Site visit: Barkerville reborn after ‘massive housecleaning’

WELLS, B.C. — Emerging in July 2013 from an 11-month cease-trade order issued by the B.C. Securities Commission stemming from a questionable resource estimate, Barkerville Gold Mines (TSXV: BGM) was left facing a severe cash crunch with its shovels still dug into a small, operating gold mine called Bonanza Ledge, outside the historic town of Wells, B.C.

Spotting the distressed miner, a private, numbered company controlled by global financier Eric Sprott threw Barkerville a lifeline in October 2013, in the form of a $15-million loan that helped the junior resume trading on the TSX Venture Exchange.

By July 2015, Sprott’s company had turned $19.5 million in various loans to Barkerville into a 41.8% stake in the company.

A few months earlier, he and newly appointed Barkverville chairman Greg Gibson turned to Thomas Obradovich — a player in the discovery of the Fruta del Norte gold deposit in Ecuador with Aurelian Resources in 2006 — and asked if he was interested in helping Barkerville get back on its feet.

“I sent up a couple of my own people … to assess the project and see if it was worth it,” Obradovich told The Northern Miner during a phone interview.

“They both came back saying the same thing: that all aspects of the project were broken down and completely dysfunctional, but it also happened to be one of the best gold deposits they’d ever seen in their careers.”

Knowing that he had something “special,” Obradovich took on the responsibility of president and CEO in January 2015, and cleaned house to form what many in the industry now refer to as “the new BGM.”

And it wasn’t an easy task. Obradovich said the problems at the operation were “glaring” — for instance, the mine operated without a block model and geologists would send the ore 110 km away to the QR mill, without regard for grade control.

“We basically had to revamp the entire company. It was a massive housecleaning, not just on the technical side, but the corporate as well,” he said. “We have recruited a team of talented, seasoned geologists to realize the true value of this prized asset.”

Confident in the property’s quality, Obradovich later brought in a couple of “crackerjack” structural geologists — at times the most critical personnel in the field of earth science — from Talisker Exploration Services, with the intent of attracting an investment from its principal client Osisko Gold Royalties (TSX: OR; US-OTC: OKSKF).

“These guys have looked at hundreds of projects across the world, and by the time they were finished at the Barkerville camp, they were just giddy over it,” he said. “They view it as one of the most premier camps in North America that’s never had a real good run at exploration.”

In July, Osisko formed a strategic partnership with BGM — investing $5 million in flow-through funds to advance exploration and expand the property’s known resources.

Now debt-free — with $10 million in the bank and three rigs turning at Bonanza Ledge — it’s easy for Obradovich to say that BGM is “back in business,” and driven to under-promise and over-deliver.

The Northern Miner travelled to the historic Cariboo gold district and met with Paul Geddes, the new vice-president of exploration, to understand what the buzz is all about.

Strolling through the historic town of Barkerville, Geddes explained that the lure for gold in the district began in the early 1860s, and over the camp’s history, placer mining has yielded up to 3 million oz. gold.

Cow Mountain 

The hunt for the motherlode didn’t start until 1931, when prospector Fred Wells came off Cow Mountain, 2 km outside Barkerville, and declared he’d found gold in the hills.

But few believed him.

According to historical records, the public in the district responded harshly to what were seen as his over-promotional claims, calling him an “opinionated prospector, devoid of geological knowledge,” with the provincial government refusing him the right to sell stock in B.C.

But with help from private financiers and his friends, Wells got the Cariboo Gold Quartz mine into production, and public opinion changed when he strolled into Vancouver with $36,168 worth of gold bullion wired to a packboard on his back.

History would repeat itself in some ways in June 2012, when Frank Callaghan, then-CEO of Barkerville Gold Mines, announced an eyebrow-raising 10.6 million oz. gold resource at Cow Mountain in 69 million indicated tonnes grading 5.28 grams gold per tonne. The previous Cow Mountain estimate in 2006 reported an indicated resource of just 431,000 oz. gold.

BGM was slapped with a cease-trade order by the B.C. Securities Commission in 2012, effective until the company produced a resource model that met National Instrument 43-101 reporting standards.

Still under Callaghan’s leadership, BGM calculated a revised resource estimate in June 2013 that shrunk the “cow” into a “calf,” with only 1.04 million oz. in 17.7 million indicated tonnes grading 2 grams gold. Inferred resources added 49.2 million tonnes at 2.74 grams gold, for another 3.94 million oz. gold.

As for Cow Mountain’s much-derided “geologic potential” outlined in the June 2012 report,  that was also slashed. The old report said the 6.4 km long trend could host 405 million to 684 million tonnes grading 4.11 to 5.49 grams gold, for 65 to 90 million oz. gold. The revised report said the target might host 150 million to 450 million tonnes grading between 2 and 5 grams gold, for a potential gold count of 9 million to 27 million oz.

But by then, the company had already lost much credibility in the markets and the geological community.

