U.S. REPORT Seine River to develop California gold mine

The results of a preliminary feasibility study on the newly acquired Lincoln project has management of Seine River Resources (VSE) optimistic the historic former producer can be developed into a modern, 300-ton-per- day underground gold mining operation. The Lincoln mine project, north of the California gold rush town of Sutter Creek was acquired from FMC Gold (NYSE), which in turn obtained the property when it acquired and merged with Meridian Gold (a subsidiary of Burlington Northern) earlier this year.

FMC, an open pit gold mine operator, is reported to have put the Lincoln project on the block shortly thereafter as the underground project did not fit in with its other operations.

Bern Brynelsen, president of Seine River and a renowned mine finder, called the $5-million acquisition “a real coup” and “an outstanding mining venture and company builder for Seine River.”

To acquire the project, Seine River paid a non-refundable US$500,000 deposit. The balance of the US$5 million is due to FMC Gold by the end of this month.

Brynelsen noted that US$7 million has already been spent on the Lincoln and Comet zones, two of three zones that make up the Lincoln mine project. He also said the project carries an additional nine miles of exploration property on which US$2 million have been spent.

“Just ask me if I like this deal,” said Brynelsen, who is also chairman of Brenda Mines (TSE) and a former western exploration manager for Noranda. “We were in the right place at the right time.”

Previous work on the property includes the driving of 2,800 ft. of 12% ramp and 2,200 ft. of crosscuts on the Lincoln and Comet zones. In addition, three raises were started on the “M” vein in the Comet zone.

At the rate of 300 tons per day, Seine River estimates that current reserves at an average grade of 0.34 oz. gold are sufficient for a project life of 6.5 years. The company is hoping to pay back capital costs estimated at US$15 million in one year by processing higher-grade reserves during the first 1.5 years. These reserves total 148,247 tons at an average grade of 0.66 oz. gold, after a 10% dilution factor.

“Management believes the ultimate potential for the Lincoln project is 10 times the present resources, or over two million ounces,” Brynelsen said.

The company is basing this view on the fact that other neighboring historic producers carried gold mineralization to depths of 6,000 ft. (The mining district produced 7.7 million oz. gold.) At the Lincoln project, 61,000 ft. of drilling is reported to have outlined reserves to a depth of 600 ft., so the prospects of expanding reserves to depth are considered promising.

Brynelsen said ground conditions are good, and no problems are anticipated with mining. Metallurgy is also reported to be straightforward. The prefeasibility study uses 92% as a recovery rate, but the company said initial metallurgical studies produced recovery rates as high as 95%.

Seine River is continuing the permitting process initiated by Meridian Gold, and no environmental problems or local opposition to the mine project are anticipated. Mineral and surface rights were purchased or leased for over two miles of strike length on the vein structures.

The Lincoln gold project was introduced to Seine River by the principals of Plumas Gold Mines, a U.S.-based company taken over by Seine River on the basis of a share exchange. Plumas’ key asset is a fully permitted underground placer mining project, also in the Mother Lode area of California. It is now in the startup phase of operations.

In June of this year, Seine River announced it had acquired 100% of a Nevada-based company that controls 4,340 acres of mining claims in Nevada and California.

The company also holds 45 claims in two groups near Mine Centre in northwestern Ontario. This early-stage gold exploration project was originally acquired by Archie Bell, a founder of Seine River Resources and a former general manager of Noranda Exploration.