Chelsea Resources mine to boast record grade

The old axiom that mines are made and not found rings true for the Spotted Horse project of Chelsea Resources, 20 miles from Lewistown which locals claim is the geographic centre of Montana. The project will rank among the highest grade gold producers in North America following mill tuneup which was progressing satisfactorily when The Northern Miner visited the property.

Mining people have often been accused of thinking too big. But Vancouver-based Chelsea Resources and its joint venture partner, Cimarron Exploration, haven’t fallen into that trap. The company’s modest-sized but fairly complex milling operation is designed to handle 50 tons of high grade feed per day, certainly not large by industry standards.

Head grades are expected to average over 1.0 oz gold per ton for the first six months and 1.5 oz or higher thereafter. Putting this into a Canadian context, gold output in the next year could be the equivalent of a 300-ton-per-day milling operation in the Timmins camp with 0.25 oz head grades. So it’s easy to understand why cash operating costs will only be around $175(US) per oz or less.

The Spotted Horse mine was officially opened Sept 26 but its first dore bullion was actually produced about six weeks earlier. To give credit where credit is due, Chelsea and its partners did a remarkable job getting the project into production within a 10- month time span. Indeed, it was a real community effort and much of the work was done by local contractors.

Speakers at the official opening acknowledged the contribution of all parties including Chelsea, whose area of expertise is primarily on the financing side. A full-page ad was also taken out in the local newspaper thanking the town and explaining the economic impact of the project on the region which is heavily dependent on agriculture.

In October, 1986, Chelsea concluded a joint venture agreement with Colorado-based Cimmaron, the operator of the mine. Revised this June, the agreement calls for Chelsea to fund the project in return for 85% of the cash flow until 1.3 times payback and 75% thereafter. Total cost to production is over $4 million. Viking Exploration is entitled to a 5% net smelter return and is also the original owner of the mine. Viking was responsible for installing the headframe and hoisting facilities five years ago but not the mill which is new. Five major oreshoots

Recent underground work has mostly involved stope development and reserve delineation. Previous production came from five major oreshoots, one of which, the Discovery vein, averaged approximately 1.0 oz per ton. The higher grade Bonanza pipe averaged about 6-10 oz and it’s possible this type material could be encountered again, which would dramatically reduce the payback period.

Toronto-based consultants Neil Westoll & Associates have calculated a mineable reserve of 35,000 oz gold and 175,000 oz silver, excluding recent high grade discoveries on the new eighth working level. The main shaft has been extended to that level and a 3-ton skip had arrived and was being prepared for installation at the time of our visit. Good reserve potential exists in projected extensions of old oreshoots and the increased hoisting capacity will allow the joint venture to optimize production from these areas and elsewhere in the mine.

The shaft is quite small which is obviously a limiting factor to increasing production further. But the joint venture hasn’t ruled out sinking another mine entry should their reserve base justify it. A mining lease agreement was recently signed for the adjacent Maginnis mine which will be reached from the eighth level. This mine produced over 100,000 oz gold in the late 1800s (about one third the estimated output at Spotted Horse) and there is still reserve potential left. Gold mineralization at Spotted Horse consists of nati ve gold and friable tellurides in a quartz-carbonate-fluorite gangue. Visual control in the ore zone is generally good and miners have learned to identify gold-bearing mineralization at the face. The project has been able to attract highly skilled miners who can mine down to less than two feet; and their bonus system is based on the grade going into the mill rather than the usual volume method. Sections narrow but rich

This tends to minimize dilution while increasing grade which is critical to the success of any mining operation. Mineralized sections are typically narrow (1-18 in) but exceedingly rich. Often they can carry a 4-5-ft mining width in this high grade material and still average 1.0 oz gold per ton. The wall rocks also carry gold so dilution is not always zero grade.

Oxidized ore extends to the lowest working level but there is no evidence of supergene enrichment, according to Dr Westoll. As he explained to The Northern Miner: “the oxidizing fluids may have been part of the mineralizing event itself,” which bodes well for the long-term potential of the property, particularly at depth.

Interestingly, the mineral assemblage at Spotted Horse (vanadium/mica/roscoelite) is similar to the Cripple Creek camp in Colorado which has produced over 21 million oz gold. Mineralization there extends to over 3,000 ft and the grade is quite uniform to depth. Sampling problematic

Sampling can be problematic in these type deposits and Dr Westoll confirms an apparent increase in over-all grade the greater number of samples taken. The reason for this is simple. High grade areas are exceedingly rich and indeed assays of over 700 oz gold per ton have been reported. But these rich sections are isolated and they can be missed easily without adequate sampling. Naturally when they are sampled the impact on grade is significant.

The mill flow sheet is relatively complex for such a small plant, says Colorado-based consultant Robert Akright. Conventional agitation tank leaching is utilized in conjunction with the Merrill-Crowe extraction process which is not complicated and well understood. Cyanide is added in the ball mill which, realistically, is where it should be. Recoveries are expected to be over 95% and the mill has been designed to include a flotation circuit for non- oxidized feed should the near surface ore be supergene in nature after all. This ore would be encountered at greater depths of course.

A comprehensive exploration program on the nearby Gold Hill property has outlined about 20 drill targets over a 300-acre area. This potential will be tested in a 10,000-ft reverse circulation drilling program which should begin shortly. Two types of targets exist: bulk tonnage gold deposits associated with near- surface breccia and stockwork zones; and high grade vein deposits which eventually could be mined from the Spotted Horse workings. Chelsea President Brian McAlister feels the Gold Hill “could possibly dwarf the Spotted Horse in reserves.”