Metanor brings back Bachelor Lake

SITE VISIT

Desmaraisville, Que. — As Yves Gagnon sloshes along the water-filled locomotive tracks of the past-producing Bachelor Lake gold mine here, he pulls something shiny from his pocket.

It’s dark at the 850-ft. level, and with only a battery-operated headlamp as a source of light, the glimmering gold button that the vice-president of Metanor Resources (MTO-V, MEAOF-O) holds in his hand is a token of the past, but also represents a bright future.

This is the last drop of gold poured at the Bachelor Lake mill, Gagnon says — but not for much longer.

The Val d’Or, Que.-based company plans to be a gold producer by the second half of 2007.

Metanor is spending $3 million to refurbish the mill so that it will be ready to take ore by August, but the mine itself won’t be ready this summer.

Instead, the mill, which is being upgraded to 750 tonnes per day from 500 tonnes, will be fed by Metanor’s newest property, the Barry Lake gold deposit, acquired in December.

The property is 65 km southeast of Bachelor Lake and ore from the open pit will be trucked along forestry roads, allowing the company to ship heavier loads to the mill than by public roads.

Metanor is currently surveying the Barry property to establish boundaries for a mining lease and the company is applying to mine a 40,000-tonne bulk sample this August.

Barry Lake has an indicated resource of 269,000 tonnes grading 4.1 grams gold per tonne, or 35,500 oz., and an inferred resource of 450,000 tonnes grading 4.68 grams, or 67,600 oz. gold. The company is expecting to increase resources once it receives the results from its 2006 drill program.

Metallurgical tests have shown gold recoveries of 94% for Barry Lake. The pit has a 2-year mine life — more than enough time to increase reserves and get the Bachelor Lake mine ready for production.

The company hopes the revival of the Bachelor Lake gold mine and mill will be a catalyst for gold production in the area. The mine produced 131,000 oz. gold from 869,000 tonnes grading 4.7 grams gold per tonne between 1982 and 1989.

Once it’s ready, the mill will be the only processing facility within a 100-km radius with the combined gold resource of properties in the area totalling 8.9 million tonnes grading 5.3 grams gold per tonne. It’s the company’s goal to acquire more properties in the area that could feed the mill. Custom milling is a second-choice option that Metanor would consider.

Aside from the mill, the mine site has a hoist room, shaft house, tailings pond, core shack and staff lodging. The existing facilities are worth about $40 million, including the mill, which would cost about $28 million to replace.

Current measured and indicated resources, calculated after a 13,000-metre drill program in 2005, are 842,000 tonnes grading 7.79 grams gold per tonne or 211,000 oz. gold. Inferred resources are 426,000 tonnes grading 6.52 grams gold per tonne, or 89,000 oz. gold. The company has enough resources for a 7-year mine life — nine years including Barry Lake — but is working to expand them.

While Bachelor Lake is Metanor’s current focus, it was a gold property within Val d’Or’s city limits — Dubuisson — that spurred the formation of the company, which had its initial public offering in December 2003.

Opportunity knocks

Metanor consultant Ghislain Morin was recovering from two heart attacks in 2001 when opportunity literally knocked at his front door.

Metanor president Serge Roy was doing the knocking with a geologist’s report for the 4.3-sq.-km Dubuisson gold property in his other hand.

“My wife was not too pleased — she wanted me to rest,” Morin says.

Roy, a commercial contractor who had worked in mining, was lacking the financial contacts and had been told Morin, who has a passion for mining and is well-known in Val d’Or, would be the ideal business partner.

“I knew Serge was from Val d’Or because I’d seen him around town, but I’d never talked to him,” Morin says. “But I could tell he was an honest guy.”

Morin was supposed to be taking it easy though, so he turned Roy away — twice.

On Roy’s third visit, Morin’s wife was out.

“I really like mining, you know, so after the third visit he convinced me to get in his pick-up truck and have a look,” Morin says. “He told me, ‘You won’t have to get out of the truck.'”

When Morin saw that the overburden at Dubuisson had been stripped back revealing the veins on surface, he couldn’t stay in the truck.

“I spent a couple of hours running around everywhere looking at the veins,” Morin says.

When Morin went home he knew he could raise some money for the project. Three weeks later, they had $1.2 million from a 70-per-share financing just in Val d’Or.

“Love money, we call it,” Morin says.

From there, Metanor started a diamond-drill program and soon had a National Instrument 43-101-compliant resource. The company decided to go public, raising $3.5 million at the time of the IPO.

