Speculation runs high on Battle Mountain-Cortez trend

Elko, Nev. — The search for gold along the Battle Mountain-Cortez trend in north-central Nevada has been re-energized by the Cortez Hills discovery, a 7.5-million-oz. oxide deposit that is still being drilled off by partners Placer Dome (PDG-T) and Rio Tinto (RTP-N).

Since the inception of the original joint venture, more than 40 years ago, the Cortez geology team has found close to 37 million contained ounces on the mine property in the measured and indicated category, including 28 million oz. that were proven and probable. Placer is the operator and owns 60% of the Cortez mine and joint-venture area of influence. The remaining 40% is held by Rio Tinto.

The linear array of deposits in Nevada has led to a naming convention that incorporates a geographic reference point, giving rise to the Carlin trend or the Battle Mountain-Cortez trend. These trends are generally interpreted to reflect deep-seated crustal structural control on fluid flow and deposition of metals. The intersection of these projections with cross-cutting structures and the presence of favourable host rocks are the key to guiding exploration efforts.

It is the Carlin-type sediment-hosted gold mineralization, found predominantly at the transition between the base of the Devonian Wenban limestone and the top of the Silurian Roberts Mountains formation, that can deliver big, bulk-minable deposits at fairly high grades.

Several junior companies are well-positioned in the Battle Mountain-Cortez trend along established and projected extensions of known structural corridors. Victoria Resource (VIT-V) has assembled a land package in the trend by acquiring the rights to the Mill Canyon and Hilltop-Slaven properties from Newmont Mining (NEM-N) in early 2003.

The southwestern property boundary of Mill Canyon is less than 2 km from the Cortez Hills discovery. It covers the projected northern extension of the Horse Canyon and ET Blue corridor, sub-parallel to Cortez. Previous exploration had identified two zones of skarn-related mineralization containing small inferred resources. In August, Victoria closed a $4-million private placement offering priced at $1.65 with majority shareholder Bema Gold (BGO-T), and as a result, the drills continue to turn at Mill Canyon. Bema owns a 33% position in Victoria.

The junior can earn a 100% interest in Mill Canyon by making staged payments totalling US$300,000 cash and 500,000 shares over two years and spending US$2 million over five years. Newmont retains a 3.5% net smelter return royalty (NSR) and back-in right to a half-interest, which can be exercised starting in 2006 or on completion of $5 million in expenditures. Newmont can enter into a joint-venture partnership by reimbursing Victoria for 250% of its expenditures to that date.

Drilling to date by Victoria has identified two target zones: Open Cut and RJR. An initial 10-hole program concentrated on the Open Cut target, a previously drilled, large, decalcified area in a promising structural environment. High-grade gold mineralization was intersected near-surface in eight of the 10 holes, including: 7.6 metres of 24.5 grams per tonne in hole 6; 3.1 metres of 59 grams in hole 8; 25.3 metres of 9.9 grams in hole 9; 11.9 metres of 27.8 grams in hole 10, 3.1 metres of 67 grams in hole 12; and 7.6 metres of 35.5 grams in hole 13.

Victoria stepped-out more than 820 metres to test a new target area, the RJR zone, where it intersected a 355-metre thick zone of intense alteration and mineralization some 265 metres below surface. A 25.9-metre section averaged 10.4 grams starting at a depth of 503 metres. A follow-up hole encountered anomalous values over a 249-metre-long section. Drilling will continue to test the Open Cut zone at depth and further explore RJ.

Hilltop-Slaven is a second package of ground, covering 130 sq. km of “checker board” claims surrounding Cortez’s Hilltop mine at the northern end of the trend. The Hilltop-Slaven property is covered by a lease agreement in which Victoria must spend US$5 million on exploration over seven years. Newmont retains a 51% back-in right. The company has carried out preliminary geological mapping and geochemical sampling across the group of claims. Victoria is trading around $1.45 in a year range of $2.30-66.

Coral Gold Resources (CGR-V) holds interests in a parcel of four properties covering 44.5 sq. km of mineral claims just north of the Pipeline-South Pipeline mining complex. This strategically located package was originally acquired by Coral in 1986 through its U.S. affiliate, Coral Resources. Over the past 18 years, Coral and its various partners have spent more than $25 million exploring the ground.

The package of properties includes: the core Robertson group of claims that are wholly owned; a carried 39% interest in the Excluded claims held by the Cortez joint venture; and a two-thirds stake of the Norma Sass and Ruf properties.

The properties are in the historic Tenabo gold mining district, in a series of low foothills on the extreme eastern flank of the Shoshone Range, 100 km southwest of Elko. The Robertson package of properties has seen a fair amount of exploration, including the drilling of at least 1,100 holes totalling 124,440 metres.

