Midway sparks Tonopah revival (March 17, 2003)

Vancouver — Drill results from the Midway prospect have intensified interest in exploring for gold in Nevada’s Nye Cty.

Midway Gold (MDW-V), previously known as Red Emerald Resource, holds the property with Newmont Mining (nem-n). Last year, the latter inked a deal to earn a 51% interest by spending US$8.8 million on exploration and development. The major can acquire a further 19% by delivering a feasibility study.

Situated 24 km northeast of Tonopah, the low-sulphidation epithermal gold prospect was previously held by Kennecott, a division of Rio Tinto (RTP-N), and consists of four previously identified zones, three of which — Discovery, 121 and 63-77 — are open in all directions.

Midway lies between the famous Tonopah mining district, to the south, and the venerable Round Mountain gold mine, to the north. Tonopah and Round Mountain were considerable producers in the first half of the past century, and the latter lives on as a heap-leach operation under Kinross Gold (K-T) and Barrick Gold (ABX-T).

Although Midway pales in comparison, it is not for want of trying. Houston Oil & Minerals was first on the scene in the 1970s, followed by Coeur d’Alene Mines (CDE-N), Rio Algom and finally, in the 1990s, Kennecott Exploration and its partner, Tombstone Explorations (TSO-T).

Last year, Midway Gold carried out drilling designed to define a resource at the Discovery and 121 zones. Highlights include 37.2 metres averaging 3.97 grams gold per tonne, starting at a down-hole depth of 39 metres, in hole 269 on the 121 zone. This included a 3.8-metre section that averaged 26.13 grams gold. On the Discovery zone, hole MW-260 cut 7.3 metres averaging 18.12 grams gold starting at 92.3 metres down-hole, while hole MW-253 cut 1.5 metres of 131.4 grams gold starting at 87.5 metres down-hole.

With Newmont as a partner, the joint venture has increased its land position to 125 sq. km. The claims now cover the projection of the Discovery zone trend, a distance of 23 km.

The Midway property is covered by alluvium, underneath which lies the favourable tuffaceous rhyolites of the Tombstone formation and older sedimentary rocks of the Palmetto formation. Subvertical dykes emplaced during the Upper Cretaceous intrude the Palmetto units. Hills to the east, north and south represent trachyandesite flows left over from the Miocene. The average thickness is 3-4 metres, though beds can thicken to as much as 300 metres.

Gold is mainly found in a silicified portion of the rhyolite sequence, and, to a lesser extent, in a similarly altered argillite unit of the Palmetto formation. Regional extensional faulting provided the conduits for the hydrothermal fluids, but mineralization is pervasive.

The newly formed partnership has launched a 9,100-metre drill program, the objective of which is expansion of the mineralized zones beyond the Discovery zone. So far, results from 14 of the holes have been received, and these confirm that gold mineralization extends more than 1 km southeast from the Discovery zone. The best values came from hole 289: 34.8 metres grading 1.96 grams gold from 46.8 metres, including a 4-metre section running 12.2 grams gold. Other highlights include the following:

r Hole 287 — 5.2 metres grading 0.62 gram gold from 24.4 metres.

r Hole 288 — 1.5 metres grading 0.4 gram gold from 15.8 metres.

r Hole 290 — 1.5 metres grading 0.9 gram gold from 71.6 metres.

r Hole 293 — 3 metres grading 1.06 grams gold from 30.5 metres.

r Hole 294 — 4.6 metres grading 1.82 grams gold from 83.8 metres.

r Hole 297 — 3 metres grading 1.26 grams gold from 41.1 metres.

r Hole 299 — 2 metres grading 4.49 grams gold from 90.5 metres, plus 6.7 metres grading 11.24 grams gold from 127 metres.

Hole 300 — 13.7 metres grading 1.08 gram gold from 62.5 metres.

The partners are preparing to drill-test the Midway North target, where prospecting yielded values of up to 3.56 grams gold from rhyolite float.

Meanwhile, Placer Dome (PDG-T) has signed a deal to acquire the Stonewall project from Pacific Intermountain Gold Co., a 75%-owned subsidiary of Seabridge Gold (SEA-V).

Stonewall is in the Tonopah trend, about 22 km southeast of Goldfield. Previous exploration discovered a series of quartz veins occupying concentric ring fractures of a Tertiary caldera. These veins range from 0.3 to 20 metres wide and show strike lengths of greater than 2 km.

Under the deal, Placer must pay US$300,000 over three years. Anytime during the option, the major can buy the property for 10,000 oz. gold or its cash equivalent. The vendor retains a sliding-scale net smelter royalty based on the gold price, which ranges from 2% when the price of bullion is less than US$300 per oz. to 9% with it is above US$900 per oz. The option agreement is subject to a due diligence period, which ends on June 30.

“With junior companies, we are entering into traditional joint-venture agreements whereby our partner can acquire a working interest in the property by making option payments in cash and/or shares and funding exploration work on the property,” says Seabridge President Rudi Fronk. “With companies that are proven producers, our aim is to generate gold flow from our exploration projects.”

Late last year, Seabridge’s subsidiary dealt a half-interest in the Thunder Mountain gold project to Castleworth Ventures (WTH-V). The project is immediately adjacent to the Midway discovery and hosts Tertiary volcanic rocks with hydrothermal alteration surrounding quartz veins.

Castleworth can earn its interest by spending US$1.5 million and issuing 1.5 million shares over three years.

The Thunder Mountain project lies along the western edge of the Hannapah mining district in the Tonopah Trend portion of the Walker Lane structural zone. The deformation zone is characterized by a series of parallel-to-sub-parallel northwest-trending strike-slip faults extending for several hundred kilometres, paralleling the Nevada-California border, south of Lake Tahoe.

The Tonopah trend is orientated east-west and defined by low-sulphidation epithermal gold-silver districts along the major Warm Springs and Kawich-Toyaibe lineaments.

Mineralization occurs along both west-northwest and north-south structural zones and comprises quartz and quartz-carbonate vein textures indicative of the upper levels of a low-sulphidation epithermal mineral system.

In the 1960s, the property was mined, on a small scale, for gold and silver. Activity was focused on a pronounced ridge of silicified rhyolite that hosts a series of high-level epithermal veins. Sampling of the historic workings returned up to 31.8 grams gold and 4,656 grams silver per tonne.

A 2,000-metre drill program is to begin by the end of the month, with the first two targets lying at projected structural intersections on the margins of a rhyolite intrusion and hydrothermally altered zone.

Golden Arrow

Moving 32 km southeast of the Midway ground, Pacific Ridge Exploration (PEX-V) has inked a deal to earn a 60% stake in the Golden Arrow property.

Says President John Brook: “The Golden Arrow meets these criteria. For the past six months, Pacific Ridge has been searching for an opportunity to participate in an advanced-stage gold project with drill-indicated target potential for a million-ounce resource, a mining-friendly location and terms allowing earn-in to a majority interest.”

Some 260 holes within a 1.5-by-4.5-km target area have resulted in a preliminary resource of 11.2 million tonnes grading 1.21 grams gold. With localized intercepts of up to 58.16 grams gold over 4.6 metres, Pacific Ridge believes previous explorers overlooked the higher-grade sections.

Under the deal, Pacific Ridge can earn a 25% interest by staged payments totalling US$300,000, issuing 1.2 million shares and spending US$2 million by the end of 2004. The junior can then pick up a half-stake by paying US$250,000, issuing 400,000 more shares and spending another US$2 million by the end of 2006. To assume a 60% interest, it must spend an additional US$2 million by the end of 2007.