Gryphon Gold awaits new resource for Borealis

“You know the old saying: the best place to find gold is near the head shaft of an old mine,” Tony Ker, president and chief executive of Gryphon Gold (GGN-T, GYPH-O), told a group of investors at a recent Richmond Club luncheon in Toronto. “People have found a lot of gold in Nevada.”

Some of that gold has come from Gryphon Gold’s very own Borealis property. Eight open pits on the property were in production from 1981 to 1990. The mined ore contained 635,000 oz. gold, of which more than 600,000 oz. were recovered through heap-leach operations.

Gryphon began exploration work at Borealis in 2003. Last year, it kicked off a 72-hole drilling program to the tune of about $4.5 million.

Borealis hosts a measured and indicated resource of 37 million tonnes grading 1 gram gold per tonne (about 1.2 million contained ounces) plus 28 inferred tonnes of 0.7 gram gold (for about 609,000 contained ounces.)

A new National Instrument 43- 101 resource calculation is expected at the end of March.

The Borealis gold project, in western Nevada’s Walker Lane mineral belt, is about 12 miles northeast of the state’s border with California and about 330 miles northwest of Las Vegas — or a two-hour drive south of Reno.

“I’m not going to say we’re Yanacocha, but I’d say we’re the largest junior in Nevada,” Ker said, referring to Peru’s massive Yanacocha gold mine, the largest of its kind in Latin America.

“All of our geologists have looked at this and said it’s one of the biggest volcanic-hosted systems they’ve seen in Nevada,” Ker said.

If Gryphon Gold moves Borealis into an open-pit, heap-leach operation, the company says it envisions mining from potential new pits as well as expanding existing pit areas.

Borealis is situated close to Kinross Gold’s (K-T, KGC-N) Round Mountain gold project, which produced 239,903 oz. gold for the nine months ended Sept. 30.

“It took fifteen or twenty years before they realized how big Round Mountain was and that’s only 80 miles away,” Ker said.

In July, Gryphon enlarged its Nevada footprint by buying Nevada Eagle Resources, which gave it stakes in 54 separate gold projects. Of those new projects, 24 are, like Borealis, situated in Nevada’s Walker Lane trend.

Twenty-eight of the 54 new properties are leased out, Ker noted, earning the company about US$600,000 a year.

Ker also said that Nevada, with its pro-mining policies, is probably one of the best places to start a new mine.

The Vancouver-based junior has a market cap of $45 million and 61.6 million outstanding shares. At the end of December, Gryphon Gold held US$5.5 million in treasury bills and bank savings deposits.

In Toronto, shares of Gryphon Gold traded at about 63 apiece at presstime.

At press-time Gryphon Gold had just announced plans to merge with American Bonanza Gold (BZA-T, ABGFF-O). A letter of intent between the pair would see Gryphon issue a half-share for each of American Bonanza’s roughly 116 million shares outstanding along with a similar exchange ratio for its option and warrants.

The move would incorporate American Bonanza’s flagship Copperstone gold project into the combined portfolio. The Arizona property holds a measured and indicated resource of 970,000 tonnes grading 10.7 grams gold for about 335,000 contained oz. gold. An additional 190,000 tonnes of 10.9 grams gold was also reviewed — kicking in a further 66,000 contained oz. gold.

Additionally, American Bonanza holds the advanced-stage Fenelon gold project in northwestern Quebec that has undergone a past pre-feasibility study as well as some underground development. About 55,000 measured and inferred tonnes grading 19.5 grams gold has been tabled in the high-grade deposit.

The company also recently entered into an agreement with Agnico-Eagle Mines (AEM-T, AEM-M) to jointly explore and develop a pair of properties in Quebec: Bonanza’s Noyon-Northway project and Agnico-Eagle’s adjoining Vezza property.

In late-2007 American Bonanza closed a deal assigning its option on the Taurus gold property in northern B.C. to Hawthorne Gold (HGC-V, HWTHF-O), which itself is in merger process with Cusac Gold (CQC-T, CUSIF-O). Hawthorne is paying $6 million over two years plus a further $3 million upon completion of a positive feasibility study or a production decision.

Shares of Gryphon Gold dropped 10% on the proposed merger news — closing off 6 to a new low of 55 apiece — while American Bonanza shares gained 15% rallying 3 to 23.5.