Gold Pan

In the late 1960s, the search for porphyry-style targets led to the discovery by Superior Oil of the Gold Pan zone — a small, shallow zone of high-grade gold mineralization. Superior was followed by a succession of companies, including Placer Development, Teck, Aaron Mining and E&B Exploration through the 1970s and early 1980s. These companies drilled a total of 19,950 metres in 270 holes on the Robertson claims.

Coral acquired control of the property in 1986 and immediately began a series of aggressive drilling programs, completing 380 reverse-circulation (RC) and seven core holes through to 1989, for a total of 33,360 metres. Much of this drilling was aimed at the Gold Pan, Gold Quartz, Gold Quartz West and Triplet Gulch areas. In 1988, Coral began a short-lived open-pit mining operation that was based on yearly production levels of 40,000 oz. At the time, proven and probable oxide reserves were to be 10 million tonnes grading 1.37 grams gold.

Approximately 317,500 tonnes of low-grade material were placed on leach pads before mining was suspended less than a year, owing to operating problems and lower-than-expected grades. Ultimately, 6,200 oz. gold were recovered. Reclamation activities, under way since 2001, have lowered the project’s bonding requirements to US$406,000.

Amax Gold optioned the Robertson property from Coral in 1990 and spent the next six years completing a district-wide program that included 338 RC holes and 62 core holes totalling more than 53,680 metres. Amax was initially focused on testing for deep-seated gold deposits but soon switched gears in favour of shallow drilling. Several intrusion/skarn-related low-grade gold bearing zones, including Altenburg Hill and Porphyry, were discovered.

Exploration efforts concentrated on developing a bulk-minable target on the low-grade Porphyry zone as a basis for completing a bankable feasibility study in 1994. The resulting reserve of 12.2 million tonnes averaging 0.65 gram and containing 180,000 recoverable ounces, based on a 0.34-gram cutoff grade, was deemed marginal at a gold price of US$400 per oz.

A new independent resource estimate, compliant with National Instrument 43-101, shows that the Porphyry zone contains an indicated 3.5 million tonnes of 1.37 grams, equivalent to 158,000 oz., at a higher cutoff grade of 0.69 gram per tonne. The four key gold zones on the Robertson property — 39A, Porphyry, Gold Pan and Altenburg Hill — together contain an overall indicated resource of 10 million tonnes averaging 1.82 grams, equivalent to 584,000 contained ounces.

Fracture zones

Most of the identified gold resources, including Porphyry, Gold Pan and 39A, lie along or near the northern contact of an Eocene-age composite granodiorite stock, forming a general
east-west trend. Mineralization is strongly controlled by a system of low- and high-angle faults and related fracture zones. Gold occurs in highly fractured, hornfels and skarn units at or near the contacts with the granodiorite intrusion. The higher-grade 39A zone (2.5 million tonnes of 3.46 grams or 283,000 oz) is localized at the intersection of two high-angle faults in retrograde altered hornfels.

Amax withdrew from the joint venture in 1996 but maintained an earn-in right covering the “excluded claims,” which were carved out of the original Robertson block and placed under a separate option agreement.

Amax later sold its rights to the Excluded claims to the Cortez mine joint venture. The southern boundary of the strategically located claim block is only a mile north of the Pipeline deposit. Portions of the property are in the northern half of the favourable Gold Acres structural window. The Cortez joint-venture partners earned a 61% interest by conducting a series of drilling campaigns in 1997-1998 that yielded only sniffs of mineralization while testing for extensions of the Pipeline deposit along structural projections. In 2002, Coral carried out small drill programs that showed only scattered anomalous gold values in a series of closely spaced holes around some of the better intercepts of Cortez.

The Cortez joint venture also optioned the Robertson, Norma Sass and Ruf properties in 1998 but walked away a year later, when Coral would not renegotiate the original terms of the agreement. The Cortez mine partners had completed 57,000 ft. of drilling in an effort to expand the 39A zone and test several outlying targets. Of the 13 holes directed at the 39A zone, only two holes encountered significant mineralization: 40 metres of 1.71 grams and 24 metres of 5.59 grams.

Going it alone, Coral returned to the Robertson property this spring after spending much of 2003 conducting sufficient reclamation work to replace the reclamation bond Placer had guaranteed for the company. Coral completed a 10-hole RC program, once again aimed at expanding the resource of the 39A zone.

The best hole cut 59 metres of 2.02 grams gold (including a 9-metre section of 7.85 grams) along the east side of the deposit starting at 175 metres from surface. A follow-up program is planned.