Metanor continued drilling at Dubuisson, which currently has a measured and indicated resource of 166,000 tonnes grading 4.82 grams gold, or 26,000 oz. gold, and an inferred resource of 3.2 million tonnes grading 4.15 grams gold per tonne, or 433,000 oz.

Morin and Roy saw that it would take a lot more time and money before Dubuisson could be a gold producer, causing them to stop drilling.

“We started looking for something close to production or with very big potential,” Morin says. “Finally we put our finger on the Bachelor Lake mine.”

Metanor acquired Bachelor Lake from Campbell Resources (CCH-T, CBLRF-O) in November 2004 for $2.3 million. Campbell had optioned the property to Wolfden Resources (WLF-T, WLFFF-O), which had the opportunity to earn 50% by spending $3 million before June 2006.

Wolfden eventually sold its interest to Halo Resources (HLO-V, HLOSF-O). Halo earned its 50% but in May 2006, Metanor bought out Halo’s share for $3.5 million cash, $750,000 in shares and a 1% net smelter return royalty (NSR).

Then Metanor bought Barry Lake in December 2006 from Murgor Resources (MUG-V, MUGRF-O) for $200,000 plus a 9% NSR. Roy says the high NSR was worth it, considering the low property price.

Metanor paid Murgor a $250,000 advance for the NSR by issuing 416,666 Metanor shares, to be followed by a second advance of $250,000 either 30 days after Metanor receives its exploitation permit for Barry, or on Jan. 1, 2008.

On April 19, Metanor announced an agreement with Canaccord Adams for a private offering to raise $20 million to further fund the Barry Lake and Bachelor Lake project. Each unit will consist of one common share and half a warrant, with each warrant exercisable into one common share for the next two years. The price of the units had not yet been decided.

At presstime, Metanor shares were trading at $1.02 in a 52-week range of between 49 and $1.37. The company has 30.2 million shares outstanding, $3.5 million in cash and no debt.

The Barry deposit is located in the Urban-Barry greenstone belt, which has experienced renewed interest after drill results from Noront Resources’ (NOT-V, NOSOF-O) Windfall Lake property in December 2006. The company reported drill intersections of between 800.1 grams gold per tonne and 1,792.9 grams gold over a larger 4.8-metre interval.

In May, Metanor will begin laying the foundation for a new hoist for the Bachelor Lake mine. The shaft sinking will begin in September, lasting eight to nine months. Currently, the shaft extends 1,800 ft. but Metanor is going to deepen it to 2,500 ft., creating room to explore at depth after it begins mining the upper levels. Metanor will spend $25 million on the project, including underground development.

Bachelor deposit

The Bachelor deposit is open to the east, west and at depth. The original deposit consists of two claim blocks, the Bachelor Lake claims and Hewfran claims, which cover an area of 25 sq. km.

Metanor has increased its land and resource
base at Bachelor Lake to 67 sq. km and 250 claims, focusing on adjacent claims. Included in that additional land was the Hansen claims, which is the location of the past-producing Coniagas zinc mine. The mine was in operation until 1967 and produced more than 700,000 tonnes grading 10.6% zinc, 1% lead and 5.3 oz. silver per ton.

Metanor recently completed 2,900 metres of diamond drilling targeting Hewfran’s west zone, the eastern extension of the Bachelor deposit and the eastern extension of the Coniagas zone.

The property is underlain by Archean volcanic rocks, including mafic, intermediate and felsic flows and their intrusive equivalents. The folded volcanic rocks trend northwest and northeast of the mine, dipping vertically to steeply northwest.

There are three structurally controlled quartz veins recognized — the Main Vein, the A Vein and the B Vein. Most of the mined material has come from the Main Vein, which extends for 1,150 metres, though 460 metres has been exploited on the western part of the property. A Vein has been traced from the ninth level to the fourth level and the B Vein, located so far on the eleventh and twelfth levels, shows the greatest potential for additional resources as grades increase with width and depth. Drilling has shown a strike length of at least 18.29 metres with an average width of 3.17 metres.

The gold mineralization at Bachelor Lake is spatially associated with pyrite and gold content correlates to pyrite content. The pyrite is usually finely disseminated and hosted in strongly altered rocks, often brecciated and sometimes injected by quartz, carbonate veins and veinlets.

Metanor also owns the Wahnapitei gold-cobalt-nickel property in Sudbury, which is next to Xstrata’s (xsraf-o, xta-l) Nickel Rim South deposit, and the Opinica gold property in the James Bay region of Quebec.