Site visit: IDM Mining pursues dual upside at Red Mountain

STEWART, B.C. — An aura of history surrounds IDM Mining‘s (TSXV: IDM; US-OTC: RVRCF)

Red Mountain gold property, 18 km northeast of the town of Stewart, British Columbia. That history is especially acute for president and CEO Robert McLeod, who has long-standing family ties to the local community and cut his teeth as an exploration geologist at the project with Lac Minerals back in the early 1990s.

Red Mountain has near-term production potential and exploration upside across a 170 sq. km land package that has seen limited systematic work.

The region was abuzz with helicopter activity during The Northern Miner’s visit in September 2016, due to renewed interest in B.C.’s Golden Triangle near the western margin of the Stikine terrain.

The region hosts a number of deposits — including the Eskay Creek and Snip — but it is likely Pretium Resources‘ (TSX: PVM; NYSE: PVM) Valley of the Kings discovery at its Brucejack gold property that catalyzed more investment in the region.

The flight into IDM’s exploration camp is picturesque, with the sun glinting sharply across the vast, white blanket that marks the Cambria Ice Field. Orderly rows of tents that mark the company’s base camp sit in the shadow of a stark, mountain peak that glows rust-red at sunset.

IDM jumped at the chance to acquire Red Mountain in 2014 from Seabridge Gold (TSX: SEA; NYSE: SA), which controls the fully permitted KSM copper-gold porphyry project nearby. IDM is working under a three-year option agreement, wherein it can earn a 100% interest in the project from Seabridge for 5 million shares, $2 million in staged-cash payments and $7.5 million in exploration expenses.

“We made the deal during a true industry downturn, when nobody was really raising a lot of money,” McLeod said during site orientation at IDM’s mess hall. “It’s really exciting to work in the Stewart area again, because I’m a third-generation miner from the community, and it will always be my hometown. And we’ve taken advantage of the significant exploration history here, which includes a fleet of mining equipment, and, best of all, the underground decline. It’s a significant investment that we’ve essentially inherited.”

The decline was completed by Lac Minerals in 1993 to allow for 30,000 metres of underground drilling on the Marc, AV and JW zones.

Royal Oak Mines extended the underground workings by another 350 metres in 1996.

Seabridge carried out two preliminary economic assessments (PEA) on the property in 2012 and 2013. The company calculated global measured and indicated resources of 1.6 million tonnes grading 8.36 grams gold per tonne and 26 grams silver per tonne for 441,500 contained oz. gold and 1.4 million contained oz. silver.

Mineralized zones consist of tabular, northwest-trending and moderately to steeply southwest-dipping gold- and silver-bearing iron-sulphide stockworks. Pyrite is the dominant sulphide, but locally, pyrrhotite has proven important. The stockwork zones are developed within the Hillside porphyry, and, to a lesser extent, in rafts of sedimentary and volcaniclastic rocks.

Standing between core-box stacks in IDM’s camp, it’s possible to glance upslope across 1.5 km of steep terrain to the old shop and underground portal.

In 2006 IDM rehabilitated the underground operations to drill core for further metallurgical and geotechnical studies.

During our visit, mechanics and other crew continued their dewatering efforts in the decline, and we could hear the metallic groan of machinery echoing off the valley walls.

IDM released another PEA in July 2016 that models a 1,500-tonne-per-day operation that would run for eight months per year. The $111-million mine would produce 70,000 oz. gold and 194,000 oz. silver annually over five years at cash costs of US$418 per oz. gold after by-product credits.

The model uses recovery rates of 88% to 90% to 88% for gold and 76% to 85% to 76% for silver.

At US$1,250 per oz. gold and US$15 per oz. silver, the PEA estimates an $87-million after-tax net present value at a 5% discount rate, along with a 32.3% internal rate of return.
McLeod adds that most of the deposit is amenable to bulk underground longhole mining, due to the wide mineralized zones.

There was a chill as we entered Red Mountain’s old underground workings, but IDM has made progress in rehabilitating them.

The company’s underground drilling plan for 2016 was 5,000 metres in 36 holes focused on step-out grids along strike and down-dip from existing resources, primarily at the JW zone.

In September, IDM announced results from 13 core holes that were headlined by the NK zone intersected by vertical hole 16-1187. The drilling was meant to test a “projected step-out of isolated, historic intercepts below the Marc zone,” and cut a mineralized interval of massive, coarse-grained pyrite veins and stockworks grading 7.43 grams gold and 12.51 grams silver over 6 metres true width.

