Banks Island moves Yellow Giant towards production

VANCOUVER — It has been a quick ride for B.C.-focused explorer Banks Island Gold (BOZ-V). Despite the fact it has been just 18 months since Banks Island signed an earn-in agreement on its Yellow Giant gold-silver property, located 110 km south of Prince Rupert, the company released its production notice for the project on Nov. 9.

Banks Island signed an agreement with Selkirk Metals — now a subsidiary of Imperal Metals (III-T) — in March 2011. As of Oct. 12, Banks Island has satisfied the majority of its earn-in requirements, including US$3.25 million in exploration expenditures and the issuance of 942,936 shares to Selkirk. In order to solidify its 100% ownership Banks Island must issue a second tranche by Dec. 2014.

Under terms of the agreement Yellow Giant is subject to a 2% net smelter returns royalty (NSR) if Selkirk does not exercise a back-in option, as well as an underlying 1.5% NSR royalty.

Since acquiring the property Banks Island has completed roughly 4,700 metres of diamond drilling and successfully delineated resources at Yellow Giant’s Tel, Bob, Discovery, and Kim zones.

On Oct. 22, the company released an updated resource for Yellow Giant that includes 78,000 measured-and-indicated tonnes grading 23 grams gold per tonne and 44 grams silver per tonne for 57,700 oz. contained gold and 85,000 oz. contained silver. The project holds an additional 81,000 inferred tonnes averaging 13.7 grams gold and 33 grams silver for 35,500 oz. contained gold and 85,000 oz. contained silver.

Future drilling will focus on expanding mineralization at the Bob zone, which has only been defined to a depth of 125 metres and is open along strike. Discovery also offers some blue sky in regards to resource expansion, as the deposit is currently defined to 60 metres depth and remains open along strike.

Banks Island spent roughly $625,000 on camp equipment and a 20-tonnes-per-hour dense media separation plant in mid-October, as the company moves the project towards the feasibility stage.

In Nov. 2011, the company published a study for a 205-tonne-per-day, two year operation at the project that, assuming a $1,360 per oz. gold price, would have a net present value of $26.4 million and an internal rate of return of 414% on the back of competitive $9.1 million initial and sustaining capital costs.

Banks Island released metallurgical results for Yellow Giant in tangent with its resource update. Grades and recoveries for flotation concentrates were released on the Bob, Tel, and Discovery zones.

The Tel zone returned 87% recoveries at a 112 grams gold concentrate grade; Bob featured 93% recoveries at a 127 grams gold concentrate grade; and Discovery returned 91% recoveries at an 89 grams gold concentrate grade. The overall average recovery fell at 90% for gold and 77% for silver at concentrate grades of 109 grams gold and 230 grams silver.

On Oct. 19 Banks Island successfully closed a non-brokered private placement that saw the company issue 1.8 million units at 81¢ per unit for a total raise of $1.47 million. The company subsequently issued roughly 400,000 flow-through units at 87¢ to top-up the financing at $1.8 million.

Banks Island has traded within a 52-week range of 28¢ and 97¢, and maintains a tight equity structure with 27 million shares outstanding. The company closed at 84¢ at time of writing, and maintains a $23 million press-time market capitalization.