Canarc busy at Benzdorp

Vancouver — With $3 million in its coffers, Canarc Resource (CCM-T) is gearing up for a phase-2 drill program at its Benzdorp property in Suriname, South America.

The cash infusion comes from a private placement of 3.3 million units priced at $0.90 per unit. Each unit consists of one common share and one-half of a common share purchase warrant. A full warrant can be exercised to buy an additional common share at $1.10 within a two year period. The shares and warrants are subject to the standard four month hold period.

Canarc owns 40% of Benzdorp and holds an option to earn up to 80% by paying US$300,000 to Grassalco, the state mining company, spending US$3 million on exploration and delivering a positive feasibility study. Grassalco, will ultimately own 20% of the project which gives it the right to receive either a floating net smelter return of 1.5% to 6%, rising with the price of gold, or a 20% net profits interest, which kicks in after Canarc recovers all of its capital investment plus interest.

Canarc acquired the project in 1996 and has spent in excess of US$2 million on exploration which consisted of thousands of soil samples, hundreds of deep auger drill holes and three bulldozer trenches.

The work has identified 12 gold targets on just 5% of the property. The high priority targets include the JQA and Roche Kreek porphyry gold-copper prospects, as well as gold prospects with high grade shear-vein mineralization, dubbed JQS, JQW, JQB and Pointu Kreek.

Sampling, trenching and auger drilling of the JQA target outlined broad zones of stockwork vein and fracture mineralization spanning an area measuring 1,000 metres by 500 metres. This mineralization remains open in several directions. Fine gold occurs in quartz-limonite veinlets associated with potassic alteration. Elevated copper and molybdenum values have been observed in deeper samples.

In trench JQA-2 samples averaged 1.2 grams gold per tonne over 62 metres, and 0.9 grams gold over 142 metres. Samples from trench JQA-1 averaged 0.8 gram over 78 metres.

The JQW and JQS and Pointu Kreek prospects host gold mineralization in shear zones and veins that trend in a northeasterly direction. Gold occurs with sulphide and oxide minerals in quartz-calcite veins as well as in replacement bodies within the shear zones. At Pointu Kreek, trench samples ranged from 44 grams gold per tonne over two metres to 2.45 grams gold over 17 metres.

The Roche Kreek anomaly lies 4 km to the south of the main JQA anomaly and measures 700 metres long and up to 280 metres wide. It remains open to the north and south. Canarc took 22 soil samples which averaged 0.234 gram gold per tonne, and the company believes the target may represent another porphyry-style body similar to JQA.

The 1,380-sq.-km property is situated 300 km southeast of Parimaribo, Suriname’s capital. It can be accessed by a charter flight to the Tabiki airstrip or by boat up the Marowijne river and then by ATV on property roads.

Mineralization is hosted in a northeast-striking belt of meta-volcanic and meta-sedimentary rocks, intruded by dioritic plutons and crosscut by northeast-, north-, and northwest-trending structures.

Last month Canarc completed a 30-hole drill program at Benzdorp and cut long intervals of porphyry gold mineralization in the JQA prospect area.

The assays for the first 8 holes completed on the project have been released. Results are outlined in the following table.

The holes gave poor core recoveries — averaging only 76% in the first four holes and 77% in the last four. Each hole was collared and bottomed in mineralization. Holes BZ03-1 and 2 were drilled east-west from either end of trench TR02-2, angled at 50 to 55 towards each other in a scissor pattern.

Both holes cut saprolite and bottomed in bedrock at about 50 metres vertical depth. Canarc states that no metallic minerals could be recognized in the quartz stockworks in saprolite due to oxidation, but the same quartz stockworks carry up to 1% chalcopyrite, 3% magnetite and 5% pyrite in the bedrock.

Alteration surrounding the quartz stockwork grades from potassic feldspar outward to phyllic (sericite) and argillic (clay) mineral suites.

Hole BZ03-3 was drilled as a vertical hole 175 metres east of trench TR97-02 and east of the deep auger gold anomaly that defines the JQA target. This area is capped by a laterite hilltop which covers the eastern extension of the JQA porphyry-type gold mineralization. The hole did not intersect bedrock but rather a thicker saprolite profile with heavy kaolinite alteration — and correspondingly poor core recoveries.

Hole BZ03-4 was drilled at 55 to the west beneath trench TR97-02. It cut a thicker saprolite profile than the first two holes and hit bedrock at a vertical depth of about 70 metres. Canarc states that there is no obvious reason why the gold values are higher in this hole and assumes that better core recoveries in this hole played a role in limiting gold loss in drilling.

Holes BZ03-5 to BZ03-8 encountered difficult ground conditions and some had to be terminated before reaching their target depth. Canarc reports that the most intensely mineralized stockwork zones in the saprolite tend to correlate with the greatest core losses and feels that the gold assays may be understated.

Hole BZ03-5 was drilled to the east towards hole BZ03-4 and beneath trench TR97-02 and hit bedrock at a vertical depth of about 30 metres. The hole cut vein stockwork with potassic alteration.

Hole BZ03-6 was angled to the west and tested the area beneath the trench. It remained in saprolite.

About 100 metres to the west, hole BZ03-7, drilled towards the west, was abandoned in saprolite.

Hole BZ03-8 was angled back to the east beneath the trench and towards hole BZ03-6. It also remained in saprolite for its entire length.

Canarc reports that all of the drill core is split by Canarc personnel at the Benzdorp camp, and then flown to Parimaribo for shipment to FILAB, a large, European commercial laboratory operating in Cayenne, French Guyana. The core samples are then dried, crushed, split and a 30-gram subsample is taken for analysis. The samples were then subjected to fire assay with an atomic absorption finish and copper was analyzed by atomic absorption. FILAB uses its own standards for quality control checks and Canarc also sends reject samples from FILAB to other laboratories for additional quality assurance checks.

Initial metallurgical tests on saprolite samples indicated excellent recoveries. A 4.7-kg trench sample returned a head grade of 1.20 grams gold per tonne. Simple gravity and flotation methods, not optimized for the test material, recovered 80.2% of the gold.

Management at Canarc believes that the JQA prospect has two attractive economic mine models. The near-surface saprolite gold mineralization may be best suited for open-pit mining and a gravity recovery plant similar to the Brasilia mine in Brazil, operated by Rio Tinto (RTP-N) in partnership with Kinross Gold (K-T). This mine produces 250,000 oz. gold per year from a head grade of 0.47 gram gold per tonne gold at a US$167 per oz. cash cost.

Secondly, once the saprolite had been mined, Canarc may have a pre-stripped porphyry-type gold-copper deposit hosted in bedrock and enough net cashflow from the saprolite mine to pay for a large flotation concentrator. A similar operation to that, the Baja de la Alumbrera mine in Argentina owned by Rio and Wheaton River Minerals (WRM-T), produces 759,000 oz gold per year from head grades of 0.59 grams gold per tonne and 0.51% copper.

Canarc currently has about 56 million shares on a fully diluted basis.