The company also identified a zone in the JW zone’s hanging wall in November, with hole 16-1210 intersecting 8 metres (true width) of 6.4 grams gold and 7.42 grams silver.

IDM’s December assays further extended mineralization in all three primary zones, which remain open for expansion to the north, south and down-dip. Hole 16-1224 was a down-dip step-out at the JW zone that cut 18.2 metres true width at 9.12 grams gold and 27.87 grams silver.

The company will incorporate the drill results into an updated resource calculation early this year that will be the backbone of a subsequent feasibility study.

IDM has also diligently worked on getting its environmental and social licences since it acquired the project two years ago.

“We always looked at the production scenario, and so we pretty much immediately began our consultations with local communities and First Nations,” executive chairman Michael McPhie said over the low buzz of a generator in a nearby workshop.

“We have also started our environmental baseline studies, and are moving through the process at the provincial and federal levels in terms of permitting,” McPhie said. “We differentiate ourselves because we have a small footprint here with limited surface expression. We hope to be recognized by the industry broadly, and communities in the north, as a leader in best practices.”

But it’s easy to see McLeod is an explorer at heart, as he scrambled 300 metres across a scree slope on Red Mountain. He was excited to point out where the 141 zone comes to surface, and says the target is open for expansion to the west, north and south.

The 141 zone hosts indicated resources of 158,000 tonnes at 4.82 grams gold for 24,500 contained ounces. Mineralization is interpreted to outcrop southeast at Red Mountain and northwest in the Rio Blanco area — which has not been drill tested — meaning there is 2 km of strike potential.

This kind of property-wide exploration could be a game changer.

There was further excitement at IDM’s camp during the visit due to a new target at the Lost Valley area, which lies 4 km southwest of Red Mountain’s resources.

In early 2016, the company reported that a surface hand trench at the newly named Randell zone included a 9.4-metre continuous channel sample of subcrop averaging 22.2 grams gold and 81.3 grams silver.

McLeod stood at the base of a cliff and pointed out a high slope of weathered fragments of quartz, sulphide material and altered monzogranite that mark the target.

“Part of the duality of the Red Mountain story is that we’re strategically advancing near-term production, but there’s also exciting exploration upside. We recently announced a discovery in an area that was exposed by the rapidly melting Cambria Ice Field to the south of us,” McLeod said.

“We dug down into the talus about one metre or so, and exposed a wide quartz vein with a lot of sulphide. It’s also part of a lineament that runs for hundreds of metres … there are stacked structures above and below it, so we don’t know how thick it could be,” he continued.

The company mobilized equipment for a late-season, five-hole drill program at Lost Valley targeting the Randell and Money Rock veins. Results were muted, with highlights including 1 metre of 3 grams gold and 23.8 gram silver in hole 16-1, and 1.2 metres of 4.63 grams gold and 90.9 grams silver in hole 16-2. IDM intends to return this year to the area for more surface drilling.

Meanwhile, the company has completed a five-hole surface program at the 141 zone that was headlined by 54 metres of 1.29 grams gold in hole 16-6, and 87.5 metres of 1.03 grams gold in hole 16-10. The zone could be important to the project, since proposed development includes an access ramp that would cut underneath it.

“It’s really striking how the ice retreating has opened up areas on the property,” McLeod said during a helicopter flight over the Bromley Glacier. “When I was working here in the 1990s, a lot of this terrain simply wasn’t accessible. We’re really only scratching the surface of a mineralized trend that runs for 16 km, and our efforts will definitely continue moving into 2017.”

In October, IDM closed an oversubscribed private placement co-led by Paradigm Capital and Medalist Capital, wherein it raised $9-million in gross proceeds. The financing involves 38 million units priced at 17¢ each, and 12.1 million flow-through shares at 21¢ per share. The units are composed of a share and half a warrant, with each full warrant exercisable at 25¢ for two years.

IDM’s relative ease in raising capital over the past year has resulted in equity dilution. The company had a relatively high 283 million shares outstanding at press time, and closed at 14¢ per share for a $40-million market capitalization.
IDM has traded within a 52-week range of 6¢ to 26¢ per share.

McLeod characterized IDM’s current capital structure as “not a major issue” but said it would be “something to watch moving forward” as the company sets its sights on beginning preliminary production at Red Mountain by 2018.