K2 exploring for gold at Wels in Yukon

DESTRUCTION BAY, YUKON — K2 Gold (TSXV: KTO; US-OTC: KTGDF) has begun a $350,000 exploration program at its 72 sq. km Wels gold property in west-central Yukon, 45 km east of Beaver Creek and 185 km south of Dawson City — the first of a two-part program. It’s funding the program through a $1-million private placement it closed in early June.

In its drill program, K2 is stepping out from the area it previously drilled, known as Saddle, as much as 2 km south to a newly recognized 3 sq. km area.

This new area comprises two zones: Gunpowder and Chai. Both were prospected at the end of the 2017 field season, with the results coming out after snow had fallen. Samples from Gunpowder graded 28.2 grams gold per tonne, 2 grams gold and 13.6 grams gold. Chai returned 1.9 and 1.67 grams gold.

K2 has finished its geophysical survey and is currently running Lidar. It will strip Chai and Gunpowder with a backhoe in early August, collect samples and design a drill program for Chai, Gunpowder and Saddle. The field season can run as late as October, before bad weather forces the company to pack it in.

“The business model for K2 is to find more Kaminak-style deposits,” K2 president and CEO Stephen Swatton says during a presentation at Destruction Bay, Yukon. We sit inside the Kluane recreation centre, which is named after the Kluane First Nation, who live in the area.

K2 is short for Kaminak 2: a second-coming of the company that discovered the Coffee gold deposit in Yukon’s Tintina gold district.

Goldcorp (TSX: G; NYSE: GG) bought Kaminak in 2016 for $520 million and is permitting more advanced work leading to construction of a mine at the site. It contains 46 million probable tonnes grading 1.45 grams gold for 2.16 million oz. gold.

A helicopter flies near Kaminak Gold’s Coffee gold project in the Yukon in 2015. More than 50 million years of subduction at converging tectonic plates has created copper-gold deposits across Western Canada. Photo by Matthew Keevil.

At Wels, K2 has only explored 5% of the total property. It says that, as with Coffee, the geochemical footprint of gold crosses all rock types. Chai, for example, contains sandstone whereas Gunpowder, to the northwest, contains gabbro.

The Yukon Geological Survey first sampled soil and till at Wels in 2002 that graded as high as 0.057 gram gold per tonne and 0.034 gram gold at the areas later called Saddle and Chai.

Then, in 2011, a private company called Gorilla Minerals optioned and resampled the ground. Infill soil sampling it conducted a year later returned 3.03 grams gold per tonne, with rock samples grading as high as 149.5 grams gold.

Over the next several years it trenched and drilled the property.

In 2017, K2 drilled more than 1,200 metres at Saddle across 11 holes. Highlights include 28.5 metres from 76.5 metres downhole grading 2.37 grams gold, 144 metres from 13.5 metres downhole grading 0.28 gram gold, and 21 metres from 78 metres downhole grading 1.48 grams gold.

K2’s second exploration phase would cost around $1 million and include trenching, as well as drilling at Saddle and target testing. The company would need to raise more money to finish the program, however, Swatton says he needs to be careful.

“With the market the way it is, I want to make sure I don’t blow up the structure of K2,” he says.

An aerial view of trenching at Wels. Credit: K2 Gold.

K2 says gold’s geochemical footprint at Wels spans multiple rock types. Credit: K2 Gold.

The likely orogenic-style deposit has received little drilling to date, but has shown ore-grade intersections over 150 metres’ strike and to 120 metres’ depth. It is open in all directions.

“The geology’s fairly blind,” vice-president of exploration Jo Price explains. “There’s not a lot of historical data and there’s no real surface exposure. We really need to open it up with trenching.”

K2 has also proposed $150,000 in exploration at its Flume, Storck and Ladue claims, all within 120 km of Wels. It aims to conduct drone surveys, prospecting and soil surveys at Storck and Ladue, as well as a geochemical analysis of exiting data at Flume.

K2 optioned Wels from Gorilla in August 2016. It can earn a 90% interest in the property by paying Gorilla $350,000 and issuing it 3 million shares. K2 will have to pay a final $100,000 in August. It has 1 million shares left to issue. 

Gorilla has a 3% net smelter return royalty on the property. It recently changed its name to Go Cobalt Mining (CSNX: GOCO).

In May, K2 also staked its 74 sq. km McArthur Creek gold project on the Alaskan side of the Moosehorn Range, 80 km northwest of Wels. The historical mining camp has produced 100,000 oz. placer gold and 4,000 oz. lode gold from orogenic-style mineralization.

Shares of K2 trade at 22¢ in a 52-week range of 18¢ to 56¢. The company has a $5.2-million market cap, with insiders owning 48%. It has $1.1 million cash-on-hand.