Barrick exercises back-in right at Pinson (April 24, 2006)

Some good drilling results and the discovery of a new, high-grade gold zone on the Pinson property being explored by Atna Resources (Atn-T, ATNAF-O) in Nevada has caught the eye of Barrick Gold (ABX-T, ABX-N).

By spending US$12 million on exploration and delivering a preliminary economic analysis of the project’s potential, Atna earned a 70% interest in the past-producing Pinson property from Barrick, but in doing so, triggered a back-in right, which the senior producer has elected to exercise. Under terms of the option agreement, Barrick must spend US$30 million over the next three years on further exploration and development of the property to back-in to a 70% interest, leaving Atna with a 30% share of the joint venture. Should Barrick fail to meet the requirement, Atna would regain its 70% stake.

Atna president David Watkins said the US$30-million investment will “reduce risk and capital requirements” and add value to the project. In a statement, he said that Barrick’s decision to exercise its back-in rights “exhibits confidence” that the Pinson project has potential to satisfy the senior gold company’s operating threshold.

In its year-end analysis, Atna reported that enough work was completed to indicate that the property has potential to be commercially viable.

“The preliminary capital cost estimate is relatively lower than comparable projects, because the company is planning to mine and sell ore for processing off-site,” Atna stated. The company noted that metallurgical test work that the mineralization is amenable to processing at several plants within trucking distance of the property.

Atna has outlined measured and indicated resources of 1.7 million tons grading 0.42 oz. gold per ton, the equivalent of 713,000 contained ounces, using a cutoff of 0.2 oz. gold per ton. The newly discovered Ogee zone holds 216,000 of those ounces at a grade of 0.65 oz. Inferred resources are estimated at 3.1 million tons averaging 0.34 oz. gold, for just over 1 million additional ounces.

The Pinson property covers 12,765 acres of private fee lands and federal lode mining claims in the heart of the Getchell gold belt. The Twin Creek mining complex of Newmont Mining (NMC-T, NEM-N) lies 9 miles northeast of the property, Barrick’s newly acquired Turquoise Ridge underground mine is 5 miles north and Newmont’s Lone Tree mine is 20 miles south.

Over its 20-year life, Pinson produced just shy of 1 million oz. gold from relatively low-grade oxidized ore mined from a series of open pits. Production at Pinson comprised both milling and heap-leach operations. Combating a dwindling oxide reserve base and high cash costs, the Homestake Mining-Barrick partnership permanently closed the mine in 1999.

The final major exploration push was conducted from 1997 through 2000 by Homestake, on behalf of the joint venture. Homestake, which was the operator of the mine, drilled more than 200 holes on numerous targets throughout the property. The drilling confirmed that higher-grade mineralization continues beneath the pit limits along fault zones that served as “feeders” for mineralizing fluids to the low-grade zones historically mined at Pinson.

Getchell fault zone

The gold mineralization at the property is focused along and adjacent to the range bounding Getchell fault zone, a major 30-mile-long regional fault system that strikes northeast, parallel to the contact of a late-Cretaceous granodiorite stock. The ore occurs in a package of slightly metamorphosed Paleozoic sequence of silicified shale, cherts and limestones of the Comus Formation. The gold shows up as micro-size disseminated grains, strongly associated with pyrite and elevated levels of mercury, arsenic and antimony. The Pinson mineralization displays numerous physical and geochemical similarities to the neighbouring Getchell, Turquoise Ridge and Twin Creek mines, all of which are considered “Carlin-type,” sediment-hosted gold deposits.

Since optioning Pinson in August 2004, Atna has explored the potential for the underground development of several zones of higher-grade sulphide mineralization extending below the Pinson open pits. The company initially completed 31 drill holes totalling almost 30,000 ft. from surface, targeting the CX and Range Front zones, two sub-parallel fault zones of mineralization that lie 600 ft. apart and dip to the southeast at about 55 below previously mined open pits.

The CX zone plunges beneath the CX, C and B pits, whereas the Range Front zone is the southern extension of the Getchell fault zone and dips below both the CX and Mag pits. Atna’s initial efforts focused on establishing a resource in areas where high-grade intercepts had been encountered in previous drilling. In addition, Atna re-assayed intercepts from 65 holes drilled over the past 20 years to provide appropriate standards and quality control so that results from previous drilling could be assimilated.