The Norma Sass and Ruf claim blocks, originally carved out of the larger Robertson holdings in 1995, are currently held by Coral in a 67-33 joint venture with Levon Resources (LVN-V), a sister company sharing common directors. Coral signed an option agreement in December 2002 whereby Goldfranchise can earn a 33.3% stake in the two property bocks by spending US$300,000 on exploration by Dec. 4, 2004.

Coral gold recently underwent a 10-for-1 rollback and now has a little more than 4.6 million shares outstanding. It trades around $1.50 in a 52-week range of $6.10-1.00.

Indian Ranch

White Knight Resources (WKR-V) holds a portfolio of 13 properties covering more than 134 sq. km along the Cortez trend, including a joint venture with Placer on the Indian Ranch property, 18 km southeast of the Cortez Hills-Pediment discovery area. Placer optioned the 44-sq.-km property in March 2003 and can earn an initial 60% interest by spending US$2 million on exploration over four years. By completing a feasibility study, Placer can boost its stake to 75%. The property is currently held 75% by White Knight and 25% by Chapleau Resources (CHI-V).

Placer began drilling on the property after receiving permits from the Bureau of Land Management for an initial six holes totalling 2,000 metres. Another four holes totalling 1,000 metres await archeological clearance before drilling can begin. Placer spent the past year carrying out geological, geochemical and geophysical investigations on the property, which covers the buried southern projection of the Coal Canyon window.

“The principal stratigraphic, structural and intrusive geological features recognized in and around this window closely resemble those known within the Cortez joint venture,” according to a report by White Knight. “These include the Roberts Mountains thrust, lower-plate calcareous lithologies, intrusive bodies with contact metamorphic aureoles, widespread alteration, and a gold-arsenic-antimony-mercury geochemical signature.”

Previous drilling and mapping indicate that 26 sq. km of the property is underlain by favourable lower-plate carbonate rocks of the Roberts Mountains Formation, Rabbit Hill Limestone, Nevada Group or underlying dolomites of the Hanson Creek Formation. Gold and associated hydrothermal alteration are present across the Indian Ranch property in both upper- and lower-plate rocks.

Drilling on the property, dating back to 1987, has encountered highly elevated gold in several holes, including 183 metres averaging 0.58 gram in a 1997 hole. Prior to completing geologic studies, Placer carried out a 2-hole, 760-metre drill program in late 2003 to meet a work obligation. The holes were drilled from sites previously permitted by White Knight. One of the holes intersected anomalous gold in the Hanson Creek Formation, whereas the second hole encountered no mineralization.

Earlier this summer, Kinross Gold (K-T) subscribed to a $2-million private placement in White Knight at the price of 90 per unit, which included a half-warrant. Shortly afterwards, Goldcorp (G-T) announced it had increased its ownership of White Knight to 13.2% (up from 10.75%) through open market purchases. The junior is exploring several of its wholly owned properties along the Cortez trend, while acquiring detailed gravity and magnetotelluric survey data for key project areas, including Fye Canyon, 13 km south of Cortez Hills.

In August, a 3,000-metre drilling campaign began on the Slaven Canyon property, at the northern end of the Cortez trend in the northern Shoshone Range, 14 miles southeast of Battle Mountain and 3 miles southwest of Newmont Mule Canyon mine. White Knight staked the property in 2001 after the previous owner, Alta Gold, went into bankruptcy. The property contains a small, 70,000-oz. resource grading 1.47 grams. White Knight believes the property offers the right setting for Carlin-style mineralization.

With more than 49 million shares outstanding and $10 million in cash, the company is trading at $1.05 in a 52-week range of $1.61-50. Chapleau is around 48 in the range of 86-26.

Nevada Pacific Gold (NPG-V) has been focused on gold exploration in Nevada since its inception in 1997 and currently holds a portfolio of early-stage properties covering 155 sq. km of mineral rights in the state. The company’s land position astride the Cortez trend totals 39 sq. km.

Keystone

Nevada Pacific recently farmed-out two properties to Placer Dome under separate option agreements. Placer can earn an initial 60% stake in the Keystone gold project by spending US$5 million over five years. The major can increase its stake to 75% by completing a feasibility study. A similar deal was struck concerning the Limousine Butte project, 32 km east of Placer’s Bald Mountain mine, along the southern projection of the Carlin trend.

The Keystone property is 19 km directly south of the Cortez joint-venture boundary. Skarn-related precious and base metal mineralization have been found in both upper- and lower-plate rocks near the contact of a granodiorite stock. Historic drilling shows high levels of anomalous gold mineralization in lower-plate jasperoids.

As part of the recent deal, Placer invested $1.3 million in Nevada Pacific through a private placement priced at 97 per share. Nevada Pacific now has three properties joint-ventured with Placer, including the BMX project, which sits in the northern flanks of the Battle Mountains between Glamis Gold‘s (GLG-T) Marigold mine, to the northeast, and Newmont’s Phoenix complex, to the southwest. A 10-hole RC program last winter intercepted elevated levels of anomalous gold and base metal mineralization.