“There’s a lot of stink out there in the mining and exploration community about this company, and everyone is quick to give their opinion,” Geddes said. “The company we have today isn’t the same one they talk about. But lucky for us, it still has the same exceptional asset.”

He added that the Cow resource was updated in March of this year under completely new leadership, bringing it up to 35.8 million indicated tonnes at 2.4 grams gold for 2.8 million oz. gold, plus 27.5 million inferred tonnes at 2.3 grams gold for 2 million oz. gold, using a 0.5 gram gold cut-off.

But the latest upgrade still isn’t enough to fully restore confidence in the company, Geddes said, explaining that he and the “critics” would rather use a geological model to constrain the resource, instead of the multiple-indicator kriging technique that’s commonly used in the industry.

He cautioned that Cow Mountain’s geology may be too complex to estimate a large resource accurately, which is easy to appreciate when standing alongside a rocky road-cut near the old mine shaft.

The sedimentary rocks that host the ore have been clearly deformed into rod-shaped structures — or mullions — which can vary in size from telegraph poles to walking sticks.

And while Geddes said he and his team are working to define the new model, he has a healthy appreciation for the greater unknown.

“My most daunting task in this job is to stay focused, because there are just so many targets out there,” he said, while driving past a number of outcrops tee
ming with rusty-looking quartz veins at almost every bend in the road.

Just across the valley are the Island Mountain deposits, where 603,800 oz. gold was mined between 1934 to 1987, at an average grade of 15.4 grams gold per tonne.

Carved into the dense Douglas fir forest, the road eventually leads to the company’s main target of exploration and development: Bonanza Ledge.

Bonanza Ledge had operated between March 2014 and April 2015, producing 91,234 tonnes at 8.66 grams gold for 24,000 oz. gold, and the resource has only been defined to 107 metres deep.

“We bottomed in ore, but we weren’t prepared to front the capital to enter into the second phase of the operation, which required us to push the pit wall back,” Geddes said. “Since our mining permit is still active, we’re entertaining different scenarios for the next phase, whether it be more economical to pursue it as an underground development, or continue with the open pit.”

The company has commissioned JDS Energy & Mining to evaluate and optimize the mining method for the orebody, and Geddes hopes to return to production next year.

Exposed in the small open pit are a number of steeply dipping, anastomosing rusty veins enveloped within a shear zone that has chewed its way through the black, carbonaceous shales.

Geddes sifts through geology maps on the back of the truck and explains that the structure — known as the BC vein — is the main exploration target on the property.

Marked as a thick red line across the paper, the mineralized BC vein has been traced by drilling for at least 1.4 km strike length at surface. Beyond that, it disappears beneath the forest floor.

But within that window, BGM has systematically drilled the open-ended vein at 50-metre centres, to depths between 200 and 400 metres in hopes of calculating a resource estimate later next year.

Results so far have returned hits such as 20.6 grams gold over 3.9 metres, 18 grams gold over 3.4 metres, 14.7 grams gold over 6 metres and 10.3 grams gold over 9.6 metres.

Standing alongside the BC vein, Geddes points to a number of identical, parallel-trending structures along the open road-cuts in the distance that are caked with sulphides.

The new discoveries, which include the KL and AG horizons, have returned intercepts of 6.4 grams gold over 7.3 metres, and 2.49 grams gold over 21.3 metres including 11.84 grams gold over 1.5 metres.

Upon closer inspection, the deformation etched across the rock faces shows that these aren’t small, discontinuous structures of limited extent.

‘Mind-boggling’ potential

“The greatest thing [former CEO] Callaghan has ever done for this company was secure the entire district,” Geddes said, pointing to the 1,777 sq. km land package that sprawls over 101 placer-producing drainages and six past-producing mines for a 60 km strike. “We don’t have to worry about competitors because we essentially have a monopoly on the whole trend.”

The source of the gold and how it manifests across BGM’s deposits is quite the enigma, considering it occurred 30 million years after porphyry mineralization in the region.

Some reckon that the gold was stripped out of the host rock by regional metamorphism and found its way through the cracks, while others suggest the gold remobilized to higher parts of the crust from underlying gold-enriched replace ment ores, such as those seen at Island Mountain.

Geddes suspects the gold may have been transported from deep within the crust by a network of terrane-bounding faults and shear zones.

In whichever case, he says the potential of the property is “mind-boggling.”

“Between Bonanza Ledge and Island Mountain there’s over 6 km of gold deposits and occurrences,” he said. “Beyond that it’s all undercover, and every time we build a new road we uncover something new.”

At the end of the work day, Geddes and his team sit outside their apartments in what they jokingly refer to as their “sharing circle” to discuss the day’s advances and challenges.

“We want to stress to the industry that we’re all really focused on producing deliverables at the highest technical standards, and we’re not going to be promotional about it,” Geddes said.

“We want people to realize the potential of this on their own, and let the results speak for themselves.”