While driving an adit from the base of the CX pit to provide access for resource definition drilling on the Range Front and CX zones, Atna discovered the high-grade Ogee zone.

Ogee zone

The new mineralized structure was found at about 750 ft. into the adit, where channel samples from each side of the 16 by 14-ft. drift averaged 0.69 oz. gold per ton across 35 ft. and 0.47 oz. across 44 ft. A crosscut was extended some 300 ft. parallel to the Ogee mineralization to provide drill stations for exploring the new zone. In November 2005, Atna got the market’s attention by intersecting 147 ft. averaging 0.97 oz. per ton in hole 4, the first reported underground hole on the Ogee zone. The mid-point of the intersection is roughly 145 ft. north along strike and 175 ft. below the adit channel sampling.

Hole 4 was collared at minus 58 and is one of a half-dozen holes drilled out along a 94 azimuth in a fan sequence to the east. The first hole was drilled at a much shallower inclination of minus 27, but experienced poor core recovery and was re-drilled by Atna with hole 3, which showed the zone to be narrowing updip. Hole 3 cut 4.9 ft. of 0.65 oz., closely followed by a 4-ft. interval grading 0.13 oz. gold per ton and a 1.9-ft. section of 0.75 oz. Drilled at minus 42, hole 10 was collared between holes 3 and 4, and intercepted 1.2 oz. across 15.9 ft. and 1.7 oz. over 58.5 ft. Hole 11 undercut hole 10 by about 75 ft., hitting 12 ft. of 0.27 oz. The zone was further tested updip by hole 2, which was collared at plus 10 to intersect 7 ft. of 0.72 oz.

Atna stepped out about 50 ft. along strike to the south by aiming the rig along an azimuth of 115. Hole 16, angled at minus 27, intersected 11.4 ft. of 0.25 oz, followed further down-hole by 8 ft. of 0.53 oz. Steepened to minus 42, hole 15 cut an impressive 135.5 ft. averaging 0.51 oz. Hole 13 was drilled at an angle of minus 58 and hit 20.7 ft. of 0.45 oz. and 14 ft. of 0.55 oz.

The rig was swung farther to the southeast and aimed along an azimuth of 163, where hole 19 intercepted a 5.2-ft. interval of 0.25 oz., followed by 27.5 ft. averaging 1.2 oz. at an inclination of minus 28.5. Steepened to minus 59, hole 5 intersected 5 ft. of 0.62 oz. and 7.5 ft. of 1.2 oz.

The most southerly hole on the Ogee zone intercepted 15 ft. of 0.63 oz. in hole 30, which stepped out about 100 ft. into the south wall of the adit.

Hole 17 was collared in drill station no. 2 at the end of the crosscut, some 250 ft. along strike to the north of the adit. Angled at minus 55, hole 17 intercepted 81.5 ft. grading 0.9 oz., followed by 33.5 ft. of 0.44 oz. This hole demonstrates that the Ogee mineralization extends to a depth of at least 420 ft. below the adit level and along strike for some 350 ft. Other notable intercepts from station included 17.2 ft. of 0.83 oz. gold per ton in hole 22, 36 ft. of 0.55 oz. in hole 25 and 44.4 ft. of 0.68 oz. in hole 34.

The Ogee mineralization is associated with intense brecciation, decalcification and abundant iron oxides within the calcareous siltstone-limestone host sequence of the Ordovician-age Comus Formation. The sh
ape of mineralized collapse breccia is described as highly irregular. The stratigraphically controlled mineralization appears best developed near the intersection of the Ogee structure and the CX-West fault within the limey sequence below a shale unit that effectively caps the mineralization. Atna has stated that samples taken from the newly discovered Ogee zone confirm the oxide nature of the mineralization. Initial metallurgical test work shows the Ogee mineralization is amenable to direct cyanidation.

Atna has roughly 63.5 million shares outstanding or 66.8 million fully diluted, with $14 million cash in its treasury at the end of March.