Nevada Pacific is currently targeting the 8.5-sq.-km Cor
nerstone property with an aggressive program of geochemical sampling and geologic mapping. Cornerstone is on the southern end of the Cortez trend, immediately adjacent to, and north of, the Tonkin Springs gold mine and less than 5 km east of the company’s Keystone project. The junior is trading at 95 in a year-long range of $1.62-68.

Tonkin Springs

In July 2003, BacTech Mining (BM-V) purchased a 55% majority stake in the formerly producing Tonkin Springs gold project from U.S. Gold (USGL-O) for US$1.7 million. The project covers 36 sq. miles immediately south of the Cortez joint venture, in the vicinity of White Knight’s Fye, Canyon, Pat Canyon and Indian Ranch properties.

BacTech assumed operatorship of the project and retained Micon International to determine the economics of developing a 1.8-million-tonne-per-year open-pit mine, based on a measured and indicated sulphide and oxide resource containing almost 1.3 million oz. in 26.9 million tonnes averaging 1.47 grams (the oxide component alone accounts for 186,000 oz.). In the inferred category are 152,000 sulphide ounces in 3.2 million tonnes grading 1.51 grams gold per tonne.

Conventional heap leaching is planned for the treatment of oxide ore, and bio-oxidation is proposed for the processing of sulphide material. Metallurgical tests indicate that 80% of the gold can be extracted from the both the oxide and oxidized-sulphide ore.

Minable reserves, incorporating five open pits based on a gold price of US$400 per oz., are estimated at 9.7 million tonnes grading 2.09 grams, equivalent to a 646,000 oz. The overall stripping ratio is 2.91-to-1. The study assumes 523,000 oz. will be recovered over a mine life of at least six years at a cash operating cost of US$238 per oz. Capital costs are projected at US$31.4 million and include US$20 million for new project infrastructure and a processing plant. An additional US$8.8 million is required for vat and heap construction, and US$2.6 million for reclamation bonds. Contract mining is proposed.

The feasibility study concluded that Tonkin Springs is both “technically feasible and economically viable,” and recommended commercial development.

In August, BacTech reported that results from further metallurgical tests on fresh sulphide ore samples from deeper portions of the deposit indicate that a finer crush and increased reagent consumption may be required to achieve previously stated recoveries. “These early results suggest that the production plan outlined in the feasibility study may not be achievable at the projected cost reported by Micon,” states BacTech.

The company says it is has slowed the pace of an environmental impact study pending results of the current mining and metallurgical investigations. As well, the company cancelled a previously announced $600,000 exploration program on the property in order to re-assess the lower-plate potential. Bactech is trading near the bottom of a 52-week range of $1.30-24.

Several companies hold land positions around the periphery of the Cortez joint venture, including NDT Ventures (NDE-V), J-Pacific Gold (JPN-V), Miranda Gold (MAD-V), Bravo Venture (BVG-V) and Greencastle Resources (VGN-V).

NDT Ventures farmed-out a stake on the Trend block of claims (to the south) to Sudbury Contact Mines (SUD-T), which can earn an initial 51% interest by paying US$350,000 in cash and spending US$1.5 million on exploration over four years. Geophysical surveys across the property are under way.

J-Pacific Gold has begun a limited, 600-metre drilling program to test a single target on the adjacent Golden Trend project. The company also completed a geochemical soil sampling program on the HC property, off to the east, and has applied for permitting to drill three deep RC holes. Jipangu of Japan, a controlling shareholder of J-Pacific, can earn an initial half-stake in each property by spending US$2.7 million at Golden Trend and US$1.7 million at HC.

Miranda Gold holds a package of eight properties covering 62 sq. km in the trend. Six of the properties tie directly onto the Cortez joint venture. Another of the properties, known as Ettu, on the southern end of the trend, was subsequently closed in with staking by Newmont. Likewise, Bravo Venture holds a portfolio of eight properties in the trend.

Other companies with ground on the southern projection of the Carlin trend include Minterra Resource (MTR-V) and American Bonanza Gold Mining (BZA-V). Minterra has also struck a deal with Mill City Gold (MC-V) to earn an initial 60% stake in a package of nine Nevada properties by spending US$5 million on exploration and issuing 1 million shares. Five of the properties are scattered along the Cortez trend.

X-Cal Resources (XCL-T), Mill Bay Ventures (MBV-V), Klondex Mines (KDX-V) and CMQ Resources (CMQ-V) all hold properties at the northern end of the Battle Mountain-Cortez trend.