.1 metres of 113.8 grams gallium and 6.1 metres of 88.5 grams gallium.
q Hole 9 intersected 120 metres averaging 34 grams gallium starting from surface.
q Hole 16 returned 67 metres grading 45 grams gallium per tonne starting at 1.5 metres down-hole.
q Hole 17 cut 27 metres grading 54 grams gallium starting from a depth of 3 metres, including 4.6 metres of 109 grams gallium per tonne.
q Hole 20 intersected 29 metres averaging 38 grams gallium starting at 3 metres down-hole, including a 7.6-metre interval that averaged 53 grams gallium.
The drilling defined two parallel mineralized zones, which exhibit continuity along strike as well as downdip. These zones dip gently to the west and southwest and are hosted in rhyolitic-to-andesitic volcanic rocks. Grades are highest within the hangingwall of the M fault zone. However, significant intercepts occur well into the footwall.
In addition to the gallium intervals, Gold Canyon recently determined that a number of rare earth elements (REEs) are present in anomalous amounts. Specifically the REEs cerium, neodymium, lanthanum and gadolinium are reported to show a consistent relationship to all the gallium-rich drill intervals the company has examined. However, Gold Canyon is unsure if it will be able to extract or refine any of the associated REEs economically. Even if it could, it would still need to market these metals.
The Cordero property also hosts 200,000-300,000 tonnes of waste rock pulled from earlier operations. Preliminary sampling indicates an average grade of 32 grams gallium per tonne.
Gold Canyon hired Kappes Cassiday & Associates of Reno, Nev.,
to perform preliminary metallurgical tests on a bulk surface sample from the B Pit. Four duplicate splits of the sample were made, and assayed results included 192, 188, 224, and 208 grams gallium per tonne. The average grade was 203 grams gallium. A 1-kg sample was then leached in an aqueous sulfuric acid solution for 24 hours. Results indicated a 70% recovery rate. The lab believes that longer leach times may result in significantly better recoveries.
Gold Canyon wants to develop a large-scale, surface, bulk-minable target capable of producing gallium as a primary product. The company is currently setting a budget and acquiring permits for the next round of exploration drilling.
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