Banks Island banking on quick-start gold mine

Recently listed Banks Island Gold (BOZ-V) has hit more high-grade gold while expanding the resource at its production-ready Tel zone in northern B.C.

Banks Island has drilled 4,700 metres in 36 holes since listing on the TSX Venture Exchange last October, with drilling designed to upgrade Tel’s current resource and expand it at depth. 

The most recent results from the program include hole 29 that hit 2 metres grading 50.8 grams gold per tonne and 43 grams silver per tonne from 201 metres downhole, and hole 32 that cut 2 metres grading 26.5 grams gold and 13 grams silver from 201 metres downhole. Both holes are estimated true widths drilled at -45 degrees, and intersect the mineralized zone below the resource at 145 metres below surface.

Previous results from the drill program include hole 15 that returned 8 metres carrying 20.7 grams gold, 55 grams silver, 12% zinc and 1.3% copper from 34 metres depth, and hole 13 that cut 1 metre averaging 64.4 grams gold, 35 grams silver and 2.3% zinc. Both holes targeted the inferred resource and also represent true widths.

The resource at Tel stands at just 47,000 inferred tonnes grading 24 grams gold, while the nearby Bob zone hosts 55,000 inferred tonnes grading 20.9 grams gold, and the Discovery zone hosts 13,000 inferred tonnes grading 25.3 grams gold. 

The 120-sq.-km Yellow Giant property that hosts all the deposits sits on Banks Island, which is located 20 km south of Prince Rupert. The company optioned the property from Imperial Metals (III-T) and must spend $3.25 million over four years to earn 100%. Imperial Metals, which owns 5% of Banks Island’s outstanding shares, has the right to buy back 51% of the property after Banks earns into it for 2.5 times what it spent.

In November Banks Island outlined small-scale, near-term mine potential on the Tel zone, envisioned as a 205-tonne-per-day operation that would last 24 months. The economics are helped by its gold mineralization, which sits between sulphide grains and can be separated by gravity. Using a dense media separation plant, the company expects recoveries of 85%.

With a modest initial cash cost of $6.8 million and $2.3 million in sustaining costs, the mine would have an impressive 1.2-month payback. Based on US$1,360 per oz. gold, it would have a net present value, using an 8% discount rate, of $26.4 million and a 414% internal rate of return.

But the company is looking to expand the mine life by adding to the Tel resource and eventually exploring elsewhere on the project’s 11-km-long trend. Banks Island also needs to earn in fully to the project, with 1 million spent so far.

Shortly after unveling its latest drill results, Banks Island announced it had an option to earn 100% of the Red Mountain gold project from Seabridge Gold (SEA-T, SA-N). The 171-sq.-km property sits 18 km east of Stewart, B.C., and has seen $40 million in exploration, including 127,000 metres of drilling and 2,000 metres of underground development. Banks Island will have to pay $12 million over three years to secure 100%.

Red Mountain hosts a measured and indicated resource of 1.6 million tonnes grading 7.8 grams gold and 29 grams silver, plus an inferred resource of 2.1 million tonnes grading 3.7 grams gold and 6 grams silver.

Banks Island closed a $488,000 flow-through financing in February at 55¢ a share and closed a similar financing of $425,000 at the end of December. The latter financing was originally $2 million, but Salman Partners indefinitely postponed its $1.5-million portion. Banks Island has 16.3 million shares out, with insiders controlling 48% of the outstanding shares.

On news of the latest drill results Banks Island’s share price climbed 6¢, or 12%, to 57¢ with 92,000 shares traded, and then climbed to a closing high of 71¢ on news of the Red Mountain option deal. The company began trading at 30¢ in late October.