A technical audit by outside consultants has concluded that exploration for “Prairie-style” gold mineralization in northeastern Alberta, currently being pursued by
The report, by consulting firm Associated Mining Consultants (AMC), concluded that “even if gold or other precious metals are present in the samples, the concentrations are so low as to be near to or below the detection limit of the analytical methods. . . . It is our opinion that the majority of competent assayers examining the BMD data would come to the conclusion that there is little precious metal in the BMD samples of Athabasca rocks and that the sporadic positive results reported are due to interferences, contamination or other known reasons.”
The announcement did not have a significant effect on Birch’s stock price, which has been stuck in the 60-80 range for much of the month, with brief forays both above and below.
Birch Mountain agreed to the technical audit as a condition of being reinstated to trading on the Canadian Venture Exchange (CDNX) in September 2000. The exchange had halted trading in the company’s shares the previous June 16, and suspended them June 28; it objected to a June 15 announcement in which the company had asserted it had discovered “a new form of gold and platinum group metals” in rocks on its Athabasca property, near Fort Mackay, Alta., 55 km north of Ft. McMurray.
At that time, Birch Mountain announced that work at the University of Calgary and at the Canada Centre for Mineral & Energy Technology (CANMET), a research centre maintained by the Department of Natural Resources, had documented a “form of . . . metallic elements detected on its Athabasca Prairie Gold property [that] has not previously been reported in nature,” and that the material was “a new form of gold and platinum group metals.”
CANMET subsequently issued a denial that it had documented a new form of precious metals, and Birch Mountain revealed, in a press release about a month later, that its own staff had “discovered” the supposed new form of metal in the U of C lab and that the University and CANMET had not provided independent confirmation of the material.
In September, the company backed away yet farther from its earlier assertion, saying that the metal was a base metal in “nanoparticulate” form — that is, between 0.1 and 100 nanometres (nm) in size. It maintained, however, that both the University and CANMET had identified the metal “in a solution extract.” (Transition-metal ions in solution are generally between 0.05 and 0.1 nm in size, so a “nanoparticulate” metal occurrence would have to have precipitated from the solution, or never been part of it at all. In any event, having been taken into solution and then precipitated, it would no longer be in its “naturally occurring” form.)
The audit report said that Birch had identified “nano-particles” that were found to be a non-precious metal, and that Birch had asked AMC not to identify the element in its report.
CANMET’s report identified the metal as crystalline with a face-centred cubic structure, which prompted AMC to conclude that it was “misleading to suggest that [Birch had] confirmed a new form of naturally occurring precious or other metal.” The identification of the metal’s crystalline structure also means that the metal was behaving as a true metal, rather than as a non-crystalline microcluster.
The face-centred cubic structure is the stable form of a number of base metals: aluminum, nickel, copper, lead, the alkaline earths calcium and strontium, and the inner-transition metals cerium, ytterbium and thorium. Of these, only copper occurs commonly in native form in nature; of the rest, only nickel (as a nickel-iron alloy, typically in meteorites) and lead are known to occur in native form at all. Previous work by Hugh Abercrombie, Birch’s exploration manager, had identified native copper and copper alloys, but no other native metals with that crystalline structure, in the Athabasca rocks.
AMC also contested Birch Mountain’s view that conventional assaying cannot detect the gold in Prairie-style mineralization. As part of its audit, AMC bought commercially available gold colloid material with gold particles in the 5-nm size range. Conventional fire assays recovered all the gold in the material.
Birch, which had agreed in advance to the CDNX’s demand that it publish the conclusions of the AMC audit as part of its continuous disclosure record, said it “considers the audit process to be flawed and disagrees with a number of the conclusions.”
President Douglas Rowe of Birch Mountain said the company might present the details of its objections to AMC’s conclusions in a subsequent release or a letter to shareholders; he said the company was not ready to make specific comments on the AMC study until all shareholders could be notified at once.
Dr. Richard Puddephatt, a chemist at the University of Western Ontario, who is on Birch Mountain’s scientific advisory board, told the Miner that, from Birch’s perspective, the problem with conventional chemical analysis in the Athabasca rocks is that the gold has an “inert coating” that essentially blocks the fluxes used in conventional assaying. The coatings are a “halo” around the particles, visible on electron microscope images. “The particles are so small that it’s not possible to determine [the composition of the coating] directly.”
Puddephatt said the coatings are “not much more” than one or two atoms thick — perhaps 0.1 to 0.5 nm — and the precious-metal particles were generally a few hundreds to a few thousands of atoms. He also said that the commercially available gold colloid material that was successfully assayed in the AMC study did not have the coatings.
Since 1995, Birch Mountain has been exploring for gold and platinum-group metals (PGMs) in Paleozoic-age rocks of the Western sedimentary basin. Most analyses of the rocks have either not detected any gold or PGMs, or turned up trace amounts of the metals at or near their average crustal abundance. This includes neutron-activation analyses, which are insensitive to the speciation of the metals and to the presence or absence of “inert coatings,” and which have, without exception, indicated only trace amounts of precious metals in the Athabasca samples.
Despite that evidence, a core of believers remains, though Birch’s stock price went into a fairly steady decline when trading resumed in September. Among those believers is a New Jersey venture capital company,
American International Ventures received 350,000 shares of Birch in a June 1999 deal under which it would introduce Birch to analytical laboratories and process consultants. A further 150,000 shares is payable “upon confirmation that a proprietary assay procedure provided to Birch Mountain reliably confirms commercial concentrations of precious metals in Athabasca rock.”
Rowe could not name the labs Birch had been introduced to, citing confidentiality clauses in the agreement with Ventures. He also said the deal with Ventures had not been arranged by Birch’s financial advisors, investment firm Legg Mason Wood Walker.
Trading in another company in the prairie-gold lottery,
The clarification said the confidentiality agreement covered a pending meeting with the mining company, where there might be some exchange of information. The stock has since settled into the $1.00-1.20 range.
Agau is run by Einar Myrholm and Kenneth Richardson, who, in the latter half of the 1980s, were associates in promoting Richardson’s HMS Properties. Richardson owns about 72% of the outstanding shares of the company.
Richardson’s HMS Properties held a land package surrounding Fort Mackay, optioned by Focal Resources in the 1990s. Early results generated by both HMS and Focal proved to be unreliable after the Alberta Stock Exchange required Focal (then listed on the ASE) to send its samples to an independent lab for conventional analysis. The Focal property ultimately passed to Birch in a 1997 deal.
Richardson and a private company he controlled, R.M.S. Masonry Systems, were also among the property vendors in Birch Mountain’s listing transaction in 1995.
Agau started life in 1996 as an ASE Junior Capital Pool company. Its principal properties, which Richardson vended into the company in its major listing transaction in October 1997, were two claim blocks near La Loche in northwestern Saskatchewan, about 120 km east of Fort McMurray.
The listing transaction also included the 6-claim Eagle property at the eastern end of Tchentlo Lake, about 90 km northwest of Ft. St. James in north-central British Columbia. (The Eagle property appears to have covered much the same ground as a property vended into Birch Mountain in that company’s listing transaction in 1995. In 1997, Birch’s Eagle property was traded for more ground with perceived “prairie gold” potential.)
Under the original vend-in agreement, Richardson was to receive up to 2.5 million shares at a deemed value of 20 per share, but the final amount was to be determined by an independent geological report. In other words, the agreement permitted a $500,000 cap on the value of the transaction.
An amended deal added a further 132,140 shares at a deemed value of $1.40, and the final transaction was for the full amount — a deemed value for both land packages of $684,996 — based on valuation reports by geologists Daniel Beauchamp (for the Eagle property) and Allan Frew (for the La Loche property).
By comparison, Albert Chislett and Christopher Verbiski got about $480,000 cash, about $160,000 in shares, and a 3% net smelter return for the Voisey’s Bay nickel claims in Labrador.
Agau did some trenching and sampling on the Tchentlo Lake claims in 1998 but subsequently dropped them because it could not find a partner interested in a joint venture. Curiously enough, the La Loche claim blocks were allowed to lapse in 1999, when Agau decided not to file assessment work. The company said, in its annual report, that had the claims been maintained in good standing, “it would have been necessary to incur additional expense to meet the requirements of the Province of Saskatchewan. Agau would not have gained any knowledge or benefit from these additional costs.” Keeping mineral title to the ground was presumably not enough of a “benefit” to justify doing the amount of work required to keep the claims in good standing.
Richardson, however, kept the shares that arose out of the listing transaction, and received shares out of escrow even after the company had dropped both properties. The company’s 2000 annual report showed him holding 1,754,760 shares of the 2,632,141 issued in the deal, of which 877,380 shares had come out of escrow between June 1999 and May 2000, a period during which the Saskatchewan properties had already been dropped. There are 877,381 of Richardson’s shares still in escrow.
In early 2000, Agau added to its holdings a 447-sq.-km property west of Fort Mackay. The claims had similar geology and were at a grassroots stage of exploration, like the Saskatchewan claims Agau had previously dropped. But it would appear that the Fort Mackay claims were not quite as valuable to Agau: vendor Larry MacGougan got only 105,000 shares at a deemed value of $126,000 for a property more than six times the size of the Lac La Loche blocks.
Since then, the company applied for, and received, a 500-sq.-km exploration permit in northwestern Saskatchewan, covering Richardson’s two lapsed claim blocks, plus additional lands. Company president Einar Myrholm told The Northern Miner he “would rather not release” an exact location for the property, but the Saskatchewan Department of Energy and Mines confirmed its location. The permit covers a block immediately southeast of La Loche, with its centre about 18 km from the town site.
The company says it has a pilot plant in operation to test extraction techniques on “micro disseminated gold and platinum group mineralization” and that it is contracting independent laboratories to verify the results. The pilot plant is processing bulk samples with a weight of 1 to 100 kg. In its Jan. 30 release, Agau said it would release results of the pilot plant work only when the company “is satisfied [the results] will comply with National Instrument 43-101,” the stricter mining disclosure rules adopted by the provincial securities commissions after the Bre-X salting scandal.
Myrholm said he had no information on when any results might be expected, and declined to describe the material the plant would be shipping to the labs, saying, “I don’t think that I should be releasing that either.”
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